On the 20th. of May 2018, the UAE government announced major legislatory reforms which will have profound impact on Dubai`s property market specifically as well as the UAE as a destination for foreign direct investment (FDI) as a whole.
The new laws, anticipated to come into force by the end of 2018, will provide for visa to be granted to highly skilled professionals for up to ten years to as well as to allow 100% business ownership everywhere in the UAE for non-nationals.
While the latter step had been anticipated for quite some time, the visa reforms were unforeseen to date and are likely to yield substantial demand effects for Dubai`s economy as a whole and its property sector in particular.
Attract and Retain – Human and Investment Capital
To date, the majority of expats consider their stay in the UAE to be just one of several episodes within their working life. Such modern nomads hardly develop emotional ties to the country of interim residence and its customs and traditions and move on once the local economic conditions worsen or better opportunities arise elsewhere.
In light of this lacking sense of belonging, the UAE leaders have understood that retaining greater parts of a so far highly transient expat community is key to a host of desirable effects among which are the accumulation of knowledge and capital. Speaking of which, expats living in the UAE have remitted 164.3bn AED (44.8bn USD) to their home countries in 2017. Granting a longer-term perspective to foreign residents will help retain parts of the inherently mobile workforce in the country and their funds invested in the local economy.
It is likely that Singapore, notably sharing many socio-economic similarities with the UAE and having risen into the top ranks of the Global Innovation Index (also) by liberalising its immigration laws, most likely inspired the UAE`s present leap of faith.
At least for the segment of the highly skilled the reforms will lead to a de-facto uncoupling of the right of residency and employment. This in turn will greatly reduce the in- and outflows of foreign residents in the course of economic cycles, thereby considerably reducing the economical cost associated with such fluctuations.
Growth and Evolution – Prospects of Dubai`s Property Market
Dubai, being the most important property market in the region, exhibits one of the highest rental yields of comparable cities worldwide. Apart from its status as an emerging market metropolis, this is also due to the fact that many expats would not consider buying into local property. There are a few repeatedly-cited reasons for this, the most prominent of which are the application of local (Scharia) laws besides a planning horizon of only a few years due to visa or related restrictions.
Although the mandatory application of Scharia law with respect to property inheritance has yielded to the option of common law DIFC wills, providing legal certainty and peace of mind especially to non-muslims, uncertainty with respect to long-term residency status is still the norm to date.
Once the new rules will take effect, Dubai`s real estate market, besides earning an increase in buyer interest from longer-term end users, will thus further mature and transition into a state of less volatility. At the same time, the announced step will instill confidence into established and evolving investor source markets, notably China.
Bottom line
The announced legislatory changes express a new level of openness in welcoming and accommodating foreign people and capital to the UAE.
Their thorough and fit implementation will strengthen regional and international property and business investors` confidence in the UAE as an investment and business destination. Moreover, the new regulations will greatly enhance inflow of international talent as well as investors and capital, thereby fueling growth in a number of sectors, predominantly finance, real estate, healthcare, manufacturing and retail, to name but a few. Dubai, being the region`s champion for innovation and growth, will without a doubt attract a substantial part of these inflows and demand effects.
While the details of the new laws remain unknown at this point in time, it already becomes obvious that the changes will entail far reaching socio-economic benefits as well as challenges – the latter stemming in parts from a further reduced endemic population in relative terms.
In an optimum scenario, the final implementing regulations (or their successive modifications) will include visa options for retirees and moreover grant longer-term visa to property investors, potentially further extending expats` planning horizons within the UAE.
In any case, the announced reforms open a new chapter for far-reaching changes within the UAE`s investment environment.
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The author advises institutional investors about property transactions and handles property portfolios in Dubai since the year 2007. Should you have comments or inquiries, please contact the author on author@property-blog-dubai.com.
