First-quarter residential prices in Abu Dhabi were little changed. Rich-Joseph Facun / The National
First-quarter residential prices in Abu Dhabi were little changed. Rich-Joseph Facun / The National
First-quarter residential prices in Abu Dhabi were little changed. Rich-Joseph Facun / The National
First-quarter residential prices in Abu Dhabi were little changed. Rich-Joseph Facun / The National

Property

Abu Dhabi may act to address property supply glut, official says

'Today, when we look at statistics it shows there’s greater supply than demand,' Ali Majid al-Mansouri, chairman of Abu Dhabi’s economic department, said.

Reuters

May 30, 2016

  • English
  • Arabic

Abu Dhabi’s property market is over-supplied and the government may take steps to address the imbalance, a senior official said on Sunday.

Prices in the UAE capital’s residential sector were flat last year, after rising about 25 per cent a year in 2013 and 2014, as affordability levels became stretched and the government cut spending following the slump in oil prices.

First-quarter residential prices were little changed and property consultants CBRE last month described buying appetite and overall sentiment as weak. Rival firm JLL warned prices could come under downward pressure if transaction volumes remain low.

“Today, when we look at statistics it shows there’s greater supply than demand,” Ali Majid Al Mansouri, chairman of Abu Dhabi’s economic department, told reporters on the sidelines of a business forum.

“We are studying this and if there’s a big difference between supply and demand we’ll meet that with innovative solutions to make sure there is a balance,” he said, without elaborating on what measures the government might take.

__________

Rents

■ Where Abu Dhabi rents have risen and fallen, Q1 2016 click here

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JLL said in a report last month that the market remained stable despite the continued impact of lower oil prices and a reduction in government expenditure.

“While there are some initial signs of government spending starting to return - particularly for mega tourism attractions - we expect caution to prevail,” David Dudley, the head of JLL’s Abu Dhabi office said in the report.

“The extent to which market stability is maintained very much depends on the return of domestic government spending in spite of a reduction in oil revenues,” he said.

Unit completions are at a 10-year low, a situation JLL attributed to wariness on the part of developers, tightening liquidity and stiffer regulation.

“We expect transaction volumes to remain low, which may start to put pressure on sales prices,” Mr Dudley said.

Abu Dhabi plans to issue tenders for Dh20 billion of infrastructure works over the next two to five years in what will likely be public-private partnerships, Khalifa Al Mazrouei, under-secretary at the emirate’s department of municipal affairs said at the same forum.

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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

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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.”

Visit Abu Dhabi culinary team's top Emirati restaurants in Abu Dhabi

Yadoo’s House Restaurant & Cafe

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Golden Dallah

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Al Mrzab Restaurant

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Al Derwaza

For the fish hubul, regag bread, biryani and special seafood soup. 

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