Upscale Lifestyle Driving Global Property Investment for UAE's Wealthy
Middle East real estate consultant Cluttons new research has revealed that a cosmopolitan lifestyle is expected to be among one of the main factors that influence the selection of a real estate investment destinations for Middle East buyers in 2015.
Cluttons extrapolated the results from its most recent International Private Capital Survey to examine the main drivers in global real estate by developing a Matrix of Desirability. The research plotted the top three global cities identified that most appealed to high net worth individuals, which were London, Dubai and Singapore and plotted these against other major global hubs.
Apart from currency advantages, financial drivers such as GDP growth, residential yields and capital value growth rates all figure highly in the minds of the global wealthy. However, lifestyle considerations attributed to the quality of education on offer, and the benefits associated with cosmopolitan global cities appeared to be important factors taken into consideration among wealthy UAE and Middle East buyers.
Results reveal that while these three cities still score very favorably on security, London's high lifestyle score is matched by Paris, while the lifestyle rating for Singapore is on par with that of New York, and slightly higher than Dubai. According to Cluttons, what this highlights is that while this model proves that the destinations identified as top picks for real estate investment stack up scientifically, there are other locations that are close contenders.
Cluttons indicates that the strengthening dollar, due in part to the drop in oil price, may lead to increased disposable income and Middle East buyers targeting property in Europe. Its strength over the last 12 months has opened up a significant currency led discount for Middle East HNWI targeting real estate assets in Europe, and there remain a number of other significant lifestyle-linked and financial aspects driving global real estate investment. These include GDP growth, the track record of performance of a real estate market and the degree to which a cosmopolitan lifestyle is attainable.
Faisal Durrani, international research and business development manager at Cluttons said, "While the slide in crude oil prices has certainly put pressure on the economies of the OPEC bloc, for the majority of GCC states who have a fixed peg to the dollar, the low oil price environment has allowed the dollar to strengthen. Separately of course the EU remains embroiled in the threat of a Greece exit, which has weakened the Euro sharply. Together, these economic conditions now mean that the Gulf States are likely to soon start feeling the impact of falling import costs, which should drive down inflation levels, while slowly boosting disposable income levels.
"If you analyze past economic cycles, it is clear that the minute such a scenario begins to materialize, seasoned investors begin the global hunt for a place to park their equity and property inevitably ends up being the preferred investment class, as was demonstrated in Cluttons' International Private Capital Survey."
Cluttons also applied its Matrix of Desirability model to other regional cities such as Manchester, Istanbul and Sharjah, with interesting results.
Joanna Leverett, head of Cluttons' international residential markets commented, "While these locations were never expected to trump global hubs' lifestyle scores, these secondary cities scored highly on security, outperforming global cities such as London, New York and Dubai, underscoring their potential as emerging real estate hot spots.
"Also, as lifestyle offered through second home ownership is such a significant influencer for HNWI, when it comes to selecting a real estate investment location, we decided to drill down further and look at holiday resorts. We adapted our model to look instead at the concentration of PGA accredited golf courses and Blue Flag Beaches, a measure of the international quality of a beach, based on 33 key criteria, we found that smaller holiday resorts such as Marbella (Spain), Bodrum (Turkey) and St. Kitts & Nevis in the Caribbean, scored very highly in our Matrix of Attractiveness when compared to places like Cape Town, Rio de Janeiro, or Cannes. While Marbella and Bodrum clearly have a reputation for sunshine and beaches, somewhere like St. Kitts and Nevis offers an added bonus of citizenship through property investment, something that is also highly attractive to Middle East based HNWI."