Dubai's prime residential market is set for the world's strongest growth next year, according to a new report.
Across the 25 cities tracked, property consultancy Knight Frank expects prime residential prices to rise by 2 per cent on average in 2023, down from 2.7 per cent predicted six months ago.
It predicts Dubai to lead the way with a 13.5 per cent rise in prime prices, ahead of the likes of Miami (5 per cent), Los Angeles (4 per cent) and Paris (4 per cent).
“Dubai’s prime residential market has and continues to be a global outlier, with record price growth in 2022, albeit this has been from a low base,” said Faisal Durrani, partner — head of Middle East research at Knight Frank.
“Prime values are being fuelled by Dubai’s safe-haven status, an exceptionally diverse range of international ultra-high-net-worth individuals in search of luxury second homes, combined of course with the government’s world-leading response to the pandemic, which has spurred business confidence.”
He added that Dubai is one of the most “affordable” luxury residential markets in the world, with prices trailing the 2014 peak levels by 21.4 per cent.
Prices have been rising this year across all sectors in Dubai amid the wider economic recovery following the pandemic.
Business activity in Dubai's non-oil private sector economy was “robust” in October as companies increased their headcounts at the fastest pace in about three years amid stronger new orders.
The emirate's headline seasonally adjusted S&P Global purchasing managers' index reading stood at 56, above the neutral 50 mark separating expansion from contraction.
The UAE economy is set to grow by more than 6 per cent this year, after expanding by 3.8 per cent in 2021, buttressed by a rebound in tourism, construction and activity related to the Expo 2020 Dubai, the International Monetary Fund said last week.
A lack of prime supply has also been driving up prices. Knight Frank said the number of new high-end homes planned is failing to keep pace with demand.
Bulgari Lighthouse on Jumeirah Bay Island (31 apartments) and Alpago’s Palm Flower on The Palm Jumeirah (11 apartments) account for the bulk of new high-end homes coming to the city’s prime neighbourhoods.
“Supply is the other critical factor in our 2023 outlook, with just eight villas in Dubai’s prime precincts expected to be delivered by 2025,” Mr Durrani said.
“Developers have not responded to the buoyancy in demand as we have seen in past cycles and with supply remaining limited and demand for luxury waterfront continuing to strengthen, our 2023 prime residential forecast of 13.5 per cent is supported by a clear demand-supply imbalance as well as a positive economic backdrop.”
Dubai prices are likely to end the year about 50 per cent higher than 2021, Mr Durrani added.
Palm Jumeirah villa prices are the most expensive in Dubai at Dh3,704 per square foot in October, data from CBRE show. Prices have risen in each of the past six months, sometimes by as much as 5 per cent on a month-by-month basis.
The Palm has been the location for a number of records this year. Alpago's Casa Del Sole villa sold for a Dubai property market record of Dh302 million, while there was also recently a rental record after a villa was leased on a six-month basis for Dh4 million.
UPI facts
More than 2.2 million Indian tourists arrived in UAE in 2023
More than 3.5 million Indians reside in UAE
Indian tourists can make purchases in UAE using rupee accounts in India through QR-code-based UPI real-time payment systems
Indian residents in UAE can use their non-resident NRO and NRE accounts held in Indian banks linked to a UAE mobile number for UPI transactions
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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.”
What are the GCSE grade equivalents?
- Grade 9 = above an A*
- Grade 8 = between grades A* and A
- Grade 7 = grade A
- Grade 6 = just above a grade B
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- Grade 4 = grade C
- Grade 3 = between grades D and E
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- Grade 1 = between grades F and G
COMPANY PROFILE
Name: Kumulus Water
Started: 2021
Founders: Iheb Triki and Mohamed Ali Abid
Based: Tunisia
Sector: Water technology
Number of staff: 22
Investment raised: $4 million
