Dubai’s main stock index hits an eight-year high, continuing its upward trend this year, buoyed by a surge in real estate activity.
The Dubai Financial Markets General Index advanced 21 percent over the past 52 weeks, effectively soaring to a 52-week high of 3878.96, rallying to the highest level since August 2015.
“The rally was fueled by a robust macroeconomic outlook stemming from the uptick in real estate and tourism activity,” Century Financial’s Chief Investment Officer, Vijay Valecha, told Arabian Business, adding that the recent increase in new listings in the region also played a role.
“Dubai’s real estate market has bucked the global trend of declining prices despite increasing interest rates. The city is expected to witness its strongest construction cycle since 2017 as new state-of-the-art projects are underway.”
One such example is the Como Residences on Palm Jumeirah. Slated to be 71 storeys high, with 76 penthouses, and the cheapest unit priced at AED21 million, this addition will further enhance the coveted skyline of Palm Jumeirah. The district has attracted a growing number of property investors this year, topping the charts as the top choice among property investors from the UK, North America and Europe.
Other prime real estate districts like Downtown Dubai have also witnessed an uptick in demand from high net-worth buyer this year, with a recent report citing the sales of over 142 luxe properties worth $10 million or more as of last month.
In June, the DFM General Index witnessed a significant surge of nearly 9.5 percent, propelling it to a 26.8 percent increase from its lowest point reached on July 6th, 2022. This surge has elevated the total market capitalisation of the index’s constituent members to AED537.3 billion, resulting in a trailing 12-month dividend yield of 4.6 percent.
The notable gains of the index can be attributed to the strong performance of real estate and tourism stocks listed on the exchange. Emaar Development’s shares experienced a remarkable 6 percent surge on Monday, reaching a record high, driven by factors such as the reinstatement of dividends, improved environmental, social, and governance (ESG) and communication metrics, enhanced international returns, and the 100 percent foreign-ownership rule.
Additionally, the stock is currently trading at a 24 percent discount to its fair-value net asset value (NAV), indicating the potential for further rallies, Valecha explained.
Meanwhile, shares of Emaar Properties reached their highest level since February 2018. Emaar Properties has consistently traded at a discount to its NAV since 2015 due to the relatively lower valuation of its domestic and overseas development business compared to its projects and land bank.
“In recent weeks, analysts re-rated several prominent real estate companies to reflect the improving fundamentals, increasing demand, stronger pricing, and projected economic growth of 3 percent this year,” Valecha added.
“Real estate investors have played a significant role in driving the DFM index’s rally. Brokerage firms at the DFM added 26,953 new investor accounts in the first five months of 2023, marking a staggering 48 percent jump from the 18,204 new accounts added over the same period in 2022.”
Dubai’s very first IPO of the year, Al Ansari Financial Services, became oversubscribed in under one hour, Valecha said, adding that the listing of 10 government and semi-government entities like Dubai Electricity and Water Authority (DEWA), Salik, and Union Coop on the DFM General Index “propelled overall momentum in the markets.”
Dubai booms despite interest rate shocks worldwide
“There has, without doubt, been a significant increase in the price and the volume of property transactions 2015 onwards and therefore, it is only natural that this gives a boost to the property-related shares,” Ayman Youssef, Managing Director at Coldwell Banker UAE, told Arabian Business.
Although Youssef shared the same sentiment as Valecha about what caused the shares to rally, he added that he believes the city’s favourable tax and visa policies, strong rental market, overall market resilience to high-interest rates, positive investment sentiment and economic trajectory, as well as the post-COVID migration boom to be key contributors too.
“There is still a window of opportunity to invest in real estate in Dubai,” he explained, suggesting that the firm anticipates a “moderate price increase in the medium term.”
Though the Dubai real estate market is well-known for its “cyclical periods of sharp booms and busts,” it has not been affected by higher interest rates and slowing economic growth which have triggered a slump in property markets worldwide, said Valecha.
“The emirate’s robust economy is attracting a plethora of expatriates from around the world. One example is Russians seeking to safeguard their wealth following the invasion of Ukraine.”
This has sparked a 15 percent jump in Dubai’s real estate prices over the past year. The return of Chinese buyers and travelers following the removal of COVID-19 curbs has also boded well for the property market.
“Over 24,658 new homes have been constructed in Dubai so far this year, marking a 37 percent YoY jump over the same period in 2022. Off-plan residential transactions came in at 28,900 year-to-date – the largest for the same period since 2009.”
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