A Dh75m Dubai Hills villa is the emirate's most expensive property deal

A villa in Dubai Hills spanning 42,543 square feet that sold for Dh75 million is the most expensive property transaction to date in the emirate, according to a report by real estate brokerage Luxhabitat Sotheby’s based on data from the Dubai Land Department.

An Emirates Hills villa that sold for Dh69m was the second most expensive residential transaction of the year. Half of the most expensive properties sold so far this year were in Dubai Hills and District One, sub-communities in Mohammed Bin Rashid City, the brokerage said in a report released on Monday.

“We have seen demand rise for townhouses and villas as they are more appealing to end-users, especially those properties with good outdoor spaces and swimming pools,” said Andrew Cleator, managing director of Luxhabitat Sotheby’s International Realty.

We have seen demand rise for townhouses and villas as they are more appealing to end-users

The sale of prime villas in Dubai doubled from 203 in the second quarter to 438 in the third quarter, the brokerage added.

“The Palm Jumeirah, MBR City District One, Arabian Ranches, Al Barari and Dubai Hills Estate among others have witnessed a significant spike in interest from end-users,” Mr Cleator said.

The property market in the UAE has become more attractive to tenants as average rental rates softened in the third quarter, real estate consultancy JLL said a report on Sunday. It added that house rents in Dubai are 12 per cent cheaper in the third quarter while the emirate’s residential sales prices are 9 per cent lower annually.

More than 2,297 apartments and 438 villas were transacted during the third quarter in Dubai’s prime residential market, a 24 per cent increase compared to the second quarter. The cumulative value of transactions in the prime residential market rose 49 per cent to reach Dh7.4 billion, compared with Dh5bn in the second quarter.

The top three areas in terms of sales volume were MBR City (Dh2.2bn worth of sales), Downtown Dubai (Dh1.2bn) and Palm Jumeirah (Dh1bn).

Nakheel’s Jumeirah Islands registered the highest growth in sales at Dh72.9m, 24 times higher than the second quarter, followed by Al Barari, which saw a five-fold growth in sales at Dh64.3m.

“Banks are currently offering low fixed-rate mortgages as well as higher loan-to-value rates. This has triggered a flurry of first-time buyer purchases as buyers now see the long-term benefits of owning opposed to renting,” added Mr Cleator.

The volume of secondary sales in Dubai’s prime residential market doubled quarter on quarter. The value of transactions in the secondary market was Dh6bn in the third quarter, compared with Dh2.7bn in the second quarter.

“As the off-plan segment hasn’t been able to absorb the capital with enough new releases, cash is diverted to the most stable secondary property markets,” said George Azar, chief executive of Luxhabitat Sotheby’s International Realty.

The number of prime apartments sold in the secondary market doubled to 1,177 in the third quarter from 520 in the second quarter, while the number of villas sold more than doubled from 418 to 188.

The average price of an apartment in Dubai’s secondary prime residential market is Dh1.8m and a villa is Dh6m, according to Luxhabitat Sotheby’s International Realty.

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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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