Property booming in ‘sanction free’ Dubai as Russian interest spikes

With more than 160 stories, the Burj Khalifa is 2,716 feet tall, or more than twice the height of New York’s 1,250-foot Empire State Building, in Dubai.

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DUBAI, United Arab Emirates — Emirati property magnate Hussain Sajwani is riding high after a record start to the year for Dubai’s property market. 

“Dubai is doing very well,” the veteran real estate developer told CNBC on Wednesday. “The way Dubai handled Covid was a key factor in booming the market now.”

Dubai saw $35 billion worth of property market transactions in 2021, the highest recorded since the global financial crisis, according to real estate firm Savills. A separate report from CBRE said total transaction volumes are now tracking at the highest level ever recorded for the first two months of this year. 

Sajwani said the United Arab Emirates, which has long been a popular destination for Russian wealth and tourism, would stand to benefit as Russians seek refuge in the UAE and a safe haven for their fortunes amid the ongoing war in Ukraine and unprecedented Western sanctions.

“I’m sure a lot of Russians are trying to fix their problems and their issues, but Dubai will benefit ultimately from any crisis,” he said. It comes after the UAE, which has deepening ties with Russia, decided not to match sanctions imposed by Western nations on Russia for its invasion of Ukraine. 

“I’ll be honest with you, these sanctions… they made a lot of people nervous,” Sajwani said. “If anyone brings money through the banking system here legally and professionally, we’ll do business with them.”

Russians were among the top purchasers of real estate before the war and sanctions, according to a recent Reuters report, which also said Russians were buying property in Dubai and even using crypto as a way of getting their money into the Gulf state. 

The country’s property market has also allegedly been a common channel for money laundering, experts have said, where individuals avoiding sanctions or seeking to park illicitly obtained wealth have been able to funnel their cash.

The UAE was put on a financial crime watchdog’s “gray list” earlier this month over concerns that the Gulf country isn’t sufficiently stemming illegal financial activities. Concerns over money laundering and illicit financial flows spurred the Financial Action Task Force, which was set up by the Group of 7 economies, put the UAE on a monitoring list alongside Turkey, Jordan, Pakistan and others.

In response to the designation, the UAE said it takes its role in protecting financial integrity “extremely seriously and will work closely with the FATF to quickly remedy the areas of improvement identified.”

Covid response key

Sajwani said progress on the Iran nuclear deal would also be a tailwind. “If the Iranian-American peace treaty, nuclear treaty, happens and takes place, it will be a big benefit for Dubai,” he said. “It will see much more stability and peace in the region,” he added.

Dubai’s property market reversed multiple years of price declines last year as the city shunned lockdowns, ramped up vaccinations and enacted new policies to draw in tourists and residents while the pandemic shut down the rest of the world. 

The long-awaited Dubai Expo 2020, delayed for a year due to the pandemic, also helped pull in interest as the multi-billion dollar project aims to become a new residential and commercial complex after the event ends in April. Whether Expo will become the new thriving city within a city its developers have planned, however, is still yet to be seen.

“Dubai’s residential market has been the poster child of the rebound in real estate demand in 2021,” Savills said. “The city’s residential market not just outperformed its past activity levels but was among the best-performing markets globally.”

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