Iranian investment in the Dubai property market slipped by nearly a quarter to Dh1.5 billion (US$408.3 million) in the first six months of the year from a year earlier as sanctions squeeze buyers from the embattled country.
Buyers from Iranstill represented the fifth-largest group of investors by nationality in the market, with 1,036 Iranians snapping up villas and apartments, data from the Dubai Land Department show.
But the investment was likely to have been higher if it were not for the impact of western sanctions against Iran, say people familiar with the property market. Iranians are facing difficulties getting approval from banks in the UAE for mortgages or to make down payments for properties, said Hossein Haghighi, an Iranian businessman living in Dubai who owns a villa in the Springs.
"Iranians are not able to bring their money in and so investment in the market is becoming very difficult," he said.
Iranians have been one of the backbones of investment in Dubai's property market for years because of their country's proximity to the emirate and traditionally close business ties. Appetite has stemmed both from the estimated 600,000 Iranian residents in the UAE and wealthy home-based Iranians.
But banks in the UAE have come under pressure in recent months to scale down their ties to Iran as a result of US, European Union and United Nations sanctions. In addition, Swift, the world's biggest electronic payment system, in March disconnected Iranian banks from its network.
The sanctions have also weighed on Iran's economy and its currency. The Iranian rial has fallen to 19,290 against the US dollar from 13,200 in November.
"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," said Tom Bunker, an investment sales consultant with Better Homes, a UAE estate agency.
"Some Iranians are even selling to help shore up their funds."
Estate agents say the drying up of Iranian buyers is in contrast to the period up until January when many reported a frenzy of activity as people from the country sought a safe place to invest.
Iranians were typically looking for a second or third home, the agents said at the time.
In the first six months of last year, 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 Dh1.9bn, Dubai Land data show.
"It has completely slowed down," said Myles Bush, the managing director of Powerhouse Properties, which specialises 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, he said.
Mr Haghighi said many rich Iranians were still seeking to preserve their assets by investing in property abroad. But other cities and countries were starting to attract their cash.
"Some are looking towards Malaysia and the Iranian population in Malaysia has grown drastically."
Those Iranians still buying property in Dubai are finding alternative ways to pay. Investors transfer cash for down payments from Iran to the UAE using money brokers or exchange houses outside the formal banking sector, said Mr Bunker. The system, known as hawala, usually involves the transfer of cash in small batches.
tarnold@thenational.ae
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