What's at Stake this week?

January 22, 2023

Did you know that Dubai is now home to over 200 centi-millionaires? A recent report from Henley Global Citizens revealed the number of millionaires residing in Dubai has rapidly increased since 2020, and will continue to rise as interest in Dubai’s thriving real estate scene and income-tax-free environment grows. Let’s take a look at some other takeaways from this week, shall we? 👇

Market Zoom: Dubai

Slow and steady wins the race

As per a recent study by Betterhomes, residential prices in Dubai will increase at a slower pace in 2023 by approximately 5% following a record-breaking year, after posting 11% growth in 2022 and 21% in 2021. ValuStrat published similar predictions regarding price stabilizations in the coming months and forecasts that prices will range between 7% – 10% with prime units to lead market activity.

Despite a slight slowdown in price appreciation, the rise in interest rates has made it difficult for many potential buyers to secure financing and has compelled them to remain renters rather than homeowners. However, it is worth noting that the Dubai real estate market has been relatively insulated from the impact of these rate fluctuations, thanks in large part to the prevalence of cash transactions, which account for a staggering 70% of all real estate deals. This has led to a steady influx of well-heeled buyers able to purchase properties outright, with the prime residential market reaping the greatest benefits. In fact, transactions in this segment alone totaled an impressive AED 30Bn in the fourth quarter of 2022.

According to Luxhabitat Sotheby’s, the average price of properties in prime areas increased by 8.72% QoQ, and the number of units sold increased by 230.24% QoQ at the end of 2022. The majority of buyers were high-net-worth individuals from Russia, followed by the United Kingdom, India, Italy, and France, whose significant investments have been driving property price growth.

Did you know? In order to sustain the sector’s noteworthy performance in the coming period, the Dubai Land Department recently published its “Strategic Plan 2026”. Already under implementation, the strategy aims to position the emirate’s real estate market as a global leader by providing seamless real estate services, implementing regulations, allocating human capital, and raising the real estate sector’s share of GDP. And to achieve these goals, it was built on five core pillars:

  1. Pioneering real estate model – to improve sustainability in the sector
  2. Incubator of real estate innovation – to leverage technology to solve key issues
  3. Data-driven sector – to create trust and transparency by providing publicly accessible data
  4. Agile DLD – to build a well-integrated digital ecosystem for partnerships, operations, and governance
  5. Exceptional Journeys 2.0 – to place humans at the center of planning and implementation 

The bottom line? Despite the challenges posed by rising interest rates, the market has remained strong which has led to a steady influx of high-net-worth buyers, particularly in the prime residential market. This has contributed, in turn, to an increase in the average price of properties in these areas while the number of units sold continued to rise sharply too. 

Money Matters

Saudi Arabia surpasses key players

According to official data from India’s Ministry of Statistics and Program Implementation, in line with previous economic projections, Saudi Arabia is on track to claim the spot for 2023’s fastest-growing major economy, with an estimated 7.6% GDP growth, due in large part to higher energy prices. 

As such, Bloomberg predicts the Kingdom will outpace the world’s second most populous country’s economy, India, which is expected to record a 7% GDP growth rate in the economic year ending March 2023. Impacted by slower demand, the Indian economy will continue to face serious headwinds owing to rigorous monetary policies adopted by its Reserve Bank to fight inflation. So far in the fiscal year, the RBI has raised its benchmark rate by 225 basis points and is expected to announce more hikes following its next policy review meeting scheduled in the first week of February. 

The Kingdom’s General Statistics Authority recently published Q3 figures that revealed the real GDP of oil activities grew by 14.2% compared to 2021 while the real GDP of non-oil activities registered a growth of 6% compared to 2021. By generating 35.2% of Saudi GDP, crude oil and natural gas activities achieved the highest contribution among all other economic activities, followed by government services at 14.1%.

In terms of FDI, a report from Lumina Advisors, a leading corporate finance firm in the region, expects Saudi Arabia will outrun its neighbor for the first time since 2012. Both the UAE and the Kingdom have hit record figures with $40Bn in FDI in 2022, a growth of 58% compared to 2021. The report further states that key projects driving FDI in 2023 will include infrastructure and engineering, tourism and hospitality, clean/renewable energy, and most notably, the Kingdom’s megaprojects. 

The report also anticipates H1 2023 will see “highly active Middle East corporates and funds continuing to invest into European companies, as domestic markets continue to face varying levels of economic turbulence.” As for H2, “sentiment will improve across developed markets, which will drive global demand for natural resources, oil included. The region is extremely well positioned for yet another strong year ahead.”

The bottom line? Saudi Arabia is set to post a strong economic performance in 2023, with GDP growth expected to outpace India and record-high FDI set to outpace the UAE. Key drivers of this growth include the oil and natural gas industry, government services, infrastructure and engineering, tourism and hospitality, and clean/renewable energy projects while the region continues to witness investment growth and demand for natural resources.

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