observer dubai market report q1 / 2019 · jumeirah park tecom the views jlt al quoz barsha mall of...

OBSERVERDubai Market ReportQ1 / 2019

Price Movements

Apartments

Apartments

Volumes

Volumes

Villas

Villas

Values

Values

Rental Movements

Completed Unit Transactions

Off-Plan Unit Transactions

Report HighlightsServices

Sales prices

The downward price corrections witnessed throughout 2018 continued in Q1 2019, albeit at a slightly slower pace than witnessed in Q4 2018. Average apartment sales prices were down 3% from the last quarter, while average villa prices were down 1% from Q4 2018.

Rental rates

As in previous quarters, we witnessed a continued downward pressure on rents in Q1 2019. This is a consequence of additional supply being added to the market, thus offering more choice to the potential tenant. Average rents saw a further 2% decrease in the apartment and villa markets from Q4 2018.

Transactions

Volumes. The completed unit market witnessed a small decline in transactional volumes in Q1 2019 with a 1% decrease compared with Q4 2018, from 3,278 to 3,230units. In contrast, the volume of off-plan transactions was up 10% on Q4 2018. Perhaps this figure is even more significant given the 33% increase in volumes in Q4 2018 when compared with Q3 2018.

Values. Transactions involving completed properties showed an increase in values of 5% from AED 5.39 billion in Q4 2018 to AED 5.64 billion in Q1 2019. Additionally, there was a significant uplift in values for off-plan properties of 35%, from AED 5.82 billion in Q4 2018 to AED 7.85 billion in Q1 2019.

Market outlook

Over 20,000 new residential units were delivered in 2018 and the projections for 2019 are for a similar or even higher number (est. 25,000 to 30,000 units), as many of the 2014-16 off-plan projects will be delivered. This will ensure Dubai’s residential market remains highly occupier and buyer friendly, due to the wide variety of options available at competitive prices/rates.

ValuationsMortgage and Secured LendingPortfolio Valuations

Advisory and ResearchFinancial FeasibilitiesHighest and Best Use StudiesMarket ResearchConceptual Advisory and Project Positioning Studies Project Redevelopment/Repositioning Advisory Investment Strategies – Acquisition and Disposal

Sales and LeasingCommercialIndustrialResidentialRetail

Property/Facilities Management CommercialMixed-UseResidential

International Properties London Off-Plan ResidentialInternational Homes and Investments International Relocations

Residential Market Q1 2019 Snapshot

QoQ −3%

QoQ −2%

QoQ -1%

QoQ +10%

QoQ −1%

QoQ −2%

QoQ +5%

QoQ +35%

The Observer - Dubai Residential Q1 2019 1

Further price declines witnessed in Q1, however off-plan sales remain strong

The downward price corrections witnessed throughout 2018 continued in Q1 2019, albeit at a slightly slower pace than witnessed in Q4 2018. Average apartment sales prices were down 3% from the last quarter, while average villa prices were down 1% from Q4 2018.

Off-plan sales continued to dominate the market in Q1, which indicates the incentives offered by developers are having the desired effect. These incentives include 5-year post-handover payment plans, the rebate of registration fees, freezing property

service charges and guaranteed rental returns. It is also worth noting that off-plan inventories are largely focused on the affordable, mid-market options, which is likely to be having a positive effect on absorption rates.

However perhaps more interestingly, in locations where the largest amount of transactions have taken place in Q1, such as MBR City, it is clear there is a growing demand for more innovative living solutions. More information is included later in this report.

HOT TOPIC Co-living spaces are set to change the face of Dubai’s off-plan residential market as their popularity gains pace. Simply put, the concept of co-living spaces is focused around the buyer or tenant being able to live and work in the same location; a detail which is important for many who do not want to be caught up in a long daily commute. As such, developers are now creating spaces that address the business and leisure requirements of residents, all in one development. In terms of the more established communities, Dubai Silicon Oasis has had success with co-living and co-working spaces as has Tecom with its Internet and Media Cities and Knowledge Village. More recently, Nshama launched UNA located at the Town Square community and Emaar, The Collective and Socio at MBR City.

The Observer - Dubai Residential Q1 2019 2

Apartments: Quarter-on-Quarter movement: (–3%)

Prices of apartments in Downtown, Dubailand, Dubai Motor City and Dubai Silicon Oasis continued to remain resilient in Q1, with these locations witnessing no price movement since the previous quarter. Small declines were seen in the Views and Discovery Gardens with a 1% decrease from Q4 2018. The highest declines were witnessed in International City, Dubai Sports City and Business Bay, all with a 7% decrease in prices since Q4 2018.

Over 80% of the new stock delivered in 2018 was apartments, with a similar ratio set to be handed over in 2019. This might explain the consistently higher rate of price decline for apartments, as opposed to villas, given the greater level of supply on the market.

Villas: Quarter-on-Quarter movement: (–1%)

Market sentiment in the villa community of The Lakes remained the most positive, as there was no movement in prices from Q4 2018. In contrast to the previous quarter, The Meadows and Springs communities witnessed the highest price declines of 4%. Small price declines were seen in Jumeirah Park with a 1% decrease, whilst Palm Jumeirah and Arabian Ranches both witnessed a 2% decline from Q4 2018.

Apartments and Villas − Residential Sales Prices and Quarterly Change

SharjahAbu Dhabi

The Palm Deira

DubaiMaritime

City

Bur Dubai

Deira

Hamriya

WuheidaMamzar

Hor Al Anz

Al Nahda

AirportFree Zone

Karama

Garhoud

Twar Qusais

Muhaisnah

Mirdif

Mizar

Khwaneej

Ghoroob

Shorooq

Warqaa

ZabeelOud

Metha

CultureVillage

UmmRamool

NaddShamma

DubaiFestival City

MeydanCity

Ras Al Khor

Bu Kadra

NaddAl Hammar

InternationalCity

AcademicCity

DubaiSilicon Oasis

Al WahaCommunity

MotorCity

SportsCity

Layan

Nad Al Sheba

Al BarariLiving Legends

ArabianRanches

Dubiotech

Awir

UmmHurairTrade

CentreDIFC

Dubai Mall

Mirdif CityCentre

Dragon Mart

Deira CityCentre

Al KhailGate

MediaCity

JumeirahIslands

JumeirahGolf

Estates

GreenCommunity

DowntownJebel Ali

Technology Park

DubaiInvestment

Park

DubaiWorld

Central

InternationalMedia

ProductionZone(IMPZ)

JumeirahHeights

TheGardens

DiscoveryGardens

Ibn BattutaMall

Jebel AliVillage

Jebel Ali Freezone EmiratesHills

InternetCity

Greens

Meadows

The Lakes

Al FurjanThe SpringsJumeirah

Park

TECOM

The Views

JLT

Al Quoz

Barsha

Mall of the Emirates

Dubai Pearl

Palm Jumeirah

Dubai MarinaBurjuman

Centre

Satwa

Badaa

Jumeirah

Al WaslSafa

Umm Suqeim

ManaraSufouh

The World

Arabian Gulf

Jumeirah BeachResidence

BluewaterIslands

The PalmJebel AliDubai

Waterfront

Barsha

MOTOR CITY713

MOTOR CITY713

DISCOVERYGARDENS

636

0%Q-o-Q

Movement

DISCOVERYGARDENS

627-1%

Q-o-QMovement

DOWNTOWN1,515

DOWNTOWN1,511

0%Q-o-Q

Movement

BUSINESS BAY1,114

BUSINESS BAY1,038-7%

Q-o-QMovement

DUBAILAND725

DUBAILAND722

0%Q-o-Q

Movement

DUBAIMARINA

1,185

DUBAIMARINA

1,153-3%

Q-o-QMovement

DUBAI SILICONOASIS

704DUBAI SILICON

OASIS

703 0%Q-o-Q

Movement

SPORTS CITY793

SPORTS CITY737

-7%Q-o-Q

Movement

JUMEIRAHLAKE TOWERS

977 JUMEIRAHLAKE TOWERS

921-6%

Q-o-QMovement

THE VIEWS1,209 THE VIEWS

1,197

-1%Q-o-Q

Movement

JUMEIRAHVILLAGECIRCLE

759JUMEIRAHVILLAGECIRCLE

728

-4%Q-o-Q

Movement

THE GREENS965 THE GREENS

925

-4%Q-o-Q

Movement

INTERNATIONALCITY

516INTERNATIONAL

CITY

481

-7%Q-o-Q

Movement

Apartment Sales Q4 2018 Apartment Sales Q1 2019Villa Sales Q4 2018 Villa Sales Q1 2019 QoQ MovementFigures in AED/Sq FtSource: REIDIN & Chestertons

ARABIANRANCHES

840

THE LAKES1,103

ARABIANRANCHES

860

JUMEIRAHPARK

868

+2%Q-o-Q

Movement

JUMEIRAHPARK

859

-1%Q-o-Q

Movement

PALMJUMEIRAH

2,035PALM

JUMEIRAH

1,984

-2%Q-o-Q

Movement

THE MEADOWS936

THE MEADOWS897 -4%

Q-o-QMovement

THE LAKES1,107

0%Q-o-Q

Movement

Dubailand

THE SPRINGS936THE SPRINGS

897-4%

Q-o-QMovement

The Observer - Dubai Residential Q1 2019 4 The Observer - Dubai Residential Q1 2019 5

Apartments − Residential Market Rent and Quarterly Change

Supply continues to be a major factor causing downward corrections in the rental market

Villas − Residential Market Rent and Quarterly Change

As in previous quarters, there was continued downward pressure on rents in Q1 2019. This was a consequence of additional supply being added to the market, thus offering more choice to potential tenants. Average rents saw a further 2% decrease in the apartment and villa markets from Q4 2018.

Due to additional stock being available and limited new demand, the most important consideration for landlords in maintaining a decent return on investment is avoiding long void periods. This means they have to consider offering not only lower rental rates but also incentives to attract and retain tenants. Current incentives being offered to tenants include; multiple rent cheques (some of which extend to monthly payments), rent-free periods, waiver of security deposits, multiple cheques to cover utility bills, shorter term leases and in some cases we have witnessed landlords covering the cost of agency fees.

Short-term, Airbnb style rentals are becoming more popular with landlords as the downward corrections continue in the long term rental market. Last year, figures show occupancy rates were at 65%, across the board, during Dubai’s peak season. Such rentals are preferable for those undertaking project work or who are on probation, as these individuals are unable to commit to traditional annual rental contracts as the tenancy cannot be registered if the residency visa is still to be granted.

Apartments: Quarter-on-Quarter movement: (– 2%)

In the apartment market, the biggest declines were seen in Dubai Motor City, Dubai Silicon Oasis, Dubai Sports City and JLT – all of which witnessed a 4% decline from Q4 2018. Popular established communities, such as Dubai Marina and Business Bay, have remained resilient with no movement in rates since the last quarter.

In contrast to findings in the latter part of 2018, where smaller format apartments and studio apartments were the most affected by market adjustments, in Q1 2019 it was 2 and 3 BR apartments which were most affected with an average 3% decline in rental rates. There was no movement in average rental rates for studio apartments.

Villas: Quarter-on-Quarter movement: (– 2%)

In the villa market, the biggest rental decline was witnessed in JVT at 5% from Q4 2018 with the most resilient locations being Jumeirah Golf Estates, Jumeirah Islands and The Lakes with no movement in rental rates from Q4 2018.

The smallest format 2 BR villa appeared to witness the biggest declines with an average 5% decrease in rents from the previous quarter.

HOT TOPIC Rent-to-Own (RTO) schemes are set to gain momentum in 2019 in Dubai’s residential market. Whilst still in their relative infancy with a number of legal and regulatory issues still to be addressed, it is likely they will boost investor interest and stimulate absorption rates as developers can tap into a new buyer segment. A pool of buyers with good salaries but without the cash reserves to afford the 25% down payment. Or those buyers who are unsure about future market trends. We predict this could place further pressure on the traditional rental market as prospective buyers will opt in favour of this model to avoid getting caught in the ‘rent trap’. RTO deals can currently be found in areas such as Jumeirah Village Circle, Palm Jumeirah and Dubai Sports City.

-5%

-4%

-3%

-2%

-1%

0%

1%

-

50,000

100,000

150,000

200,000

250,000

Studio 1BR 2BR 3BR QoQ Change

Business Bay DIFC DiscoveryGardens

DowntownDubai

Dubai Marina DubaiSilicon Oasis

Dubai Sports City

Dubailand InternationalCity

JLT JVC The Greens The Views DubaiMotor City

PERCENTAG

E CHAN

GEAE

D R

ENTA

L RA

TES

Figures in AED/Sq FtSource: Propertyfinder & Chestertons

-5%

-4%

-3%

-2%

-1%

0%

-

50,000

100,000

150,000

200,000

250,000

300,000

350,000

400,000

450,000

ArabianRanches

TheSprings

TheMeadows

The Lakes VictoryHeights

Al Furjan JVT JumeirahIslands

JumeirahGolf Estates

PalmJumeirah

2BR 3BR 4BR 5BR QoQ MovementFigures in AED/Sq FtSource: Propertyfinder & Chestertons

AED

REN

TAL

RATE

S

PERCENTAG

E CHAN

GE

-5%

-4%

-3%

-2%

-1%

0%

1%

-

50,000

100,000

150,000

200,000

250,000



DowntownDubai


Dubai Sports City



PERCENTAG

E CHAN

GEAE

D R

ENTA

L RA

TES


-5%

-4%

-3%

-2%

-1%

0%

-

50,000

100,000

150,000

200,000

250,000

300,000

350,000

400,000

450,000

ArabianRanches

TheSprings

TheMeadows




PalmJumeirah


AED

REN

TAL

RATE

S

PERCENTAG

E CHAN

GE

-5%

-4%

-3%

-2%

-1%

0%

1%

-

50,000

100,000

150,000

200,000

250,000



DowntownDubai


Dubai Sports City



PERCENTAG

E CHAN

GEAE

D R

ENTA

L RA

TES


-5%

-4%

-3%

-2%

-1%

0%

-

50,000

100,000

150,000

200,000

250,000

300,000

350,000

400,000

450,000

ArabianRanches

TheSprings

TheMeadows




PalmJumeirah


AED

REN

TAL

RATE

S

PERCENTAG

E CHAN

GE


Value of Residential Transactions Q1 2019 (AED Billions)

Off-plan sales dominated the market in Q1,where demand is being seen for innovativeliving solutions

Volume of Residential Transactions Q1 2019 (Number of Units)

Overall, transactional activity was on the rise in the first quarter of 2019. However, going forward, interest rate hikes could pose a potential threat to investors in the UAE. In October 2018, the FED increased interest rates by 25 basis points, with another hike taking place in December 2018. As the Dirham is pegged to the US dollar, interest rates rose in the Emirates as well. Two additional rate hikes are expected in the US during 2019, which will immediately correlate to interest rate increases in the UAE.

Q1 data suggests high demand for certain off-plan projects. The highest performing of which, in terms of volumes, was at MBR. From the total number of all transactions which took place in Q1 at MBR, just over 70% were for Emaar projects; with Collective Tower and Socio at Dubai Hills representing most of those sales. Both of these projects are centered on co-living spaces. These spaces are aimed at a younger buyer and tenant profile offering an all-inclusive, holistic living space where they can live and work within the same neighbourhood.

Of Dubai’s existing residential projects, Dubailand, Dubai Marina and Palm Jumeirah continued to show consistent sales performance, in terms of volume of units transacted throughout Q1.

Transaction Volumes

Quarter-on-Quarter Movement (Completed Units): -1% Quarter-on-Quarter Movement (Off-Plan Units): +10%

The market for completed units witnessed a small decline in transactional volumes in Q1 2019 with a 1% decrease compared with Q4 2018, from 3,278 to 3,230 units.

In contrast, the volume of off-plan transactions was up 10% on Q4 2018. Perhaps this figure is even more significant given the 33% increase in volumes in Q4 2018 compared with Q3 2018. This could be due to the attractive incentives offered by developers to entice buyers - coupled with the fact that inventories are mostly focused on mid-market, affordable properties, as well as options for more innovative living solutions.

Dubailand continued to be the most popular community in terms of ready unit transaction volumes as it was in Q4 2018 and MBR City was the most popular off-plan location.

Transaction Values

Quarter-on-Quarter Movement (Completed Units): +5% Quarter-on-Quarter Movement (Off-Plan Units): +35%

Transactions involving completed properties showed an increase in values of 5% from AED 5.39 billion in Q4 2018 to AED 5.64 billion in Q1 2019. Additionally, there was a significant uplift in values for off-plan properties of 35% from AED 5.82 billion in Q4 2018 to AED 7.85 billion in Q1 2019.

Palm Jumeirah was the most popular location in terms of completed unit transaction values at AED 817 million and Downtown Dubai for off-plan units at AED 1.9 billion.

HOT TOPIC Dubai Land Department (DLD) has announced new plans to secure Foreign Direct Investment into the UAE which could have a significant impact on both transaction volumes and values. This includes promoting UAE real estate to prospective Chinese investors, with the goal of attracting at least AED 1 billion of inward property investment from this source market in 2019. This goal is being supported by the DLD offices in Beijing and Shanghai with a third office opening in Shenzhen in the near future. Freehold ownership, high rental yields, affordability and tax-free investments will play a key role in driving Chinese investment into the UAE. Russia and India are the other key markets being targeted by the DLD.


1,000

0

2,000

3,000

4,000

5,000

6,000

Q4 2018 Q1 2019

Completed Properties O�-planFigures in AED/Sq FtSource: REIDIN & Chestertons

Completed Properties

O�-plan

5.647.85

3,278

4,514

3,230

4,965

Figures in AED/Sq FtSource: REIDIN & Chestertons

1,000

0

2,000

3,000

4,000

5,000

6,000

Q4 2018 Q1 2019



O�-plan

5.647.85

3,278

4,514

3,230

4,965


1,000

0

2,000

3,000

4,000

5,000

6,000

Q4 2018 Q1 2019



O�-plan

5.647.85

3,278

4,514

3,230

4,965


Q1 2019 Sales TransactionsCompleted Units

Top 10 Areas Based on Transaction Volumes (Number of Units) Top 10 Areas Based on Transaction Volumes (Number of Units)

Q1 2019 Sales TransactionsOff-plan Units

Top 10 Areas Based on Transaction Values (in million AED) Top 10 Areas Based on Transaction Values (in million AED)

100 50 150 200 250 350 400300

Al Furjan

Emirates Living

Downtown Dubai

Dubai Sports City

Business Bay

Jumeirah Village Circle

International City

Palm Jumeirah

Dubai Marina

Dubailand

200 400 600 800 1,000


Al Furjan

Arabian Ranches

Business Bay

Downtown Dubai

Emirates Living

Dubai Marina

Dubailand

MBR City

Palm Jumeirah

200 400 600 800 1000 1200 1400

Dubai Marina


Jumeirah Lake Towers

Dubai Harbour

Dubai South

The Lagoons

Business Bay

Downtown Dubai

Dubailand

MBR City

500 1000 1500 2000 2500


Palm Jumeirah

Dubai South

Dubai Marina

Business Bay

Dubai Harbour

Dubailand

The Lagoons

MBR City

Downtown Dubai

Source: REIDIN & Chestertons Source: REIDIN & Chestertons


100 50 150 200 250 350 400300

Al Furjan

Emirates Living

Downtown Dubai

Dubai Sports City

Business Bay


International City

Palm Jumeirah

Dubai Marina

Dubailand

200 400 600 800 1,000


Al Furjan

Arabian Ranches

Business Bay

Downtown Dubai

Emirates Living

Dubai Marina

Dubailand

MBR City

Palm Jumeirah

200 400 600 800 1000 1200 1400

Dubai Marina



Dubai Harbour

Dubai South

The Lagoons

Business Bay

Downtown Dubai

Dubailand

MBR City

500 1000 1500 2000 2500


Palm Jumeirah

Dubai South

Dubai Marina

Business Bay

Dubai Harbour

Dubailand

The Lagoons

MBR City

Downtown Dubai



100 50 150 200 250 350 400300

Al Furjan

Emirates Living

Downtown Dubai

Dubai Sports City

Business Bay


International City

Palm Jumeirah

Dubai Marina

Dubailand

200 400 600 800 1,000


Al Furjan

Arabian Ranches

Business Bay

Downtown Dubai

Emirates Living

Dubai Marina

Dubailand

MBR City

Palm Jumeirah

200 400 600 800 1000 1200 1400

Dubai Marina



Dubai Harbour

Dubai South

The Lagoons

Business Bay

Downtown Dubai

Dubailand

MBR City

500 1000 1500 2000 2500


Palm Jumeirah

Dubai South

Dubai Marina

Business Bay

Dubai Harbour

Dubailand

The Lagoons

MBR City

Downtown Dubai



100 50 150 200 250 350 400300

Al Furjan

Emirates Living

Downtown Dubai

Dubai Sports City

Business Bay


International City

Palm Jumeirah

Dubai Marina

Dubailand

200 400 600 800 1,000


Al Furjan

Arabian Ranches

Business Bay

Downtown Dubai

Emirates Living

Dubai Marina

Dubailand

MBR City

Palm Jumeirah

200 400 600 800 1000 1200 1400

Dubai Marina



Dubai Harbour

Dubai South

The Lagoons

Business Bay

Downtown Dubai

Dubailand

MBR City

500 1000 1500 2000 2500


Palm Jumeirah

Dubai South

Dubai Marina

Business Bay

Dubai Harbour

Dubailand

The Lagoons

MBR City

Downtown Dubai




Contact Us Nick Witty, BSc (Hons) MRICSManaging [email protected]

Adam Wilson, BSc (Hons) MRICS ACIArbDirectorHead of International [email protected]

Vladimir Cvetinovic, MRICSAssociate DirectorValuations & Advisory - Abu [email protected]

Ivana Gazivoda VucinicHead of [email protected]

Ellen SleutjesHead of Property Management - [email protected]

Slim BoukerAdviser to the [email protected]

Mena Head Office1802, Blvd. Plaza Tower 1Sheikh Mohammed Bin Rashid Blvd. Downtown DubaiPO Box 28336, Dubai United Arab Emirates Office: +9714 381 0200 Fax: +9714 325 3359 Email: [email protected]

Abu Dhabi OfficeOffice M01, Mezzanine FloorAl Ghazal Building (Above Al Hilal Bank) Khalifa Park PO Box 128983, Abu Dhabi United Arab EmiratesOffice: +9712 447 3100 Fax: +9712 441 6200 Email: [email protected]

Bahrain OfficeMaz Business CentreThe LagoonAmwaj IslandOffice: +973 1603 0646Email: [email protected]

Disclaimer:All articles and data presented herein is intended for information purposes and has been compiled from sources deemed reliable including the Valu-ations and Research Department of Chestertons, sales and leasing staff, published data, and secondary sources. Though information is believed to be correct, materials presented is subject to errors, omissions, changes, or withdrawal without notice.

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observer dubai market report q1 / 2019 · jumeirah park tecom the views jlt al quoz barsha mall of...

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