Dubai's residential property market posted strong growth in August, with total sales up 37 per cent annually to Dh31.2 billion ($8.5 billion), boosted by rising demand for off-plan units.
The value of off-plan sales doubled on a yearly basis to Dh16.79 billion last month, the latest market report by EFG Hermes said.
Robust activity in the Dubai Land and Business Bay areas drove off-plan sales, the report found.
Average selling prices continued their upward trend last month, increasing 20 per cent year-on-year to Dh2,230 per square foot on average.
Rates in the luxury segment posted strong annual growth of 37.7 per cent, with average prices at Dh3,870 per sq ft.
The top five areas by transaction value were Dubai Harbour (Dh2.7 billion), The Palm Jumeirah (Dh2.49 billion), Downtown Dubai (Dh778 million), Jumeirah (Dh393 million) and Dubai Healthcare City (Dh349 million).
In the affordable segment, prices rose 8.5 per cent yearly in August, with average rates at Dh1,815 per sq ft, EFG Hermes said.
Total transaction value stood at about Dh13 billion, with the top five areas including MBR City (Dh3.7 billion), Business Bay (Dh2.3 billion), Dubai Marina (Dh1.07 billion), Arabian Ranches (Dh1.01 billion) and The Lagoons (Dh837 million).
Meanwhile, in the budget segment, prices dropped by 4.5 per cent year-on-year, although they were up 4.4 per cent on a monthly basis averaging Dh990 per sq ft.
Looking at transaction values, the top five areas were Dubai Land (Dh4.9 billion), Dubai South (Dh1.28 billion), Jumeirah Village Circle (Dh915 million), Al Furjan (Dh 713 million) and Jumeirah Golf Estates (Dh544 million).
Dubai's property market has bounced back strongly from the coronavirus-induced slowdown, helped by government initiatives such as residency permits for retired and remote workers.
The emirate's move to expand the 10-year golden visa programme and higher oil prices also supported property market growth momentum.
Dubai’s residential real estate prices rose 17 per cent in the second quarter on an annual basis, marking the 10th consecutive quarter of expansion, amid strong demand and robust economic growth, a report by consultancy Knight Frank last month found.
Overall, total transactions in Dubai's real estate market rose nearly 25 per cent annually to Dh44.67 billion in August, the EFG report said.
While residential and office activity posted strong gains, land transactions recorded the least growth on a yearly basis.
Rental market mixed
On the rental side, the market recorded mixed performance in August, the EFG report found.
Areas such as Motor City, Downtown Dubai (affordable) and Dubai Sports City saw strong annual growth of 37.5 per cent, 29 per cent and 28 per cent, respectively, for two-bedroom apartments.
However, in Downtown Dubai (luxury) rents were down 17.6 per cent year-on-year, and in Emirates Living (The Greens) and International City, they nudged up 11 per cent and about 14 per cent, respectively, for two-bedroom units.
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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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