DUBAI // Villa rental rates in Dubai plunged by almost a quarter over 12 weeks, according to new data published today - and agents warned that prices may tumble further should the worst predictions of a summer population exodus come true.
House rental prices dropped by an average of 24 per cent in Dubai between April and June, while those of flats fell by 21 per cent, according to a report by the property services firm Asteco.
Villa and apartment purchase prices also fell by an average of 15 and 13 per cent respectively, according to the figures, although properties in Palm Jumeirah bucked the trend, increasing by up to 20 per cent.
The research comes only days after statistics showed that rents had fallen by up to 35 per cent in parts of Abu Dhabi, although they remained far higher than those in Dubai.
Several agents last month said Abu Dhabi landlords were keeping rents in the capital high and clinging to unrealistic income expectations, which had worsened the housing shortage.
Andrew Chambers, the managing director of Asteco, said the disparity in rents between the two cities was driving large numbers of people who work in the capital to commute from Dubai.
"We have seen prices in Dubai fall again this quarter, and we are seeing a continuation of the trend of people who work in Abu Dhabi relocating to Dubai," Mr Chambers said.
"In this sense, prices in Dubai are being buoyed by people who are working in Abu Dhabi. People are comparing the prices and deciding whether they would like to live in an apartment in Abu Dhabi and pay a high price but not have to commute, or a place in Dubai, where they will have to drive, but they will pay a lower price and get extra facilities like a pool and a gym."
Dubai's International City district was the cheapest area to rent a one-bedroom flat. It saw rents fall by 21 per cent during the last three months to Dh40,000 per year. The most expensive area was Palm Jumeirah, where tenants could expect to pay Dh100,000.
The most expensive area to rent a three-bedroom villa was Downtown Burj Dubai, where it would cost Dh265,000 per year, while the cheapest area was Mirdiff at Dh107,000.
The property report said that if there was a large-scale movement of people out of Dubai during July and August, prices could drop further.
Jesse Downs, the director of research and advisory services at Landmark Advisory, a division of the property brokerage firm Landmark Properties, said she expected to see more declines.
"In terms of rents, we are still in a downwards price cycle," she said. "Prices have come down significantly. However, in some areas prices have started to plateau, and in others even increase. In recent years, we have seen a large inflation of prices, which has forced some people to leave Dubai and move to areas such as Sharjah."
She added that people previously priced out of the market were now considering moving back in. That, combined with the large number of people working in Abu Dhabi but living in Dubai, was helping stabilise rents in Dubai.
"We have expected there is going to be a mass exodus from Dubai, and we have already seen people leaving," she said. "I do think prices will decline but it is hard to say by how much. It depends on the extent of the pent-up demand."
@Email:chamilton@thenational.ae
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Formula Middle East Calendar (Formula Regional and Formula 4)
Round 1: January 17-19, Yas Marina Circuit – Abu Dhabi
Round 2: January 22-23, Yas Marina Circuit – Abu Dhabi
Round 3: February 7-9, Dubai Autodrome – Dubai
Round 4: February 14-16, Yas Marina Circuit – Abu Dhabi
Round 5: February 25-27, Jeddah Corniche Circuit – Saudi Arabia
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.”
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.
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