By Nicholas Maclean
The UAE's knowledge-based economy quest will have a very positive impact on real estate
When the UAE Cabinet approved a raft of amendments to the residency status of ex-patriate professionals earlier this year, many celebrated. For those that would like the option of remaining in the country long-term the changes in law are indeed a gamechanger. The significance, however, of such amendments goes far beyond the added sense of security that the nation’s foreign residents will, undoubtedly, now experience. Rather, these changes reinforce the UAE’s commitment to developing into a knowledge-based economy that attracts and retains the greatest of talents; and, the implications that this will have on the nation’s real estate sector are important to the wider economy.
Expatriates make up approximately 80 percent of the UAE’s population and are consequently of great influence to the UAE economy. Ensuring that talented individuals remain in the country has a two-fold effect: Firstly, there is the direct impact that comes from ensuring that their spending power remains in the UAE, as opposed to being transferred to their home country: and secondly,that talented professionals tend to command high incomes and legislation that promotes a greater sense of inclusion will encourage such individuals to invest into the UAE economy.
The real estate sector, in particular, the residential market has, historically, been closely linked to the country’s economic performance. A flurry of expatriates into the country has a positive effect on the nation’s rental market, which equally, feels the effects once foreign residents return home. This is however less so in the investorment market. According to Dubai Land Department, there was a 12 percent rise in owner/occupier mortgage transactions in March 2018 compared to 2017, demonstrating a maturing effect whilst also highlighting a growing confidence amongst buyers in the emirate. It will be interesting to see how the new draft law will further stimulate the owner/occupier market in coming years due to the added sense of security that foreign residents will undoubtedly now feel.
Retail and hospitality are additional sectors that will directly benefit from the UAE’s ability to retain a highly talented workforce, with strong purchasing power. Residents who experience a high level of job security are more likely to spend on staycations, on dining out and in the UAE’s extraordinarily variety of retail outlets.
As the UAE continues to diversify its economy away from a reliance on oil into a society that celebrates the importance of human capital, retaining talent has never been more crucial. The co-dependent relationship between the UAE’s status as an economic powerhouse and its ability to keep exceptional talent should not be underestimated. To date, the UAE has been incredibly successful in creating an environment that supports and celebrates local and foreign talent alike to ensure the nation’s continued development. The majority of foreign corporates cite ‘depth of labour pool’as a key contributor to their decision to locate business units in the UAE.
The new residency rules is just one of a number of recent initiatives that are aimed at attracting and retaining a highly skilled and educated workforce to/in the UAE to further stimulate the economy. Under the new law, long-term residency will be available to retirees who, amongst other conditions, own property worth AED2m. This law encourages younger residents to consider such an investment, while rewarding those that have made important contributions to the nation and its development into the economic powerhouse that it is today. Retirees are not the only demographic that are being recognised for their efforts. The UAE Cabinet has also unveiled plans to introduce 10-year residency visas to specialists in the medical, scientific, research and technical fields and longer visas for students and entrepreneurs, whilst enabling foreign investors to fully own a company in the UAE. These fundamental changes are sure to stimulate both the rental and owner-occupier markets across residential and commercial sectors.
While the new laws on residency are a boost to those already living in the UAE, they should prove instrumental in attracting further talent to the country. It is clear that some would-be expats are deterred from relocating due to the uncertainty that surrounds foreign residency visas. The UAE is leading the way in letting the world know that the country is open to the brightest and most talented individuals and will support them in any way it can to ensure they feel settled and secure in their new country of residence. It also sends a clear message to investors, that the UAE is extremely business friendly and has the sophisticated legal framework required to support foreign entities that wish to establish a presence in the Emirates.
This legal evolution is an example of the UAE’s forward-thinking approach to creating a truly innovative society that nurtures talent, supports entrepreneurship and rewards hard work. Experience also suggests that the processed changes will be adopted beyond the borders of the UAE. Whilst the new law will undoubtedly stimulate demand, it will, of course, be some time before we see this translate into transactions and pricing. The amendments provide increased security to those wishing to live and invest in the UAE long-term. But, perhaps most importantly they provide a message to those outside the country, that this is a government that is committed to stimulating further economic growth and providing the conditions required for foreign investments to flourish. The benefits that this will bring to the wider economy will be meaningful.