q1 report 2016 - abu dhabi

Abu Dhabi Residential Market Report

Q12016

© Cavendish Maxwell 2015 | www.cavendishmaxwell.com © Cavendish Maxwell 2015 | www.cavendishmaxwell.com 32

Dubai Residential Market Report - Q3 2015

• Abu Dhabi residential market highlights

• Macro-economic factors

• Sale price performance

• Rent performance

• Residential supply

Content


Abu Dhabi Residential Market Report - Q1 2016

2016 Pipel ine

2,400 addit ional units

Abu Dhabi residential market highlights

UAE real estate market SWOT

Q4 2015 - Q1 2016

-1% -2%

Q1 2015 - Q1 2016

-4% -4%

“Annual inflation rate declined to 5.4% at the end of 2015 after it had reached its highest level of 6.1% in August 2015.”

“Announced petrol and diesel prices for April 2016 have increased by an average of 11% from the previous month.”

• The Abu Dhabi Consumer Price Index (CPI) and annual inflation rate have gradually decreased partially due to a decline in petrol prices.

• Moody’s rating agency, estimates that the Abu Dhabi GDP will grow by 3.2% in 2016 due to the lower oil prices, whilst the emirate continues to reduce the oil sector contribution to GDP.

• In an effort to improve competitiveness, transparency and encourage further investment into the real estate market, the Abu Dhabi government has implemented Law No. (3) of 2015 as of January 2016.

• The UAE and GCC nations are strategically preparing for a post-oil future, with the most recent announcement of introducing a value added tax (VAT) by up to 5% in 2018.

• Whilst, OPEC crude oil prices continued to decline reaching the lowest price of 22.48 USD/barrel in mid January 2016, prices began to rebound towards the end of January and continued on this upward trend reaching an average of 34.33 USD/barrel at the end of March 2016.

• On April 17, 2016 representatives from OPEC and non-OPEC producing nations are set to meet in Qatar to discuss the possibility of a production freeze agreement. Whilst news of this forthcoming meeting may have had a stabilising effect on recent crude oil prices, it is thought this may be short lived unless an agreement is reached and implemented to alter production.

Macro-economic factors

140

135

130

125

120

115

110

105

2.4

2.2

2

1.8

1.6

1.4

1.2

1

6%

5%

4%

3%

2%

1%

0%

Annual inflation rateUnleaded Petrol 98 Unleaded Petrol 95

Unleaded Petrol 91 DieselCPI

2014Jan162015

Feb16

Mar16

Apr162011

Oct152010

Sep152009

Aug152012

Nov152013

Dec15

CPI

AED

/ li

tre

Ann

ual i

nflat

ion

rate

Source: Abu Dhabi Statistics Centre Source: UAE Ministry of Energy

Figure 1 Figure 2

Average price movement Residential supply(investment zones)

Abu Dhabi CPI and annual inflation rate UAE petrol prices

Unit types

80% apartments

20% vi l las

(may be subject to delays)

Strengths

• Hydrocarbon reserves • Low government borrowing • Regional ‘safe haven’ • Tourism • Cosmopolitan cities• Transparency (regionally)

Opportunities

• Improving legislation• Iranian sanctions easing • Theme parks in Dubai and museums in Abu Dhabi• Improving transportation network • Expo 2020• Real estate PPP law

Weaknesses

• Oil price declines• Water availability • Dollar strength • Ruble decline • High household debt • Transparency (globally)

Threats

• Regional political instability • Increasing interest rates • Introduction of VAT• Affordability • Global economy/Chinese slowdown • Liquidity/credit availability



1,800

1,600

1,400

1,200

1,000

800

600

400

200

0

1,800

1,600

1,400

1,200

1,000

800

600

400

200

0

0%

-1%

-2%

-3%

-4%

-5%

-6%

0%

-1%

-2%

-3%

-4%

-5%

-6%

Al Raha

Beach

Al Reef V

illas

Al Reef D

ownto

wn

Saadiy

at Beac

h Villas

Al Reem

Island

Saadiy

at Beac

h Resid

ences

Al Ghad

eer

Al Raha

Gardens

Ave

rag

e p

rice

AED

/ s

q ft

Ave

rag

e p

rice

AED

/ s

q ft

% c

hang

e

% c

hang

e

Apartment price performance Villa price performance

-1% -1% -1% -1% -1%

• Prices in the Abu Dhabi market have remained relatively resilient to price declines due to the limited increase in residential supply within the investment zones.

• Further supply scheduled for delivery in 2016 in Al Reem Island may place slight pressure on prices of apartments.

• Villa prices declined slightly at 1% in both Al Reef and Saadiyat Beach villas, similar to the rate of decline in Q4 2015, whilst the rate of decline in Al Raha Gardens increased to 2% in Q1 2016.

• The current prices in Al Raha Gardens and Al Reef may represent attractive opportunities for investors as gross investment yields range between 6% and 7%.

• There is still a wide gap between the strong demand for high quality villas and the existing supply, keeping the price declines at a much lower rate than in Dubai.

Apartments: “Marginal decline of 1% in apartment prices during Q1 2016.”

Sale price performance

Figure 3 Figure 4

Source: Property Monitor Index Source: Property Monitor Index

Villas: “Villa prices declined between 1% and 2%”

Q4 2015 Q1 2016

QoQ % change Q4 2015 - Q1 2016 12 Month % change Q1 2015 - Q1 2016

Q4 2015 Q1 2016

QoQ % change Q4 2015 - Q1 2016 12 Month % change Q1 2015 - Q1 2016

-4%

-5%-5% -5%

-3% -3%

-4% -4%

-2%

-1% -1%



• Rents in Abu Dhabi declined in Q1 2016 from Q4 2015 as the rental market catches up with the sale market trend.

• Studio apartment rents dropped by 1% in Al Ghadeer, and 2% in Al Reef Downtown and Al Reem Island.

• One bed apartment rents declined by 1% in Al Ghadeer, Al Raha Beach and Al Reem Island, and 2% in Al Reef Downtown and Saadiyat Beach Residences.

• Two bed apartment rents declined by 1% in Al Ghadeer, Al Raha Beach, Al Reef Downtown and Al Reem island, and 2% in Saadiyat Beach Residences.

• Al Ghadeer rents are considerably lower than other investment zone apartment locations within Abu Dhabi as the community is on the outskirts of the emirate but has been popular with residents commuting to Dubai for work.

• As rents in Dubai continue to decline, the demand from commuters is likely to shift from Al Ghadeer to communities within Dubai, which may offer competitive rents.

• Saadiyat Beach Residences and Al Raha Beach rents are considerably higher as they offer better quality units.

Apartments“Apartment rents declined between 1% and 2% in Q1 2016.”

Figure 5 Figure 6

Rent performance

• Villa rents in Al Raha Gardens and Al Reef have declined by 2% for three, four and five bedroom villas in Q1 2016 from Q4 2015.

• Saadiyat Island villa rents have remained the most resilient as the supply remains limited on the island with average drops of 1% in both the four and five bed units.

• Villa rents on Saadiyat Island remain the highest in the Abu Dhabi investment zones with average rents of AED 430,000 per annum for a four bedroom villa.

• Whilst the anticipated completion of Hidd Saadiyat villas in Q3 2016 is likely to place slight pressure on villa prices and rents on the island, the strong demand for high quality villas is likely to prevent drastic declines for these unit types.

Villas“Villa rents have declined by an average of 2% in Q1 2016.”

Apartment rents - Q1 2016 Vi l la rents - Q1 2016

Al Ghadeer Al Raha Beach Al Raha GardensAl Reef Downtown Al Reem Island Al Reef VillasSaadiyat Beach Residences Saadiyat Beach Villas

180,000

160,000

140,000

120,000

100,000

80,000

60,000

40,000

20,000

-

600,000

500,000

400,000

300,000

200,000

100,000

-

3%

2%

1%

0%

-1%

-2%

-3%

3%

2%

1%

0%

-1%

-2%

-3%

AED

per

ann

um

AED

per

ann

um

% c

hang

e

% c

hang

e

Studio 1 bed 2 bed QoQ % change Q4 2015 - Q1 2016 3 bed 4 bed 5 bed QoQ % change Q4 2015 - Q1 2016

-1%

-2%

-1%

-2%-2%-2%

-1%-1%

-2%

-1%

-2%-2% -2%

-1%

-2%

-1%

-2%

-1% -1%-1%

-2%

Source: Property Monitor Index Source: Property Monitor Index



Abu Dhabi investment zones residential supply 2015 - 2018

• The majority of the pipeline supply is scheduled for delivery in Al Reem Island, adding approximately 1,500 apartments.

• Approximately 70% of the 2016 pipeline supply is set to be completed in Q2 2016.

• 80% of the total supply are apartments and 20% are villas.

• The largest introduction of residential supply is anticipated in 2017 with approximately 8,700 units. These projects may be subject to delays as developers keep a close eye on the market movement and conditions.

• Anticipated completions in 2016 include Hidd Al Saadiyat villas on Saadiyat Island adding approximately 414 villas and The Leaf Tower adding 400 apartments on Al Maryah Island.

Pipeline Supply“2,400 additional units expected to be delivered in the investment zones during 2016.”

Figure 7

2015 2016 2017 2018

10,000

8,000

6,000

4,000

2,000

-

255

250

245

240

235

230

225

220

Ad

diti

ona

l uni

ts

Cum

ulat

ive

sup

ply

(‘00

0)

Cumulative supply Pipeline supply

Source: Cavendish Maxwell research

Del

iver

ed

Residential supply

Jonathan Brown BSc (Hons) FRICSHead of Abu Dhabi Office

M: +971 50 940 3540 E: [email protected]

Miles Phillips BSc (Hons) MRICS ACIArbPartnerHead of Operations - UAE


Amit Shukla Senior AssociateDevelopment Advisory and Real Estate ResearchM: +971 56 360 3540E: [email protected]

Sofia Underabi BPropEc AAPI PartnerHead of Residential Valuation M: +971 50 435 6527 E: [email protected]

Dima Isshak BScResearch Manager


PROPERTY SERVICESMIDDLE EAST & AFRICA

Jay Grant MSc IRRV (Hons) Managing Partner


T: +971 (0) 4 453 9525 E: [email protected]

2205 Marina Plaza, Dubai Marina, P.O. Box 118624, Dubai, United Arab Emirates1006 Corniche Bakery Building, Al Firdous Street, Tourist Club Area, Abu Dhabi, United Arab Emirates

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