More tenants in Dubai are renewing their residential leases as rents continue to rise, with a 14 per cent annual increase in the number of renewals in the second quarter of this year, according to a new report.
City-wide rents rose for the 14th consecutive quarter, property consultancy Cushman and Wakefield Core found.
Apartment rents are up by 22 per cent compared to the same period last year, its report said, and villa rents rose by 13 per cent year-on-year.
“Household incomes are not keeping pace with rising rents, which is further contracting disposable incomes,” Prathyusha Gurrapu, head of research and consulting at Cushman and Wakefield Core, said.
“Similar to the trends seen in the sales market, rents in the mid-market apartment districts, such as Discovery Gardens, Dubai Sports City and Dubailand, saw the steepest rise, whereas prime districts saw lower levels of increase.”
This week, Abu Dhabi launched the emirate’s first residential rental index, aimed at providing indicative rental values for tenants and landlords in different areas of the capital. The Rental Index is available online at the Abu Dhabi Real Estate Centre’s website www.adrec.gov.ae.
Rents continue to rise in Abu Dhabi. Apartment rents increased by 2 per cent annually in Abu Dhabi during the second quarter, while villa rents jumped 5 per cent, according to the latest report from Asteco.
Dubai's Real Estate Regulatory Authority updated its rent calculator earlier this year. The Rera calculator, which was recalibrated on March 1 to become more representative of open-market pricing, is revised periodically.
Residential sales prices in Dubai continued their upward trajectory for the 16th consecutive quarter with a 21 per cent year-on-year increase, according to the Cushman and Wakefield Core report. However, it said, prime districts saw a relative moderation in sales price increases, while mainstream and affordable districts are witnessing steep increases that are impacting their affordability.
The study found that Dubai remained a strong global ultra-prime market, with more than 305 residential properties sold for above Dh20 million in the second quarter, a 12 per cent annual increase. However, there has been a marked slowdown in off-plan transactions over the last two quarters.
“This is mainly due to the lower off-plan inventory available in the market for these ticket sizes. That said, secondary market ultra-prime transactions have retained their steady activity levels with 135 transactions,” Ms Gurrapu said.
During the second quarter, only 5,391 units were delivered compared to more than 8,350 in the preceding quarter, the report said.
A total of 24,300 residential units are anticipated over the remainder of the year, bringing the annual total to nearly 39,000 units, which is similar to 2023 and in line with market demand.
“Growing from a high base, new project launch volumes continue to see record numbers with a 42 per cent annual increase, as demand and absorption remain buoyant,” Ms Gurrapu said.
“We have also seen developers with large landbanks initiating projects and smaller private developers aggressively acquiring land, which continues to be a challenge to source.”
Until the end of 2021, the differential between off-plan transactions and secondary market transactions was limited. However, over the last two to three years, off-plan transactions have sharply increased, underpinned by the rise in new project launches.
Ms Gurrapu said that while secondary market transactions recorded a moderate growth of 5 per cent, off-plan transactions saw a substantial spike of 61 per cent.
In the second quarter, off-plan transactions accounted for more than double the number of secondary market transactions, indicating that the off-plan market has a higher share of investors compared to end users, she added.
“Primary off-plan sales prices [inventory sold by developers] are higher than secondary off-plan prices [resales by individuals] across most Dubai districts and off-plan projects,” the report said.
“Although the percentage difference is still in single digits, it suggests that sellers are struggling to match original prices and selling slightly below market value to exit.”
Other indicators of market stabilisation include a higher number of sales listings with no change in prices in the first half of 2024, while a much lower number of listings saw prices increase compared to the same period, according to Cushman and Wakefield Core.
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Ten tax points to be aware of in 2026
1. Domestic VAT refund amendments: request your refund within five years
If a business does not apply for the refund on time, they lose their credit.
2. E-invoicing in the UAE
Businesses should continue preparing for the implementation of e-invoicing in the UAE, with 2026 a preparation and transition period ahead of phased mandatory adoption.
3. More tax audits
Tax authorities are increasingly using data already available across multiple filings to identify audit risks.
4. More beneficial VAT and excise tax penalty regime
Tax disputes are expected to become more frequent and more structured, with clearer administrative objection and appeal processes. The UAE has adopted a new penalty regime for VAT and excise disputes, which now mirrors the penalty regime for corporate tax.
5. Greater emphasis on statutory audit
There is a greater need for the accuracy of financial statements. The International Financial Reporting Standards standards need to be strictly adhered to and, as a result, the quality of the audits will need to increase.
6. Further transfer pricing enforcement
Transfer pricing enforcement, which refers to the practice of establishing prices for internal transactions between related entities, is expected to broaden in scope. The UAE will shortly open the possibility to negotiate advance pricing agreements, or essentially rulings for transfer pricing purposes.
7. Limited time periods for audits
Recent amendments also introduce a default five-year limitation period for tax audits and assessments, subject to specific statutory exceptions. While the standard audit and assessment period is five years, this may be extended to up to 15 years in cases involving fraud or tax evasion.
8. Pillar 2 implementation
Many multinational groups will begin to feel the practical effect of the Domestic Minimum Top-Up Tax (DMTT), the UAE's implementation of the OECD’s global minimum tax under Pillar 2. While the rules apply for financial years starting on or after January 1, 2025, it is 2026 that marks the transition to an operational phase.
9. Reduced compliance obligations for imported goods and services
Businesses that apply the reverse-charge mechanism for VAT purposes in the UAE may benefit from reduced compliance obligations.
10. Substance and CbC reporting focus
Tax authorities are expected to continue strengthening the enforcement of economic substance and Country-by-Country (CbC) reporting frameworks. In the UAE, these regimes are increasingly being used as risk-assessment tools, providing tax authorities with a comprehensive view of multinational groups’ global footprints and enabling them to assess whether profits are aligned with real economic activity.
Contributed by Thomas Vanhee and Hend Rashwan, Aurifer
Russia's Muslim Heartlands
Dominic Rubin, Oxford
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Results
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The bio
His favourite book - 1984 by George Orwell
His favourite quote - 'If you think education is expensive, try ignorance' by Derek Bok, Former President of Harvard
Favourite place to travel to - Peloponnese, Southern Greece
Favourite movie - The Last Emperor
Favourite personality from history - Alexander the Great
Role Model - My father, Yiannis Davos
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.”
