Dubai property prices rise in April boosted by off-plan sales

Dubai property prices in April rose 0.49 per cent from a month ago, helped by a rise in off-plan transactions, a new report found.

Prices in April – the month during which the UAE enforced stay-at-home directives – stood at Dh866 per square foot on average, slightly higher than the Dh862 per square foot recorded in March, the Cavendish Maxwell’s Property Monitor report said.

“This increase is likely artificial and temporary in nature as closing resale deals in the absence of physical viewings is a greater challenge than for off-plan," the report said.

"Now that the mobility restrictions have been eased and online modes of transfer for both off-plan and resale properties have become available, a more normal market mix should result.” Off-plan property deals accounted for 72.1 per cent of total transactions in April compared to 27.9 per cent for resale.

However, the volume of closed transactions in April was significantly lower than the previous month due to mobility restrictions imposed by the government to contain the spread of the coronavirus pandemic. A total of 1,825 transactions were recorded during the month, down 47 per cent from March.

The report also said year-on-year property prices have fallen by 8.3 per cent, which is an improvement on the previous 12 months to April 2019 where a year-on-year decline of 9.7 per cent was recorded.

The bulk of off-plan market transactions were by Dubai Properties at 26.2 per cent, with a high volume of registrations at La Vie (Jumeirah Beach Residences), Madinat Jumeirah Living, and Villa Nova. This was followed by Emaar at 23.5 per cent, with the majority of their off-plan registrations at Marina Vista (Dubai Harbour), and various projects at Dubai Creek Harbour and the Opera District.

Dubai's real estate market has slowed in the wake of a drop in oil prices that began in 2014, and due to an oversupply in the property market. The coronavirus pandemic has further pressured the sector as live viewings dwindled.

However, with movement restrictions easing in the UAE, the sector is expected to rebound.

Dubai's property market is expected to bounce back strongly in 2021 on the back of increased economic activity related to Expo 2020, Damac chairman Hussain Sajwani said last month.

Company%20profile

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Mercer, the investment consulting arm of US services company Marsh & McLennan, expects its wealth division to at least double its assets under management (AUM) in the Middle East as wealth in the region continues to grow despite economic headwinds, a company official said.

Mercer Wealth, which globally has $160 billion in AUM, plans to boost its AUM in the region to $2-$3bn in the next 2-3 years from the present $1bn, said Yasir AbuShaban, a Dubai-based principal with Mercer Wealth.

“Within the next two to three years, we are looking at reaching $2 to $3 billion as a conservative estimate and we do see an opportunity to do so,” said Mr AbuShaban.

Mercer does not directly make investments, but allocates clients’ money they have discretion to, to professional asset managers. They also provide advice to clients.

“We have buying power. We can negotiate on their (client’s) behalf with asset managers to provide them lower fees than they otherwise would have to get on their own,” he added.

Mercer Wealth’s clients include sovereign wealth funds, family offices, and insurance companies among others.

From its office in Dubai, Mercer also looks after Africa, India and Turkey, where they also see opportunity for growth.

Wealth creation in Middle East and Africa (MEA) grew 8.5 per cent to $8.1 trillion last year from $7.5tn in 2015, higher than last year’s global average of 6 per cent and the second-highest growth in a region after Asia-Pacific which grew 9.9 per cent, according to consultancy Boston Consulting Group (BCG). In the region, where wealth grew just 1.9 per cent in 2015 compared with 2014, a pickup in oil prices has helped in wealth generation.

BCG is forecasting MEA wealth will rise to $12tn by 2021, growing at an annual average of 8 per cent.

Drivers of wealth generation in the region will be split evenly between new wealth creation and growth of performance of existing assets, according to BCG.

Another general trend in the region is clients’ looking for a comprehensive approach to investing, according to Mr AbuShaban.

“Institutional investors or some of the families are seeing a slowdown in the available capital they have to invest and in that sense they are looking at optimizing the way they manage their portfolios and making sure they are not investing haphazardly and different parts of their investment are working together,” said Mr AbuShaban.

Some clients also have a higher appetite for risk, given the low interest-rate environment that does not provide enough yield for some institutional investors. These clients are keen to invest in illiquid assets, such as private equity and infrastructure.

“What we have seen is a desire for higher returns in what has been a low-return environment specifically in various fixed income or bonds,” he said.

“In this environment, we have seen a de facto increase in the risk that clients are taking in things like illiquid investments, private equity investments, infrastructure and private debt, those kind of investments were higher illiquidity results in incrementally higher returns.”

The Abu Dhabi Investment Authority, one of the largest sovereign wealth funds, said in its 2016 report that has gradually increased its exposure in direct private equity and private credit transactions, mainly in Asian markets and especially in China and India. The authority’s private equity department focused on structured equities owing to “their defensive characteristics.”

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