What's at Stake this week? | August 13, 2023

Significant economic growth is still in the cards for Dubai as a recent report declared over $30.3Bn (AED 111.3 Bn) registered in GDP for Q1 2023 marking a 2.8% increase year-on-year, outpacing many leading global economies, including OECD nations at 1.6%, the European Union at 1.1%, and the US at 1.8%. Key takeaways from the data issued by the Dubai Data and Statistics Establishment of the Dubai Digital Authority show:

• The trade sector grew by 1.2% YoY, contributing 10% of the overall Q1 2023 growth, with a value addition of AED 25.5 Bn
• The real estate sector experienced a 2.4% growth, riding on higher property sales?
• The financial sector expanded by 3.2%, with a notable 14.9% increase in deposit balances from the previous year

??Market Watch: Dubai, UAE

Dubai set to become the next global hedge fund center according to DIFC

Dubai is fast establishing itself as a major player in the global hedge fund scene, as indicated by a recent report jointly produced by the Dubai International Finance Centre (DIFC) and Refinitiv, a leading provider of financial markets data.

• The DIFC recorded a whopping 54% surge in hedge funds establishing operations within its precincts in 2022. Significantly, a large portion (nearly two-thirds) of these funds have their roots in industry powerhouses in the US and UK. The newcomers to Dubai include two of the world's top ten hedge funds.
• About 50 hedge funds, collectively managing assets north of $1 trillion, are currently seeking a license to operate in Dubai. This interest is spurred in part by Dubai's attractive "zero personal income tax regime" and its diplomatic stance, serving as a “neutral ally” to both the West and East.
• The DIFC is not just attracting hedge funds; it’s positioning itself as a critical gateway to the expansive MEASA (Middle East, Africa, and South Asia) region. Moreover, as the number of hedge funds in DIFC grows, smaller hedge funds, tech startups, and additional prime brokers continue to enrich the local financial ecosystem.

??Did you know? The DIFC stands out as 1 of just 10 financial centers globally recognized as a “broad and deep global leader”, ranked among the top 15 financial centers in areas of Government and Regulatory, Professional Services, and Business Environment sub-indicators.

Beyond the financial and regulatory perks, Dubai is also offering hedge funds a chance to tap into the region's burgeoning retail and institutional wealth. The UAE saw the most substantial net influx of millionaires in 2022, suggesting an affluent market ready for sophisticated financial instruments, with more than 4,500 millionaires expected to make their way to the budding emirate this year alone, according to Henley & Partners.

The bottom line? With perks like attractive tax incentives, a growing support ecosystem, and access to emerging markets, Dubai is quickly becoming a hub in the global hedge fund landscape, solidifying its place as a preferred destination for financial titans and investors alike. For progressive hedge funds looking to the future, Dubai isn't just an option; it's becoming the preferred choice.?

Sands of Opportunity

As a low-tax, investor-friendly jurisdiction, and a haven for conflict-exposed regions, Dubai's reputation has been the driving force behind the city's ability to attract a growing number of international buyers and investors. As uncertainties loom in some markets with currency depreciation and geopolitical conflicts, investors seek stability and higher returns on their investments, making Dubai an attractive destination. The capital inflow and investment into Dubai have had a positive impact on the city's economy, contributing to its GDP expansion, population growth, and overall economic growth in the UAE.

According to The National, the UAE Central Bank's revised 2023 forecast for the country's non-oil economic growth has increased from 4.2 % to 4.5%, thus reinforcing the importance of Dubai's role in driving economic prosperity in the region. So what's the link to real estate?

• The vibrancy of the city's economy translates into increased demand for commercial and residential properties, boosting both the rental & sales market.?
• International buyers find comfort in Dubai's real estate market, given its tax advantages and ability to gain long-term residency through the UAE Golden Visa Program, further fuelling its growth.
• There is a strong correlation between growth in tourism and demand for short-term rental properties.

What’s new in real estate?

“We have seen positive momentum in the market over the recent months, showcasing the resilience of Dubai’s [property] sector. The market reflected solid performance for July supporting all expectations and breaking the market volume peak in 2013, resulting in the highest year-on-year increase in market value of transactions,” Scott Bond, Property Finder’s UAE country manager, said.

Data provided by DXB Interact indicates significant growth and activity in Dubai's real estate sector in July 2023. Here are some key insights:

• July sales transactions totaled 11,129 marking a 56.3% increase from the year prior
• Looking at the residential market only, a total of 7,789 transactions were recorded marking a 61.3% increase from 2022
• Over the past 12 months, the average apartment and villa asking rents grew by 16.7% and 25.8%, respectively.

What’s in it for you?

For real estate enthusiasts, this data offers insight into market trends, investment opportunities, and Dubai's overall economic health. When making informed real estate investment decisions, you might consider investing in cities with a solid economic base and a strong real estate sector. This is why new and emerging real estate ownership models, such as fractional ownership, become a viable option to explore (with the added bonus of diversification). Investing in real estate is no longer reserved for high-net-worth individuals, (HNWI) as fractional ownership offers an opportunity for anyone to tap into this asset class and generate a passive income. With the likes of CNBC advising individuals to put their money to work through investment apps, it’s no wonder that fintech around the world is leading the charge with innovative products to allow anyone to build long-term wealth.?