Iranian investment in Dubai’s property market has plunged in the first six months of 2012 due to Western sanctions placed on the Islamic republic a year earlier, according to a newspaper report on Sunday.
Iranians were the fourth-biggest group of property purchasers after Indians, Britons and Pakistanis, with 1,124 buyers of properties valued at a total of $528 million, reported The National newspaper, citing data of the first six months of 2012 from the Dubai Land Department.
However, recent data by Dubai Land showed that Iranian buyers were the fifth-largest group of investors by nationality in the market, with 1,036 Iranians snapping up villas and apartments.
“It has completely slowed down,” said Myles Bush, the managing director of Powerhouse Properties, which specializes in upmarket homes. “They seemed to come in dribs and drabs and now they’ve stopped.”
The vacuum has been filled in part by investment from wealthy Greeks, Spaniards and Britons seeking to escape the fallout from the euro-zone debt crisis, Bush added.
The UAE imposed sanctions against Iran on November 2010, as per United Nations’ resolution. Iran is also facing sanctions from both the European United and the United States.
Due to pressures in the recent months, the UAE’s banks had to scale down their tie to the Islamic republic. The pressure has also intensified, when swift, the world’s biggest electronic payment system, in March disconnected Iranian banks from its network.
People familiar with the property market are finding it difficult to get approval from UAE banks to pay for mortgage or make down payment for properties, Hossein Haghighi, an Iranian businessman living in Dubai, told The National newspaper.
“Iranians are not able to bring their money in and so investment in the market is becoming very difficult,” said Haghighi, who owns a villa in Dubai.
The lure of Dubai’s lifestyle, proximity to Iran, and the traditionally close business ties, have for years made Iranians a strong force as investors in Dubai’s property market.
Iranian demands for the property market has stemmed from around 600,000 Iranians living in the UAE, as well as a sizeable wealthy group of Iranians in the Islamic republic.
Iranians who are still buying property in Dubai, however, are finding alternative ways to pay.
Tom Bunker, an investment sales consultant with UAE estate agency Better Homes, told the paper that investors are transferring cash for down payments from Iran to the UAE using money brokers or exchange houses outside the formal banking sector.
The system, known as hawala, usually involves the transfer of cash in small batches.
“In the last couple of months the sanctions in Iran are starting to take their toll and Iranians are not buying as they have lost about 50 per cent of their wealth,” Bunker added.
“Some Iranians are even selling to help shore up their funds.”