UAE personal finance insights – Strong economy

UAE personal finance insights – Strong economy
01 April 2013

Societal and environment issues should be prominent in investment decisions

Sheikh Nahyan bin Mubarak Al Nahyan, Minister of Culture, Youth and Community Development, and Chancellor of Higher Colleges of Technology (HCT) calls for socially responsible investing in the UAE. He called on investors to: “keep societal and environment issues prominent in our investing decisions"

The debate at which Sheikh Nayhan spoke was aimed at encouraging social entrepreneurship in the region is a priority, as it helps to not only to positively contribute to socio-economic development and combat unemployment, but also creates real added value within our economies. 

Evidence of robust non-oil private sector activity

An economic monitor report issued by SAMBA has forecast real GDP growth of 3.3% in the UAE for 2013 based on strong oil prices and evidence of robust non-oil private sector activity.

The report states: “The UAE as a whole has also benefited from its ‘safe haven’ position given the unrest in much of the broader MENA region. This has encouraged capital flows and helped boost confidence, particular as it coincided with higher oil prices and a healthy increase in both oil (4.6 percent) and NGL (9.8 percent) production in Abu Dhabi last year. Together with strong public spending, this helped boost overall UAE real GDP growth to an estimated 4.2 percent in 2012. Looking ahead, the push from rising hydrocarbons output will drop off sharply, but sustained improvements in Dubai’s traditional activities and rising public spending should help maintain positive momentum. This will be aided by the recent recovery in real estate and confidence, although the debt overhang and weak credit growth will remain. Overall we expect the UAE economy to grow by another 3.3 percent this year.”

Real estate is recovering

Increasing evidence is emerging that the property market in the UAE, and Dubai in particular, has bottomed out and that a strong recovery is apparent in certain segments. Indices compiled by Cluttons suggest that prices for mid-range villas and apartments in Dubai were up between 30 percent and 20 percent respectively year-on-year in January. There is also evidence that the volume of property transactions is on the rise. Safe haven inflows have certainly provided a boost to the residential market, and rising prices have helped boost the balance sheets of Dubai’s GREs, most of which have significant stakes in the property market. EIB offers limited deals

Investor sentiment improves

The steady improvement in economic activity has also seen stock markets in the UAE perform well. Dubai’s bourse was up nearly 20 percent last year, and Abu Dhabi’s nearly 10 percent, with both significantly outperforming the MSCI Emerging Markets index. The positive momentum has continued into this year with both stock exchanges up between 15-18 percent as of mid-March.

Mortgage cap decision?

Although there has been no official announcement at the time of writing, rumours abound in the UAE media that the UAE Central Bank’s revised mortgage caps will be set at 80% of the home’s value for UAE nationals and 75% for expatriates while subsequent second and third home loans would be capped at 65% and 60% respectively for nationals and expatriates. 

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Head of Behavioral Finance
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