A Dubai market report has shown an increasing number of tenants are renewing their existing residential leases after two years of significant rent hikes.
Real estate consultancy CBRE found many residents are not prepared or able to pay higher rates on new leases. Its latest report also suggests that the change may be due to a lack of available stock particularly in prime and core residential areas.
Data from the Dubai Land Department revealed that in the year to date to March, the total number of rental registrations stood at 159,941, marking an increase of 5.8 per cent from the previous year.
This growth has been underpinned by a 12.3 per cent growth in renewed rental registrations, whereas new contracts registered recorded a decline of 4.1 per cent, CBRE revealed.
Rental growth in Dubai has accelerated this year, after a period of moderation last year.
In March, average residential rents reported an annual increase of 21.2 per cent, up from the 20.4 per cent growth a month earlier, according to CBRE.
Over the period, average apartment and villa rents grew by 22.1 per cent and 14.5 per cent, the report found.
As of March, the median apartment and villa asking rent stood at Dh123,429 and Dh344,658, it said.
“In Dubai, residential rents will continue to increase; however, not at the same rate that we have been seeing to date, and we expect that the rate of change will diminish in the second half of the year,” Taimur Khan, head of research for Middle East and North Africa in Dubai at CBRE, said.
The Real Estate Regulatory Agency rent calculator was recalibrated on March 1 to become more representative of open-market pricing.
This is expected to be a double-edged sword for tenants, analysts told The National.
The calculator is revised periodically for certain communities and buildings to reflect current market rental rates. It shows whether or not a rent increase is allowed and uses criteria such as location, property type, current rent and number of rooms and works by comparing properties with similar ones nearby.
Rents in Dubai rose 19 per cent year-on-year last year, compared with 27 per cent the previous year, property consultancy Cushman & Wakefield said in a market report.
It said many tenants were opting to stay put because rental increases during renewals are much lower compared to signing new leases, but several renewing this year will face higher rent due to the adjustment in Rera's calculator.
Price growth also continued to accelerate during the first quarter of 2024, with average sales prices increasing by 20.7 per cent in the year to March, the CBRE report found.
Throughout this period, average apartment and villa prices increased by 20.4 per cent and 22.1 per cent.
Although headline median sales rates are still marginally below the 2014 highs by 0.1 per cent, several prominent residential neighbourhoods have already surpassed their 2014 figures, CBRE said.
As of March, mean apartment prices stood at Dh1,486 per square foot, and average villa prices reached Dh1,776 per square foot. Standard villa sales rates are currently above their 2014 baseline by 22.9 per cent, according to the consultancy.
“The UAE’s residential market started the year on a relatively strong note, where the elevated demand levels continue to drive performance,” Mr Khan said.
“The strong levels of activity and high absorption levels, which have reduced available supply, will continue to support price growth in Dubai over the remainder of the year.
“Looking ahead, we expect Dubai’s residential sales market to maintain its upward trajectory. Prices in both the apartment and villa segments of the market will continue to grow, however, not at the same pace.”
In terms of supply, 6,526 residential units were delivered in Dubai in the first quarter, with 59.7 per cent of this stock being located in Meydan One, Jumeirah Village Circle and Al Furjan, the report showed.
Over the remainder of the year, 46,086 units are expected to be handed over, with 31.4 per cent of this stock scheduled for delivery in District Seven, Damac Lagoons and Business Bay.
Given previous materialisation rates, CBRE estimated that only a limited portion of this upcoming stock will come online as planned.
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Name: Dr Hassan Mohsen Elhais
Position: legal consultant with Al Rowaad Advocates and Legal Consultants.
Libya's Gold
UN Panel of Experts found regime secretly sold a fifth of the country's gold reserves.
The panel’s 2017 report followed a trail to West Africa where large sums of cash and gold were hidden by Abdullah Al Senussi, Qaddafi’s former intelligence chief, in 2011.
Cases filled with cash that was said to amount to $560m in 100 dollar notes, that was kept by a group of Libyans in Ouagadougou, Burkina Faso.
A second stash was said to have been held in Accra, Ghana, inside boxes at the local offices of an international human rights organisation based in France.
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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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Label: Warner Records
Number of tracks: 11
Rating: 4/5
