The Dubai property market recorded its strongest start to a year, with 12,119 sales transactions to date, a report compiled by real estate data platform Property Monitor has shown.
This was a 17.7 per cent increase in transactions compared to 2017, which was the previous best start to a year, the company said.
The Dubai property market also registered a record 6,346 transactions last month, which was 43.5 per cent higher than any other February on record, the company said. February sales also grew 9.9 per cent on a monthly basis.
Dubai remains very affordable by international standards with many European markets raising barriers to external investment
Zhann Jochinke,
chief operating officer of Property Monitor
“Dubai remains very affordable by international standards with many European markets raising barriers to external investment, coupled with rising interest rates and inflation headwinds dampening the post-Covid recovery,” said Zhann Jochinke, chief operating officer of Property Monitor.
“This combination of factors could be added momentum for Dubai as a safe-haven market in the near term.”
The UAE’s property market has recovered strongly from the coronavirus-induced slowdown on the back of government initiatives such as residency permits for retirees and remote workers, as well as the expansion of the 10-year golden visa programme.
Property prices and rents in Dubai’s residential market will continue to increase in 2022 on the back of the emirate’s “strong economy”, a recent report by S&P Global Ratings said.
Dubai registered 2,576 off-plan transactions in February, down 4.9 per cent compared with January but an increase of 112.9 per cent on a yearly basis, said Property Monitor.
“While strengthening on transaction count basis, the market share of off-plan transactions fell to 40.6 per cent of the whole from 46.9 per cent last month,” the report said.
“However, with the significant amount of new development projects launched in recent months and several additional launches in the pipeline, the market share of off-plan sales is likely to again increase in the coming months.”
In February, more than 3,000 off-plan residential units entered the market for sale, said Property Monitor. Townhouses represented 58.5 per cent by volume of this new inventory, while apartments and villas accounted for 36.8 per cent and 4.7 per cent, respectively.
Emaar Properties led the off-plan market with a market share of 17.3 per cent, followed by Damac Properties, with 16.8 per cent and Azizi at 10.8 per cent, the research revealed.
Meanwhile, there were 2,180 resale transactions in February, which represented a market share of 34.4 per cent, up 4.5 per cent compared to January.
Dubai also recorded 1,580 mortgage-backed transactions in the same period, up 11.7 per cent from January levels.
“This month-on-month increase is largely the result of newly handed-over projects that are now eligible for home financing, particularly for townhouses, which saw loan volumes increase by 58.9 per cent. We foresee mortgage volumes resuming their downward trend as the cost of home ownership inevitably increases with interest rate hikes,” the report said.
The Dubai property market also recorded a 1.12 per cent increase in prices in February, the report said.
Average property values in Dubai stood at Dh1,001 per sq ft in February, down 18.8 per cent from the market peak in September 2014 and 27.6 per cent above the market trough of April 2009, Property Monitor said.
“Market headwinds and downside risks remain centred around the trajectory of inflation and interest rate rises amid global tensions,” Mr Jochinke said.
“While this may affect sentiment and raise a barrier to purchasing for some end-user buyers, we believe that other positive factors will outweigh any increase in the cost of credit and the market will continue its bull run.”
Mid-tier properties valued between Dh1 million and Dh3m accounted for the largest share of the Dubai sales market at 48.8 per cent in February, while low-priced units priced below Dh1m represented 32.9 per cent of the market. High-end properties above Dh3m made up 18.3 per cent of the sales market, the report added.
Rental yields increased to more than 6 per cent in February, with yields for townhouses experiencing the highest increase to 5.6 per cent from 5.2 per cent. Gross yields for apartments stand at slightly more than 7 per cent and villas at 5.1 per cent.
“We anticipate that rental market behaviour will mirror that of the sales market with the newer and most attractive developments being in high demand and leading yield curves higher. Older and less desirable communities and towers may suffer with slower demand and rents, which do not rise with the wider market,” according to the report.
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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Another way to earn air miles
In addition to the Emirates and Etihad programmes, there is the Air Miles Middle East card, which offers members the ability to choose any airline, has no black-out dates and no restrictions on seat availability. Air Miles is linked up to HSBC credit cards and can also be earned through retail partners such as Spinneys, Sharaf DG and The Toy Store.
An Emirates Dubai-London round-trip ticket costs 180,000 miles on the Air Miles website. But customers earn these ‘miles’ at a much faster rate than airline miles. Adidas offers two air miles per Dh1 spent. Air Miles has partnerships with websites as well, so booking.com and agoda.com offer three miles per Dh1 spent.
“If you use your HSBC credit card when shopping at our partners, you are able to earn Air Miles twice which will mean you can get that flight reward faster and for less spend,” says Paul Lacey, the managing director for Europe, Middle East and India for Aimia, which owns and operates Air Miles Middle East.
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England v New Zealand (Saturday, 12pm)
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Ali Kasheif, Salim Rashid, Khalifa Al Hammadi, Khalfan Mubarak, Ali Mabkhout, Omar Abdulrahman, Mohammed Al Attas, Abdullah Ramadan, Zayed Al Ameri (Al Jazira), Mohammed Al Shamsi, Hamdan Al Kamali, Mohammed Barghash, Khalil Al Hammadi (Al Wahda), Khalid Essa, Mohammed Shaker, Ahmed Barman, Bandar Al Ahbabi (Al Ain), Al Hassan Saleh, Majid Suroor (Sharjah) Walid Abbas, Ahmed Khalil (Shabab Al Ahli), Tariq Ahmed, Jasim Yaqoub (Al Nasr), Ali Saleh, Ali Salmeen (Al Wasl), Hassan Al Muharami (Baniyas)
