Dubai a money laundering haven for Israelis and Russians

Various international reports revealed that Dubai became the preferred money-laundering destination for the wealthy of Russia and Israel in the absence of standards of oversight and transparency.

Reuters news agency quoted the international consultancy Peter Homes as saying that Russians are the largest non-resident buyers of residential real estate in Dubai in the third quarter as they seek a haven in light of the conflict in Ukraine. In addition, Russians are escaping conscription and the tightening of Western sanctions.

The company’s data shows that buyers from Britain ranked second, despite their decline by 43% from the previous quarter, then came buyers from India, Germany and France. The number of non-resident Russian buyers rose 11% from the prior quarter.

“Russians fleeing the war, during recent conscription, have become the most buyers over the summer, and with the war in Ukraine continuing, we expect this trend to continue,” said Richard Wind, managing director at Better Homes.

Since the beginning of the year, Russia and Britain have been the most significant sources of investment in Dubai’s real estate market, rebounding strongly from the recession in 2020. However, rising mortgage interest and the cost of living may be headwinds.

Wind indicated that the pound’s weakness might make some British investors reassess the situation, but he did not expect a significant impact on the investments of high-net-worth individuals.

Better Homes explained that its report for the third quarter adopted a different methodology that covers only non-resident buyers, not total buyers. As a result, the Russians ranked fourth in its previous report for the first half of 2022 for the most significant buyers after India, Britain and Italy.

Wind said that the change aims to define the countries of origin of incoming investment to the Dubai market more clearly.

Better Homes stated that total sales and value transactions increased by 61% in the third quarter on an annual basis, as 22,895 units were sold, with a total value of 52.39 billion dirhams ($ 14.26 billion).

In the context, the American “Bloomberg” agency said that the real estate market in the Emirate of Dubai set a new record after selling a luxury villa on the artificial Palm Island for $ 163 million without revealing the identity of the buyer, noting the continued flow of Russian and Israeli funds to the emirate.

According to the US agency, the “continuous rise” of the real estate market in the Emirate of Dubai over the past year will not make this record last long.

When Indian billionaire Mukesh Ambani bought an $80 million Palm mansion in Dubai for his youngest son last March, it was a new record for Dubai’s property market. But, after holding the number for seven months, an anonymous buyer also paid $82.4 million for a property on Palm Island.

In October, the Dubai Land Department announced a new record real estate deal worth $163 million in Palm Jumeirah without revealing the buyer’s identity, marking the highest level ever.

According to the US agency, real estate brokers and developers, more than 70 real estate transactions are paid in cash or without mortgages.

Therefore, any slowdown due to higher borrowing costs is likely to be limited, according to the forecast of the Los Angeles-based real estate group CBRE.

There are also other tax advantages in Dubai, given that buyers pay a 4 per cent fee to the Land Department, compared to the 15 per cent tax for luxury homes in London, for example.

Dubai imposes value-added tax and corporate fees, but no income taxes exist.

And “Bloomberg” reported that many of Dubai’s real estate buyers are rich Russians looking for a haven for their money after their country invades Ukraine.

In addition to the Russians, among the newcomers are Israeli investors and crypto-millionaires.

There were also bankers fleeing the restrictions of Covid in Asia and the repercussions of Britain’s exit from the European Union in the capital, London.

Principal property prices in the emirate rose 70.3 per cent in the twelve months to September, making it the biggest gainer on the global “Knight Frank” index, focusing on the city’s most desirable and expensive homes.

The US agency indicates that high-interest rates and the economic slowdown associated with high global energy prices impeded real estate deals in several international cities, including London, Paris and New York.

The Dubai Land Department usually does not provide access to information regarding buyers’ identities of specific properties, and the city’s property registry is not public.

Economic observers say the authorities in Dubai have little incentive to increase oversight or exercise more transparency due to the economic benefits of the money flowing into the property market.

“Dubai is an easy place to buy property in a relatively anonymous manner,” said Judy Vittori, a non-resident scholar at the Carnegie Endowment for International Peace who has researched the emirate’s real estate sector.

“With every international crisis, it seems that money is flowing there, and sometimes it is openly encouraged, as happened during Covid, but not so with the Russian conflict,” she added. It will remain an essential part of their economic development plan.”