Moscow’s loss, Dubai’s gain? Russian buyers flock to UAE real estate as mortgage rates skyrocket to 18% in home market

In another interesting trend, cash-rich investors from France are emerging as a significant investor group in Dubai’s upscale residential market, which offers them nearly half payback period on property investments, compared to that in Paris.

“Buyers, in large numbers, are looking at investing in Dubai real estate rather than in Moscow.” Olga Poletskaya, head of the investment department at Colife Invest, the investment wing of Dubai-based global property and rental services firm, told Arabian Business.

“The surging mortgage rate in Moscow and elsewhere in the country – the rate shot up to 18 per cent currently after withdrawal of the 8 per cent preferential rate for new properties in April this year – coupled with the spike in house prices in that market are driving Russian investors to Dubai,” she said.

Poletskaya said in order to invest in real estate and earn from it, an investor would need to rent out a property with a return of at least 18 per cent, which is unrealistic.

Top honchos in some of the leading real estate companies with projects in the Emirate and other emirates in the UAE also confirmed the rising interest of Russian investors.

Dubai real estate draws international buyers

Industry experts said Dubai’s real estate market, especially the residential market, continues to emerge as highly attractive to investors from countries like Russia, France and several others amidst unpredictable and unattractive market conditions in their respective domestic markets.

Owning property in Dubai is prestigious, safe, and can yield high returns from rental income and property value appreciation, they said.

For instance, the cost per square meter in the primary housing market in Moscow is estimated to have doubled in the last four years – from an average of $800 per square meter in summer 2020 to $1,600 per square meter in summer 2024.

Poletskaya said this increase has also raised the size of the initial payment.

“The scheme of buying an apartment with an 8 per cent mortgage, renting it out for the same 8 per cent annual return, and using the rental income to cover the mortgage payments no longer works.

“As a result, investors are seeking options in other countries and are choosing Dubai,” the senior Colife executive said.

Turkey, particularly Istanbul, is also a popular destination for real estate purchases by Russians.

She said since July 2024, the 8 per cent preferential mortgage rate for new buildings in Russia has been discontinued, and this has made buying properties in cities like Moscow unaffordable not only to investors, but also to end-users who want to buy a property for personal use.

Due to the high mortgage interest rate, the monthly payout for mortgages will now be twice as high, leading to a plunge in property demand in Moscow by as much as 42 per cent since July, Poletskaya said.

Dubai attracts French property buyers

Industry insiders said the rising interest of French investors in Dubai’s residential real estate market is mainly on account of shorter payback time.

The payback period for real estate in Paris is estimated to be about twice as long as in the Emirate.

High taxes in Paris – and the absence of such taxes in Dubai – is adding to the lure for cash-rich French investors to pick the Gulf city for their property investments.

Dubai Marina, JLT, Dubai Hills, Dubai Creek Harbour, Downtown and Business Bay are said to be among the sought after neighbourhoods for investments by both French and Russian investors.

The advanced infrastructure facilities, easy accessibility to major city destinations, besides their ambience for good living conditions are cited as making the preferred locations for these investors.

High demand from tenants for these areas is another factor which is making investments in these neighbourhoods an economically superior proposition for the investors.