q1 report 2016 - dubai

Dubai Residential Market Report

Q12016

32 © Cavendish Maxwell 2016 | www.cavendishmaxwell.com © Cavendish Maxwell 2016 | www.cavendishmaxwell.com

Dubai Residential Market Report - Q1 2016

• Dubai residential market highlights

• Macro-economic factors

• Sale price performance

• Rent performance

• Residential supply

• Cavendish Maxwell Residential Market Survey Q1 2016

Content

© Cavendish Maxwell 2016 | www.cavendishmaxwell.com © Cavendish Maxwell 2016 | www.cavendishmaxwell.com 54


2016 Pipel ine

36,000 scheduled units

Q1 2016 Complet ions

4,600 units

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

Dubai residential market highlights

UAE real estate market SWOT

Q4 2015 - Q1 2016

-3% -3%

Q1 2015 - Q1 2016

-7% -8%

“Annual inflation rate declined to 4% at the end of 2015 after it had reached its highest level in August 2015 of 4.41%.”

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

• The Dubai Consumer Price Index (CPI) and annual inflation rate have gradually decreased partially due to lower petrol prices which reduced the transport price index by 10% in December 2015.

• From January to December 2015, the highest price increase was in food and non-alcoholic beverages by 5%, followed by an increase of 4% during the same period in the housing, water, electricity, gas and other fuels category.

• 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

126

124

122

120

118

116

114

112

110

108

2.4

2.2

2

1.8

1.6

1.4

1.2

1

5%

4%

3%

2%

1%

0%

-1%

-2%

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: Dubai Statistics Centre Source: UAE Ministry of Energy

Figure 1 Figure 2

Average price movement Residential supply

Dubai CPI and annual inflation rate UAE petrol prices

(may be subject to delays)



• Prices continued to decline during the first quarter of 2016 as market sentiment heavily impacted market movement as both buyers and sellers remained in a waiting period.

• Whilst the Dubai Land Department (DLD) reported a monthly increase of approximately 20% in January 2016 from December 2015 in the number of unit sale transactions registered, this represents a 32% decrease year on year from January 2015.

• Apartment prices declined between 2% and 5% in Q1 2016 from Q4 2015 across locations and communities currently tracked by the Property Monitor Index (PMI). During a 12 month period, apartment prices have declined between 5% and 11%.

• In addition to the general macro-economic factors affecting the real estate market in Dubai, new supply has kept downward pressure on prices.

• The current price levels may represent a strong opportunity for end-users, as some of the more established communities become more financially accessible, leading to more diverse options for buyers.

• Investors have remained on the sideline waiting for the prices in the secondary market to decline further or have bought select off-plan units launched at lower than average market price.

Apartments“Apartment prices declined between 2% and 5%, with an overall average decrease of 3% during Q1 2016.”

Figure 3

Sale price performance

• Prices in established and prime villa communities such as Arabian Ranches, The Springs, Lakes and Meadows have continued to decline, making them viable options for end-user buyers who may have previously been renters within these communities.

• Whilst better quality villas in more established communities have been more resilient to market price declines, closing the gap between the buyer and seller price expectations remains a challenge.

• With the current price declines, gross rental yields range between 4% in Jumeirah Islands and Jumeirah Golf Estates, up to 7% in the Springs.

• Villa size, location, age, and the availability of facilities and amenities within the villa community remain to be the major deciding factors for many buyers.

Villas“Villa prices decreased between 2% and 5%, with an overall average drop of 3% during Q1 2016.”

Figure 4

Source: Property Monitor Index

Apartment pr ice performance

Business Bay

Emirates Living (Views and Greens)

Discovery Gardens

International City (Clusters)

Downtown Burj Khalifa(excluding

Burj Khalifa)

Jumeirah Beach

Residences

Dubai Marina

Uptown Motor City

Dubai Sports City

Palm Jumeirah (Shoreline

Apartments)

2,500

2,000

1,500

1,000

500

0

0%

-2%

-4%

-6%

-8%

-10%

-12%

Ave

rag

e p

rice

(AED

/ s

q. f

t.)

% c

hang

e

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

-5%

-9%

-8%

-7%

-6% -6% -6%

-11%

-5%

-8%

-6%

-2%

-3%

-2% -2% -2%

-5%

-2% -2%

-3%


Vi l la pr ice performance

Al Furjan Villas

Jumeirah Village

Triangle

Arabian Ranches

The LakesJumeirahGolf Estates

The MeadowsJumeirah Islands

The SpringsJumeirah Park

Victory Heights

1,800

1,600

1,400

1,200

1,000

800

600

400

200

0

0%

-2%

-4%

-6%

-8%

-10%

-12%

-14%

-16%

Ave

rag

e p

rice

(AED

/ s

q. f

t.)

% c

hang

e

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

-4%

-9% -9%

-6% -6%

-8%

-7%

-6%

-12%

-14%

-6%

-5%

-2% -2%

-3%

-2% -2%

-5%

-3%

-2%

98 © Cavendish Maxwell 2016 | www.cavendishmaxwell.com © Cavendish Maxwell 2016 | www.cavendishmaxwell.com




100,000

90,000

80,000

70,000

60,000

50,000

40,000

30,000

20,000

10,000

-

1%

0%

-1%

-2%

-3%

-4%

-5%

QoQ % change Q4 2015 - Q1 2016Min Max

Jumeira

h Beac

h Resid

ences

Jumeira

h Lake

s Towers

Busine

ss Bay

Downto

wn Burj

Khalifa* DIFC

Dubai Sp

orts C

ity

Motor C

ity

Interna

tional C

ity (Clust

ers)

Dubailan

d

The Gree

ns

The Vie

ws

Dubai M

arina

AED

per

ann

um

% c

hang

e

Studio rents - Q1 2016

-1% -1%

-2%

-3% -3%

-1%

-2%

-1%

0% 0% 0%

-2%

180,000

160,000

140,000

120,000

100,000

80,000

60,000

40,000

20,000

-

1%

0%

-1%

-2%

-3%

-4%

-5%


Jumeira

h Beac

h Resid

ences

Jumeira

h Lake

s Towers

Busine

ss Bay

Downto

wn Burj

Khalifa* DIFC

Dubai Sp

orts C

ity

Motor C

ity

Interna

tional C

ity (Clust

ers)

Dubailan

d

The Gree

ns

The Vie

ws

Dubai M

arina

AED

per

ann

um

% c

hang

e

One bedroom apartment rents - Q1 2016

-2%

-1%

-3%

-4%

-1% -1%

-2%

-3%

-1%

0%

-4%

-2%

250,000

200,000

150,000

100,000

50,000

-

1%

0%

-1%

-2%

-3%

-4%

-5%


Jumeira

h Beac

h Resid

ences

Jumeira

h Lake

s Towers

Busine

ss Bay

Downto

wn Burj

Khalifa* DIFC

Dubai Sp

orts C

ity

Motor C

ity

Interna

tional C

ity (Clust

ers)

Dubailan

d

The Gree

ns

The Vie

ws

Dubai M

arina

AED

per

ann

um

% c

hang

e

Two bedroom apartment rents - Q1 2016

-1%

-2%

-1%

-3%

-1%

-2% -2%

-1%-1% -1%

0%

-2%

• The delivery of new developments has increased the options for tenants as they shift from established locations to emerging areas such as Dubai Sports City and Dubailand.

• Prices have declined at a faster rate than rents, leading to more attractive gross rental yields in the market.

• As sale prices continue to decline, some homeowners who may have previously been looking to sell have turned to renting their property instead as they have not been able to achieve their expected sale prices.

• Buyers, however, especially those residing in Dubai for the long-term are starting to consider buying over renting.

• In most recent years as the city border continues to expand inland to less developed areas, developers are designing and delivering villa communities which are self sufficient providing a full scale of facilities and amenities, including retail, food and beverage outlets as well as schools.

• This shift in design trend, alongside the sale market conditions and additional villa supply, has placed pressure on established villa communities.

Apartments: “Apartment rents have declined up to 4% in Q1 2016.”

Rent performanceFigure 5 Figure 8

Figure 6 Figure 9Figure 7 Figure 10

Source: Property Monitor Index Source: Property Monitor IndexSource: Property Monitor Index Source: Property Monitor Index

Source: Property Monitor Index*Excluding Burj Khalifa

*Excluding Burj Khalifa*Excluding Burj Khalifa


300,000

250,000

200,000

150,000

100,000

50,000

-

3%

2%

1%

0%

-1%

-2%

-3%

-4%

-5%

-6%

QoQ % change Q4 2015 - Q1 2016Average rent

The Mead

ows

The Sp

rings

Arabian

Ranch

es

Al Furja

n Villas

The La

kes

Jumeira

h Park

Jumeira

h Golf

Estate

s

AED

per

ann

um

% c

hang

e

Three bedroom villa rents - Q1 2016

-1%

-3% -3% -3%

-5%

0%

2%

350,000

300,000

250,000

200,000

150,000

100,000

50,000

-

3%

2%

1%

0%

-1%

-2%

-3%

-4%

-5%

-6%


The Mead

ows

The La

kes

The Sp

rings

Arabian

Ranch

es

Victor

ia Heig

hts

Jumeira

h Park

Jumeira

h Islan

ds

Jumeira

h Golf

Estate

s

AED

per

ann

um

% c

hang

e

Four bedroom villa rents - Q1 2016

-3%

0% 0%

-4%

-5%

0% 0%

-1%

500,000

450,000

400,000

350,000

300,000

250,000

200,000

150,000

100,000

50,000

-

3%

2%

1%

0%

-1%

-2%

-3%

-4%

-5%

-6%


The Mead

ows

The La

kes

Arabian

Ranch

es

Victor

ia Heig

hts

Al Furja

n Villas

Jumeira

h Park

Jumeira

h Islan

ds

Jumeira

h Golf

Estate

s

AED

per

ann

um

% c

hang

e

Five bedroom villa rents - Q1 2016

0%

-2%

-3%

-1%

-2%

-1%

-4%

2%

Villas: “The delivery of additional villas into the market has created a downward pressure on rents.”



• 43% of the total number of units initially scheduled for 2015 were postponed to a completion date in 2016, whilst 4% were placed on hold with no definitive completion date.

• 10% of the units delivered in the first quarter of 2016 were projects delayed from 2015 and mainly located in JVC, Dubailand and Meydan.

• Approximately 44% of the completed developments in Q1 2016 have been apartment units, 38% townhouses and the remaining 18% villas.

• The completion of Phases 1 - 4 of Reem Mira villas in Q1 2016 brought an additional 1,582 units into the community with Phase 5 of the project expected to be completed at a later date in 2016, with an additional 316 villas.

Q1 2016 Completions:“Approximately 4,600 residential units have been completed in the first quarter of 2016.”

Figure 11

Residential supply

21

1

3

2

7

108

4

7

6

5

4

3

2

1

9

5

6

1 Al Jaddaf2 Business Bay3 DIFC4 Dubai Investment Park5 Dubai Silicon Oasis

6 Dubai Sports City7 Dubailand8 IMPZ9 Jumeirah Park10 Jumeirah Village Circle

400 - 500

501 - 600

601 - 700

701 - 800

801 - 900

901 - 1,000

1,001 - 2,000

Range

21

1

3

2

7

10

8

4

9

6

9

8

7

6

5

4

3

2

1

5

1 Al Furjan2 Business Bay3 Dubai Marina4 Dubai Silicon Oasis5 Dubai Sports City

6 Dubailand7 International City8 Jumeirah Village Circle9 Mohammed Bin Rashid City10 Reem

1,001 - 1,500

1,501 - 2,000

2,001 - 2,500

2,501 - 3,000

3,001 - 3,500

3,501 - 4,000

4,001 - 4,500

4,501 - 5,000

> - 5,001

Range

• At the end of 2015, there were approximately 38,000 units initially scheduled for delivery in 2016. This figure, in addition to the 7,734 units delayed from 2015, had brought the total of additional units expected for delivery to 46,000.

• As Q1 2016 came to an end, many developers delayed the delivery of their projects from 2016 to 2017.

• Of the total number of projects initially scheduled for delivery in 2016 (excluding those delayed from 2015), 20% have been further delayed to 2017 and 6% have been placed on hold.

• As the map below highlights, the majority of additional residential units are set to be delivered in Dubailand followed by Dubai Silicon Oasis and Meydan in Mohammed Bin Rashid City.

• Approximately 80% of the market wide 2016 pipeline supply are apartments and 20% are villas and townhouses.

Pipeline Supply 2016:“As of Q1 2016, there are 31,600 additional units scheduled to enter the market during the remaining three quarters in 2016, subject to any delays.”

Figure 12

2015 Completions - Top 10 locations 2016 Pipeline - Top 10 locations

Source: Cavendish Maxwell research Source: Cavendish Maxwell research



Q2 2016 sales out lookApartmentsPercentage of agents who predicted apartment prices would:

VillasPercentage of agents who predicted villa prices would:

Q2 2016 rents out lookApartmentsPercentage of agents who predicted apartment rents would:

VillasPercentage of agents who predicted villa rents would:

increase by more than 5% increase by up to 5% not change decrease by up to 5% decrease by more than 5%

increase by more than 5% increase by up to 5% not change decrease by up to 5% decrease by more than 5%

Figure 13

Figure 14Source: Cavendish Maxwell Residential Market Survey

Source: Cavendish Maxwell Residential Market Survey

35%37%

2%

0%

1%

0%

46%43%

9% 13%8% 6%

34%41%

46%41%

14% 15%6% 3%

Looking back - Q1 2016

Cavendish Maxwell Residential Market Survey

Looking forward - Q2 2016

The majority of agents surveyed had predicted apartment and villa prices to decline further by up to 5%.

Agents had predicted that rents would remain the same during Q1 2016.

predictions vs reality

Apartment and villa prices fell by 3% during Q1 2016.

Rents have declined across most unit types and areas.

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

M: +971 56 604 2750 E: [email protected]

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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