Dubai Real Estate Is 'Dominated by Cash Buyers'

Dubai real estate agent Laura Adams won’t soon forget one Iranian home buyer. “He literally put a suitcase on my desk, opened it up, and it was full of 1,000-dirham notes,” says the Carlton Real Estate managing director. “I asked him to go across the road to Western Union and get it exchanged for a manager’s check, half a million dirhams ($136,000).” It wasn’t the first cash-stuffed suitcase she’d seen. One customer told Adams he had the money with him because he’d just completed a diamond deal and didn’t want to stop by the bank, she says. A Russian buyer walked in with €250,000 in cash ($334,000) as the down payment on a two-bedroom apartment in the Burj Khalifa, the world’s tallest tower, and paid the rest with a single check.

With the emirate’s property market rebounding, buyers from Iran to Russia to Greece paid cash and avoided mortgages in as many as 70 percent of Dubai home purchases last year, up from 49 percent in 2007, says researcher Reidin.com. The widespread use of cash limits the power of United Arab Emirates regulators to avoid another real estate bubble like the one that burst in 2008, sending prices down as much as 65 percent. Last month the U.A.E. proposed barring foreigners from taking out a mortgage worth more than half the value of a home, a move that would not affect those paying in cash. “The overall level of impact on the market, which is overwhelmingly dominated by cash buyers, is going to be relatively small,” says Nicholas Maclean, Middle East managing director for commercial real estate giant CBRE Group. The Emirate Banks Association is proposing a looser mortgage cap of 75 percent for foreigners, Chairman Abdul Aziz Abdulla Al Ghurair told reporters last month.