The cost of housing is back on the agenda in Dubai, as an increasing number of statistics point towards rapidly rising sale prices and rents. As the emirate gears up for one of the largest Cityscape exhibitions in years, the rapidly rising cost of renting and owning property in Dubai, particularly in the residential sector, is leading many commentators to question whether another bubble is developing.
Jones Lang LaSalle reported last week that house prices in the emirate rose by an average of 17.9 per cent over the year to the end of August, while it estimates that population and employment growth increased by just 5 per cent over the same period. Jones Lang described such growth as unsustainable, and warned that there could be a correction within the next 12 months.
A survey carried out by Knight Frank in the first quarter of 2013 found that Dubai’s prime rental market was the fastest growing in the world, with a year on year growth of 18.3 per cent, compared with 1.9 per cent in Singapore, and falls of 2.3 and 3.1 per cent for Hong Kong and London.
However, a survey published last month by the international property adviser Savills offers an alternative viewpoint, which may offer more comforting news for Dubai as it continues to seek to attract foreign businesses to its shores.
Savills’ “value for money” ranking, part of its World Cities Report, surveyed 10 leading business centres, measuring accommodation costs against GDP per head, as an indicator income potential for businesses located in the city.
Using this formula, Singapore was deemed to be the best value for money city of the 10 centres surveyed, despite its comparatively high commercial and residential rents, followed by Sydney, Moscow and New York. Mumbai, where costs were just over half of those of Singapore, came in last in the survey in terms of value for money.
“The value of real estate is higher where more corporate revenue can be generated,” said Yolande Barnes, director of residential research at Savills. “In other words, it is worth paying more to accommodate an executive team in Singapore with its high GDP than in the low GDP Mumbai.”
Using such criteria, Dubai and the UAE continue to rank as attractive options for international businesses, thanks to the country’s relatively small but growing population, and an economy showing strong signs of growth. The UAE’s economy is forecast to grow by 3.95 per cent this year, according to a composite of economic forecasts compiled by Bloomberg, comparing favourably with markets such as Singapore (2.6 per cent) and Hong Kong (3 per cent).
At the emirate level, Dubai’s GDP is forecast to grow by 3.9 per cent during 2013, according to Emirates NBD.
And the UAE ranked 26th in the World Bank’s Doing Business report for 2012, second only to Saudi Arabia, topping the Middle East for starting a business, getting electricity, registering a property and trading across borders.
While such factors mean the outlook for Dubai and the UAE remains positive, challenges remain for businesses and employees, with large commercial and residential rental increases in the past 12 months.
On the one hand, businesses looking to set up or expand in Dubai can still take advantage of commercial rents far below those reached at the tail end of the emirate’s boom years. A report last week from the property broker Asteco found that commercial rents are still on average 66 per cent below the peak rates paid in September 2008.
However office rents are on the up again, with office space in growth districts such as Jumeirah Lakes Towers and Tecom C up 110 per cent and 82 per cent year on year. Average commercial rents across Dubai grew 43 per cent during the year, according to Asteco.
Of greater concern perhaps is the continuing rise in residential rents across the city. Rental rates for apartments and villas in Dubai were up 23 and 19 per cent year on year respectively, Asteco’s report found, with rents rising fastest in areas such as International City, JLT, the Springs and Mirdif. While rental rates for both apartments and villas rents are still below the heights of 2008’s third quarter, the gap has narrowed to 38 and 31 per cent respectively.
Dubai’s commercial and residential rental rates are widely forecast to keep on rising, with prices pushed up by Dubai’s continuing economic recovery.
The emirate’s economic recovery, however, will not result in salary increases in line with the increases in rents, according to research published by Hay Group last month.
In the midst of Dubai’s recovery, companies are hiring like never before, according to Hay Group. Of the 270,000 employees surveyed for the consultancy’s UAE Compensation and Benefits Report, 44,000 had begun work for a new company in the past 12 months, as compared with 34,000 last year.
Yet the company found that a sizeable number of new arrivals in Dubai come from western countries with stagnant economies, with lower salary expectations than expatriates from growth economies in Asia.
As a result, salaries grew on average by 4.4 per cent in 2013, compared with 4.9 per cent in 2012. Although salaries are forecast to increase by an average of 5 per cent next year, increasing inflationary pressures in areas such as health care and education are likely to limit any growth in disposable income.
jeverington@thenational.ae
Titanium Escrow profile
Started: December 2016
Founder: Ibrahim Kamalmaz
Based: UAE
Sector: Finance / legal
Size: 3 employees, pre-revenue
Stage: Early stage
Investors: Founder's friends and Family
THE LIGHT
Director: Tom Tykwer
Starring: Tala Al Deen, Nicolette Krebitz, Lars Eidinger
Rating: 3/5
David Haye record
Total fights: 32
Wins: 28
Wins by KO: 26
Losses: 4
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.”
'The Predator'
Dir: Shane Black
Starring: Olivia Munn, Boyd Holbrook, Keegan-Michael Key
Two and a half stars
The%20US%20Congress%20explained
%3Cp%3E-%20Congress%20is%20one%20of%20three%20branches%20of%20the%20US%20government%2C%20and%20the%20one%20that%20creates%20the%20nation's%20federal%20laws%3C%2Fp%3E%0A%3Cp%3E-%20Congress%20is%20divided%20into%20two%20chambers%3A%20The%20House%20of%20Representatives%20and%20the%20Senate%3C%2Fp%3E%0A%3Cp%3E-%C2%A0The%20House%20is%20made%20up%20of%20435%20members%20based%20on%20a%20state's%20population.%20House%20members%20are%20up%20for%20election%20every%20two%20years%3C%2Fp%3E%0A%3Cp%3E-%20A%20bill%20must%20be%20approved%20by%20both%20the%20House%20and%20Senate%20before%20it%20goes%20to%20the%20president's%20desk%20for%20signature%3C%2Fp%3E%0A%3Cp%3E-%20A%20political%20party%20needs%20218%20seats%20to%20be%20in%20control%20of%20the%20House%20of%20Representatives%3C%2Fp%3E%0A%3Cp%3E-%20The%20Senate%20is%20comprised%20of%20100%20members%2C%20with%20each%20state%20receiving%20two%20senators.%20Senate%20members%20serve%20six-year%20terms%3C%2Fp%3E%0A%3Cp%3E-%20A%20political%20party%20needs%2051%20seats%20to%20control%20the%20Senate.%20In%20the%20case%20of%20a%2050-50%20tie%2C%20the%20party%20of%20the%20president%20controls%20the%20Senate%3C%2Fp%3E%0A
How to protect yourself when air quality drops
Install an air filter in your home.
Close your windows and turn on the AC.
Shower or bath after being outside.
Wear a face mask.
Stay indoors when conditions are particularly poor.
If driving, turn your engine off when stationary.
if you go
The flights
Etihad and Emirates fly direct from the UAE to Seoul from Dh3,775 return, including taxes
The package
Ski Safari offers a seven-night ski package to Korea, including five nights at the Dragon Valley Hotel in Yongpyong and two nights at Seoul CenterMark hotel, from £720 (Dh3,488) per person, including transfers, based on two travelling in January
The info
Visit www.gokorea.co.uk
The specs
Engine: 2.0-litre 4-cyl turbo
Power: 247hp at 6,500rpm
Torque: 370Nm from 1,500-3,500rpm
Transmission: 10-speed auto
Fuel consumption: 7.8L/100km
Price: from Dh94,900
On sale: now
The%20specs
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Company profile: buybackbazaar.com
Name: buybackbazaar.com
Started: January 2018
Founder(s): Pishu Ganglani and Ricky Husaini
Based: Dubai
Sector: FinTech, micro finance
Initial investment: $1 million
More on Palestine-Israeli relations
Europe’s rearming plan
- Suspend strict budget rules to allow member countries to step up defence spending
- Create new "instrument" providing €150 billion of loans to member countries for defence investment
- Use the existing EU budget to direct more funds towards defence-related investment
- Engage the bloc's European Investment Bank to drop limits on lending to defence firms
- Create a savings and investments union to help companies access capital
Where can I submit a sample?
Volunteers can now submit DNA samples at a number of centres across Abu Dhabi. The programme is open to all ages.
Collection centres in Abu Dhabi include:
- Abu Dhabi National Exhibition Centre (ADNEC)
- Biogenix Labs in Masdar City
- Al Towayya in Al Ain
- NMC Royal Hospital in Khalifa City
- Bareen International Hospital
- NMC Specialty Hospital, Al Ain
- NMC Royal Medical Centre - Abu Dhabi
- NMC Royal Women’s Hospital.
THE BIO: Martin Van Almsick
Hometown: Cologne, Germany
Family: Wife Hanan Ahmed and their three children, Marrah (23), Tibijan (19), Amon (13)
Favourite dessert: Umm Ali with dark camel milk chocolate flakes
Favourite hobby: Football
Breakfast routine: a tall glass of camel milk
COMPANY PROFILE
Name: Kumulus Water
Started: 2021
Founders: Iheb Triki and Mohamed Ali Abid
Based: Tunisia
Sector: Water technology
Number of staff: 22
Investment raised: $4 million
How to avoid crypto fraud
- Use unique usernames and passwords while enabling multi-factor authentication.
- Use an offline private key, a physical device that requires manual activation, whenever you access your wallet.
- Avoid suspicious social media ads promoting fraudulent schemes.
- Only invest in crypto projects that you fully understand.
- Critically assess whether a project’s promises or returns seem too good to be true.
- Only use reputable platforms that have a track record of strong regulatory compliance.
- Store funds in hardware wallets as opposed to online exchanges.
