The pipeline of new properties due for completion in Dubai this year continues to swell, while agents are confident that the low volumes experienced for house sales over the past two years is about to pick up, according to Cavendish Maxwell.
The property consultancy’s fourth-quarter residential survey states that 61,000 homes are scheduled for completion this year, with this number swelled by the fact that 13,000 units that were anticipated to be completed last year slipping over into 2017. It also added that “delays are likely to greatly reduce activity” this year.
The company said that 16,400 new homes were handed over last year, with the bulk of these in Dubailand and Dubai Silicon Oasis. It said transaction volumes for sales dropped by 19 per cent year-on-year, citing 14,500 deals between January and mid-December. Average apartment prices dropped by 3.4 per cent year-on-year and villas fell by 3.6 per cent, but the rate of decline slowed towards the end of the year.
“Marginal declines are expected to continue in 2017 and a turnaround will be largely dependent on oil prices and US dollar movement,” said Sofia Underabi, the head of residential valuation at Cavendish Maxwell.
She said that residential demand is driven by expat employment growth, but recent redundancies have kept net jobs growth fairly low.
“In comparison, residential supply continues to expand, albeit at slower rates than pre-2009 and 2013-14 levels.”
A poll of agents carried out by Cavendish Maxwell found that 55 per cent expect agreed sales volumes would increase during the first three quarters of this year, while 11 per cent predict a decline and 34 per cent forecast a flat market.
In Abu Dhabi, meanwhile, apartment prices in investment zones dropped by 2 per cent year-on-year, while villa prices dropped by 2.5 per cent. Again, the pace of price falls slowed at the end of the year.
“While the rate of decline in Q4 2016 has slowed in comparison to the first half of the year, the residential market in Abu Dhabi is expected to remain under pressure from redundancies in the oil and gas sector, cuts at key employers such as Etihad and job losses likely to result from the mergers of NBAD-FGB and Mubadala-Ipic,” said research manager Manika Dhama.
About 1,900 new homes were handed over in investment zones in the emirate last year, and a pipeline of 8,300 are due for completion this year.
A survey published this week by Al Masah Capital stated that it expects 57,000 new homes to be completed in Dubai between the last quarter of 2016 and the end of 2018, with 53 per cent of those due for handover this year.
“Going forward, this supply is expected to be absorbed as the economy gains momentum and the city sees an increase in its expatriate workforce due to upcoming events such as Expo 2020,” it said.
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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.”
Company Profile
Company name: Cargoz
Date started: January 2022
Founders: Premlal Pullisserry and Lijo Antony
Based: Dubai
Number of staff: 30
Investment stage: Seed
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