Who owns offshore real estate? Evidence from Dubai cross-border real estate investments

This paper analyzes offshore real estate in Dubai based on a micro-dataset capturing the ownership (private and corporate) of about 800,000 properties in Dubai. Alstadsæter et al. estimate the total market value of properties in Dubai at USD 533 billion in 2020, of which about 27% was foreign-owned—at least USD 146 billion. This is about twice as much as in London, although the population in Dubai is one-third smaller.

A comparison of countries’ real estate in Dubai to their GDP reveals significant ownership through other tax havens. Saint Kitts and Nevis has, by far, the most significant ratio of real estate in Dubai to GDP. However, tax havens like the British Virgin Islands, the Cayman Islands, the Bahamas, and Seychelles also own significant amounts, reflecting ownership through shell companies.

Properties owned by tax havens tend to be more expensive on average than other foreign-owned properties. The mean property value in Dubai is USD 603,000. For comparison, properties owned by Antigua and Barbuda are worth USD 3.6 million on average, and properties owned by Cyprus, American Samoa, Jersey, Puerto Rico, and Gibraltar are worth between USD 1 million and USD 1.5 million on average.

Lastly, the authors employ Norwegian administrative tax record data to estimate the wealth distribution of Norwegian property owners in Dubai. They demonstrate that the probability of owning offshore real estate rises with wealth, within the very top of the wealth distribution. Moreover, the authors find that at least 70% of Dubai properties owned by Norwegian taxpayers were not reported for tax purposes in 2019.

Key results

• 27% of the total market value of Dubai properties is foreign-owned—at least USD 146 billion.
• The value of Dubai real estate owned through other tax havens is disproportionate to their GDP: Saint Kitts and Nevis (141%), British Virgin Islands (37%), and Seychelles (19%).
• Properties owned by tax havens tend to be more expensive on average than other foreign-owned properties.
• The probability of owning offshore real estate rises with wealth, including within the very top of the wealth distribution.
• About 70% of Dubai properties owned by Norwegian taxpayers were not reported for tax purposes in 2019.

Data

The paper builds on two datasets:

• A micro-dataset capturing the ownership of about 800,000 properties in Dubai provided by confidential sources (private records compiled by UAE-based professionals in the real estate and property industry) to the Center for Advanced Defense Studies, a US nonprofit organization dedicated to analyzing and reporting conflict and security issues worldwide.
• Norwegian administrative tax record data delivered by Statistics Norway and contained detailed information on income and wealth from the individual tax statements. The final sample of Norwegian property owners in Dubai included 172 tax residents.

Methodology

The properties were linked to the owner’s country using nationality, which is more readily observable than residency. As the data included corporate and private owners, it was matched with the publicly available ICIJ offshore leaks database to identify the beneficial owner of firms. About 7% of all owners (who owned 19% of the properties in value) had untraceable nationality.

By matching properties owned by Norwegians to administrative tax records in Norway, the authors estimated the wealth distribution among property owners.

Go to the original article

The working paper can be downloaded from the EU Tax Observatory website. [PDF]