Real estate industry insiders have high hopes by now that Iranian traders and businessmen will soon return to Dubai’s property market. In the coming few months, they are actually expected to become top Dubai property investors, leaving Saudis and Indians behind. There are many reasons for predicting such development, but some of them are rooted in a centuries old trading relationships between the both countries and the new appealing image of Dubai as a very modern regional business and culture hub.
Last week, the announcement of the framework nuclear deal with Iran gave hope for economic development and progress not only to the Iranian people, but in general to the population of the Gulf states. Along with its complex political aspects, the resolution is expected to help for the opening of Iran’s economy and such development could result in AED 100 billion in trade between Iran and the UAE. If the final agreement is signed, business opportunities and the improved relations between the two countries will encourage Iranians to start investing again in Dubai property market.
Iran is one of the traditional business partners of the United Arab Emirates, but there has been a decline in trade between the two countries because of the sanctions, which saw oil (and other) exports stopped. However, on April 2, a framework nuclear deal between Iran and the U.S., Russia, China, France, the UK, and Germany was announced, with the talks spurring optimism. If an agreement on keeping Iran’s nuclear program peaceful is reached by the end of June, this will open up the country’s market after an almost total embargo, imposed by the U.S.
The deal will include easing or even lifting up restrictive economic and financial sanctions and although it is expected to become a reality in 2016, this is a great opportunity for Gulf economies and the UAE in particular, as it’s already Iran’s largest non-oil trading partner. According to Bloomberg, Iran was the fourth-biggest trading partner of the UAE in 2013. That year, the United Arab Emirates exported AED 93,51 billion worth of goods to Iran and imported goods, valued at AED 3,66 billion.
Iran’s oil, when re-introduced on global markets may contribute to drop in prices, but this will hardly affect the UAE and in particularly Dubai, as their open economies are now relying on non-oil trade. In fact, unlike Saudi stocks, which fell 1.7 percent on Sunday, the main Dubai’s stock market index climbed 1.4 percent to 3,666 points, while Abu Dhabi index rose 0.1 percent to 4,542 points. Meanwhile, the Tehran Stock Exchange’s main index surged 3.5 percent.
However, removed sanctions will ease not only oil and gas export, but also transport, financial services, non-oil trade, as well as foreign investments in Iran. This will have a huge impact on the business climate in the country and Iranian investors, eyeing Dubai as a doorway to other markets, will look at the property market. Traditionally, Iranians have been interested in buying real estate in Dubai – they were once top buyers, and they will return, which will make up for the decline of Russian investments. Moreover, Dubai is home of a large Iranian community and in 2014, Iranians invested AED 4.5 billion in Dubai’s real estate market. In 2016, when most of the conditions under the agreement will probably take into effect, this investment may jump by 50 percent.
The improved relations between Iran and the United Arab Emirates with the financial and trade benefits, will encourage more Iranians to consider residence in the UAE. After Emiratis, Saudis were the second biggest investors in Dubai real estate sector in 2014 with 1,745 transactions worth AED 5,207 billion, which is less than a billion more than the total Iranian investment, according to official data by Dubai Land Department. With the agreement reached, as expected, soon Iranians may be top Dubai property investors.
After Iran has been isolated of the international banking system and its foreign trade has been hindered by the sanctions for years, it has finally has a real chance of opening up to the global economy. This will result in an economic boom and plenty of benefits for many of its neighbors. The deal will free huge Iranian financial power, a substantial part of which will target Dubai markets, including the real estate sector. In a couple of months, we may have a new big player in Dubai property – Iranian investors.
