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The criteria of stability, returns and demand for luxury properties heighten competition between Dubai and Istanbul

Financial, economic and political stability factors are always important in attracting domestic and foreign investments, in addition to opportunities provided by public and private sector development strategies. Stability requirements and investment returns are among the standards which determine the strength or weakness of demand for real estate products, as well as the value and volume of real estate dealings, in all territories.

Real estate market indicators in many countries are now showing a rise in supply, while other markets suffer from a shortage of medium and low cost real estate products, yet an increase in the supply of luxury real estate.

A number of major international cities like London, Dubai and Istanbul have recorded an increase in foreign investment over the last year. In all cases, the markets that provide the highest standards of benefits, including stability of prices, fixed value of investment assets and higher returns, are the markets where demand for real estate products will continue. They will also witness new real estate projects that meet diversity in demand, which means more competitiveness and innovation in real estate projects.

In this regard, Al Mazaya Holding Company’s Weekly Real Estate Report highlights the importance of investment activity currently being recorded in the Turkish real estate sector and its increasing appeal, due to the country’s ability to make quick amendments in laws and regulations to attract investors. The real estate market in Dubai, however, remains in the lead when it comes to its competiveness with major cities around the world and in terms of the volume of investments, growth of demand, the modernity of projects and its ability to meet the goals and aspirations of a wide number of international investors.

It is worth mentioning here that the Dubai and Turkish real estate markets enjoy a high level of investment appeal and feasibility in the medium and long term. Of course, there remain differences between the two markets. Dubai tends to attract investment based on business development and, as an attraction for foreign companies, building the Emirate’s competitiveness at the international level, so as to create a leading position among other key world cities. On the other hand, in Turkey, domestic and foreign demand for tourism and recreation projects account for a large share of the activity recorded by the Turkish real estate market.

With particular reference to the Turkish real estate market, Al Mazaya Report says that there are a number of internal economic pressures and indicators proving favourable for the continuity of foreign investment opportunities. With the continued demand for Turkish properties by individual investors, from GCC countries in particular, it is clear that Arab investments are steering clear from other regional markets that are witnessing social and political turbulence. This reinforces the attractiveness of the Turkish real estate market for HNWI (High Net Worth Individual) Arabs and raises the prospects of their continued interest in the Turkish market, as long as there is stability in the country.

Circulated data indicates that currently 25 per cent of sales in the Turkish real estate market are conducted by foreigners, amounting to 15 per cent of the total value of deals in Turkey. In 2015, 35 per cent of these foreign buyers were Arab.

Al Mazaya’s Report also points to market data that indicates GCC-based capital has acquired USD 2 billion, out of USD 5 billion, in Turkey, raising the number of completed deals of Arab investors to approximately 11,000 real estate units in 2015, with this number is expected to reach 15,000 units in 2016.

With a diversity of real estate products, in the Turkish market, the sale of houses to foreigners exceeded 23 per cent in Q4 2015, compared to the same period in 2014. It is to be noted that a large part of real estate demand and investment for residential projects is currently focused in or around Istanbul. It is projected that the price of land will increase in areas where the number of residential projects is rising, which means more returns for the owners of these investments.

In view of its geographic location, stability and progress, natural beauty and cultural history, Turkey has many attractive elements that appeal to investors. Attractive prices have also helped to increase the demand from GCC investors, especially if compared with the prices of properties in Europe and the US.

Accordingly, the Turkish real estate market has lately been recording significant rises in the price of real estate assets. This means that prospects for the construction of low cost housing projects will decrease if land prices maintain their rise and high taxes continue to be levied on properties. Despite the pressures on the Turkish economy, there are still chances to enter into good investments in its real estate sector.

The impact of low oil prices, decline of financial markets and the development of the Chinese economy, is actually working in the interest of existing investors in the Turkish market. With projections of decreasing Russian investments in the country, the pace of demand and increased supply will affect the real estate market and lead to a further decline in the prices of real estate projects. This should provide Arab investors with good opportunities for negotiation – at point of sale.

Al Mazaya Report states that the Dubai real estate market enjoys all necessary elements for competitiveness at both regional and global levels with the sector’s liquidity still good and able to attract foreign demand for its products. This is in light of the fact that supply and demand forces are balanced.

The market demand for residential units in the emirate has increased at an average of 6.5 per cent annually, mainly as a result of the continued projects connected with hosting Expo 2020. Al Mazaya says that the emirate is still an ideal destination for foreign investors to develop their business around the world, in view of its strategic location connecting the East and West. As a result, the demand for Dubai properties is witnessing continuing growth. This is because the business sector in the emirate is growing in line with its activity, despite the low oil prices. The emirate’s economy remains strong and stable, since its main source of revenue depends mainly on non-oil trade, tourism and the business sector.

The report also points out that Dubai’s luxury properties are still targeted by HNWIs across the world. As for returns, the value of assets and projects constructed before and after the financial crisis has realised higher rates of returns for their owners, while the leasing sector has also achieved strong results and high returns.

Al Mazaya’s Report considers that the competition between Dubai and Istanbul markets will gain yet more momentum in the coming year. The tourism sector will take a lead as it is considered a key driver for real estate demand in both markets. Business activities, government plans and financial and political stability factors will also be highly important for the consistency of demand and the increase of real estate activities of companies, in both territories.

It is noteworthy that over 10,000 of the richest investors in the world have a significant presence in Dubai, which has increased – and will continue to increase – the market’s attractiveness for more investors. Istanbul’s real estate market is currently ranked fourth in the world in a recent report on international rankings of the best investment locations around the world; Dubai is ranked seventh.