Q1 2015 Dubai Residential Market Report by cavendish_maxwell

Residential Market Report Dubai - United Arab Emirates Q1 2015

1.0

FOREWORD

2.0

CAVENDISH MAXWELL INTRODUCTION

3.0

PROPERTY MONITOR INTRODUCTION

4.1

DUBAI RESIDENTIAL MARKET TRENDS – THE STORY SO FAR

4.2

MARKET WIDE TRENDS

4.3

SALE PRICE & PERFORMANCE

4.4

CURRENT RENTAL PRICE & PERFORMANCE

4.5

OFF PLAN PROJECT PERFORMANCE

4.6

INVESTMENT PERFORMANCE

5.0

SUPPLY

6.0

REGULATION

7.0

ECONOMIC FACTORS

8.1

DEVELOPMENT FINANCE

8.2

MORTGAGE FINANCE

9.0

SENTIMENT

Residential Market Report | © Cavendish Maxwell 2015

Residential Market Report | ÂŠ Cavendish Maxwell 2015

INTRODUCTION

1.0 Foreword Adam Wisher, MRICS Head of Development Advisory & Real Estate Research

‘The lower transaction volumes during the second half of 2014 created a downward pressure on prices that led to reductions in Q1 2015 as sellers began to lower their expectations to get deals through. The average price at the end of Q1 stood at AED 1,344 per sq ft, representing a 5.1% market wide decline in the preceding 9 months from what looks to be the peak in Q2 2014. The extent of this trend is not a one-sizefits-all generalisation with established locations - Business Bay, Dubai Marina & parts of Downtown - showing the most resilience. Secondary apartment locations such as International City and end user villa communities have been hit the hardest with year-on-year drops of up to 11%. Despite these declines, there is still appetite in the off-plan market with several successful launches of product in secondary locations such as Dubai Sports City, Dubai Silicon Oasis and Dubailand. Developers in these locations have, however, had to offer very flexible payment plans alongside developer track record and marketing exposure to drive absorption.

2.0 Cavendish Maxwell introduction: a full spectrum property service firm We are a firm of chartered surveyors and property consultants focusing on property services throughout the Middle East and Africa. Established in 2008, Cavendish Maxwell has expanded into one of the region’s largest and highest profile property consultancies. As a fully qualified member firm of the Royal Institution of Chartered Surveyors (RICS), and with extensive knowledge of the region’s property and asset markets, we have the necessary experience and expertise to deal with property and business assets of all types.

Given our growing prominence in the market more banks, private clients, landlords, tenants and developers are turning to Cavendish Maxwell due to our excellent reputation as property consultants and advisors. We offer a comprehensive range of property services across six departments, each of which is headed by fully qualified chartered surveyors.

3.0 Property Monitor: the property data partner for your business The data included within this report draws from the Property Monitor, a live data service driven by bespoke research conducted by Cavendish Maxwell and a number of Approved Partners. The Property Monitor draws on real-time data as and when MOUs are signed and therefore represents the most current source of actual transactions. More detail than is presented in this report is available from Cavendish Maxwell on

request, alongside a range of valuation, agency, advisory, research and other property services. The Property Monitor is also available to market operatives who are looking to access transactional evidence to inform investment development and transactional activity. All data is verified by an RICS surveyor and covers both Dubai and Abu Dhabi.

This appetite will be tested in the coming years with 23,000+ units being delivered in 2015. A total pipeline of 54,495 units are expected to be delivered during 2015-2017, 45.7% of this coming from Dubailand and Sports City master developments. In terms of sentiment, the majority of the market expects further price declines up to 5% in the run up to Q3.

Residential Market Report | © Cavendish Maxwell 2015

DUBAI MARKET TRENDS: CURRENT ACTIVITY

4.1 Dubai residential market the story so far…

“Factors driving the market include supply, sentiment, regulation and finance - a combination of which have led to varying trends post the peaks of 2008 and most recently in Q2 2014.”

The property market in Dubai saw unprecedented levels of growth during 2007 and early 2008 following the establishment of the freehold areas, and the subsequent law governing them in 2006. Prices peaked in 2008 following high levels of speculation and then dropped just as drastically in the wake of the global economic crisis. These clear cycles between 2008 and 2014 are discussed in this report focusing on the fundamentals behind the factors affecting the market to inform how it will progress up to 2020.

The emerging market of Dubai has seen relatively short cycles with prices bottoming out in Q1 of 2011 before seeing growth to what looks to be another peak, albeit below that of 2008, in Q2 of 2014.

Key points • Year on Year (Y-o-Y) drops of 28% and 20.4% following 2008 peak.

• Market confidence grew from 2012 and 2013 (Y-o-Y price increases of 37.2% & 12.7% respectively) with changes in the business models of developers alongside new regulations and the EXPO 2020 announcement.

• 2009 - period of market consolidation as major government based developers re-grouped, restructured debt and planned for a more sustainable business model.

figure 1

Dubai real estate market economic Timeline source: cavendish maxwell

1600 1500 1400

1400

1320

1350

1356

1380

1200 Lehman Brothers collapse

1090

1000

1100 1010

Early signs of trouble for Governmentrelated entities

UAE Real Estate Boom

Oil price collapse at $ 47/ barrel Expo 2020 announcement

average 878

800

600

Oil price collapse at $ 32/ barrel

US housing bubble began to burst Oil price peak at $ 145/ barrel

Nakheel and DWC announcing plans for debt restructuring

$10 BILION $ 10 billion-worth bond issuance by the Dubai Central Bank

400

Rebound growth for the general markets - oil prices above $ 100

Abu Dhabi’s $10 billion loan to Dubai

Post-Expo 2020

Russian currency crisis

Q1 2010 to Q1 2012 Prolonged period of slow growth, prices around AED 878/ sq.ft.

200 Q1 2007

Q1 2008

Q4 2008 Q1 2009

Residential Market Report | © Cavendish Maxwell 2015

Q4 2009

Q2 2012

Q4 2013

Q1 2014

Q3 & Q4 2014

DUBAI MARKET TRENDS: CURRENT ACTIVITY

“Prime areas recovered first and have remained most resilient following recent price compressions - prime stays prime.”

4.2 Market wide trends established area profile, sales Sales value trends, by area Source: Property Monitor Indices*

2,800 2,600 2,400 2,200 2,000 1,800 1,600 1,400 1,200 1,000 800 600 400

Dubai Apartment Averages

Dubai Villa Averages

Downtown Burj Khalifa

DIFC

Arabian Ranches

2015 Q1

2014 Q4

2014 Q3

2014 Q2

2014 Q1

2013 Q4

2013 Q3

2013 Q2

2013 Q1

2012 Q4

2012 Q3

2012 Q2

2012 Q1

2011 Q4

2011 Q3

2011 Q2

2011 Q1

2010 Q4

2010 Q3

2010 Q2

2010 Q1

2009 Q4

2009 Q3

2009 Q2

2008 Q1

2008 Q4

2008 Q3

200

Springs

figure 2 * the Property Monitor indices draws from data collated under exclusive agreements with reputable local agents and the Cavendish Maxwell’s valuation business. This includes off-plan and secondary transactions as well as mortgage and non-mortgage deals. Importantly the data comes in real-time as and when MOUs are signed and all transactions verified by an RICS surveyor.

Key points

“It is important to view quarterly trends and also those since the peak but the year-to-date will reflect the strong performance of some areas in Q1 of 2014.”

• Whilst declines were marginal across Q3 & Q4 2014 with sellers holding firm alongside reduced volumes, the last quarter has seen a drop across the market. In Q1 2015 villa properties declined by 3%, compared to apartments which dropped by 2%. • The market looks to have peaked at Q2 2014 at an average price of AED 1,416 per sq. ft. (In the 9 months succeeding we have witnessed a drop of 5.1%, comparing to a drop of 21% in the corresponding period following the peak of 2008.)

Residential Market Report | © Cavendish Maxwell 2015

DUBAI MARKET TRENDS: CURRENT ACTIVITY

4.3 Sale price & performance - year to date (YTD) Residential sale prices. Dubai, villas source: Property Monitor

Q1 2014 AED YTD ranking per sq. ft.

TIME PERIOD

Area Jumeirah Golf Estates (1*) Jumeirah Islands (2*) The Lakes (3*) Jumeirah Park (4*) Victory Heights (5*) The Meadows (6*) Arabian Ranches (7*) The Springs (8*) Jumeirah Village Triangle (9*) Al Furjan Villas (10*)

4 7 8 10 13 14 15 17 18 20

1,525 1,656 1,509 1,200 1,347 1,632 1,411 1,321 1,124 1,077

Q2 2014 AED per sq. ft.

Q3 2014 AED per sq. ft.

Q4 2014 AED per sq. ft.

Q1 2015 AED per sq. ft.

1,592 (4.39%) 1,727 (4.29%) 1,562 (3.48%) 1,237 (3.08%) 1,369 (1.63%) 1,674 (2.57%) 1,433 (1.59%) 1,357 (2.73%) 1,163 (3.41%) 1,049 (-2.66%)

1,591 (-0.06%) 1,700 (-1.56%) 1,585 (1.45%) 1,237 (0.00%) 1,370 (0.07%) 1,675 (0.06%) 1,419 (-0.98%) 1,345 (-0.90%) 1,131 (-2.75%) 983 (-6.29%)

1,566 (-1.57%) 1,680 (-1.18%) 1,543 (-2.63%) 1,209 (-2.26%) 1,347 (-1.68%) 1,659 (-0.99%) 1,399 (-1.38%) 1,323 (-1.66%) 1,094 (-3.21%) 977 (-0.54%) +/- Average

1,551 (-0.96%) 1,660 (-1.19%) 1,503 (-2.62%) 1,189 (-1.65%) 1,314 (-2.43%) 1,577 (-4.92%) 1,363 (-2.58%) 1,248 (-5.65%) 1,038 (-5.19%) 956 (-2.18%) -2.94%

Q2 2014 AED per sq. ft.

Q3 2014 AED per sq. ft.

Q4 2014 AED per sq. ft.

Q1 2015 AED per sq. ft.

1763 (4.43%) 1647 (6.12%) 1501 (3.37%) 1876 (4.37%) 2565 (3.22%) 1654 (2.48%) 922 (4.89%) 1,022 (6.02%) 982 (2.92%) 815 (0.99%)

1767 (0.22%) 1627 (-1.21%) 1497 (-0.24%) 1854 (-1.18%) 2532 (-1.27%) 1648 (-0.36%) 915 (-0.76%) 1,021 (-0.10%) 936 (-4.59%) 770 (-5.52%)

1762 (-0.26%) 1609 (-1.11%) 1490 (-0.47%) 1847 (-0.40%) 2518 (-0.56%) 1630 (-1.09%) 889 (-2.84%) 1,000 (-2.06%) 933 (-0.39%) 744 (-3.38%) +/- Average

1732 (-1.74%) 1592 (-1.06%) 1484 (-0.40%) 1828 (-0.99%) 2509 (-0.37%) 1608 (-1.35%) 870 (-2.14%) 9,43 (-5.70%) 911 (-2.33%) 717 (-3.63%) -1,97

Decline from YTD Q2 ‘14 Peak % change % change -2.58% -3.88% -3.78% -3.88% -4.02% -5.79% -4.88% -8.03% -10.75% -8.87% -5,65

1.70% 0.24% -0.40% -0.92% -2.45% -3.37% -3.40% -5.53% -7.65% -11.23% -3,30

figure 3

Residential sale prices. Dubai, apartments source: Property Monitor

TIME PERIOD

Area

Q1 2014 YTD Market AED wide ranking per sq. ft.

Dubai Marina (1*) 1 Emirates Living (Greens/Views) (1*) 1 Business Bay (3*) 3 Jumeirah Beach Residences (4*) 5 Downtown Burj Khalifa (5*) 6 Palm Jumeirah (Shoreline Apt) (6*) 9 Dubai Sports City (7*) 11 Uptown Motor City (8*) 12 Discovery Gardens (9*) 16 International City (10*) 19

1,688 1,552 1,452 1,798 2,485 1,614 879 964 954 807

Decline from YTD Q2 ‘14 Peak % change % change -1.76% -3.34% -1.13% -2.56% -2.18% -2.78% -5.64% -7.73% -7.23% -12.02% -4,64

2.60% 2.60% 2.20% 1.70% 1.00% -0.40% -1.00% -2.18% -4.50% -11.20% -0,92

“Apartments dominate the top ten performing locations and peripheral areas have been hit hard in the villa market.” “The villa market has dipped between 2.28% (Jumeirah Golf Estates) to 10.75% (Jmeirah Village Triangle) since the market peak and an average of 5.65%. The apartment market has seen a boarder range of decline from 1.76% in Dubai Marina down to 12% in International City with an average of 4.64%.

figure 4

4.4 Current rental points & performance quarterly Rental price trends, by unit type source: Property Monitor

Villa community (Assumes 4 bed villa) Victory Heights The Springs Arabian Ranches Jumeirah Village Triangle Jumeirah Islands The Meadows Jumeirah Park The Lakes Jumeirah Golf Estates

AED Rent per sq. AED Rent per unit (p.a.) (‘000) ft. (p.a.) March ‘15 March ‘15 81 72 70 53 60 68 65 71 74

195 - 225 190 - 220 180 - 230 205 - 230 285 - 320 245 - 260 260 - 290 280 - 310 340 - 370

Apartments (Assumes 2 bed apartment)

AED Rent per sq. AED Rent per unit (p.a.) (‘000) ft. (p.a.) March ‘15 March ‘15

International City Motor City Dubai Sports City Emirates Living Jumeirah Beach Residences Dubai Marina Business Bay Downtown Burj Khalifa (Upscale) Downtown Burj Khalifa (Luxury)

60 76 70 108 105 114 96 120 155

67 - 75 110 - 120 90 - 110 130 - 150 130 - 160 130 - 150 130 - 160 135 - 165 260 - 280

End user villa communities such as Arabian Ranches and the Springs declined 4.8% and 8.% respectively but still show a strong occupancies and amongst the highest rates per sq ft in the rental market.”

figure 5

Residential Market Report | © Cavendish Maxwell 2015

DUBAI MARKET TRENDS: CURRENT ACTIVITY

“ Strong investor performance in the Downtown, Emirates Living & Dubai Marina locations.” “Peripheral areas showing strong investment returns for those entering the market now - International City, Discovery Gardens, Sports City & Motor City with above 8% returns - but lower overall performance taking into consideration the price compression in these areas.” “Apartment locations dominate top 5 performing areas for investors.” “Future investment potential in emerging areas with strategic locations such as DWC and DIP.”

4.5 Off-plan project performance Investor appetite remains for off-plan and under construction projects. Outside of tier one developer led schemes, we have seen strong performance for recent launches outside of prime locations. A sample of recently launched schemes include: • Grand Horizon, Dubai Sports City. 200 units launched by developer / agent GGICO. Launch Date: Feb 2015. • Acacia at Park Heights, Phase 3, Mohammad Bin Rashid (MBR) City. 479 Apartments Launched By Emaar. Launch Date: Feb 2015. • Town Square Phase, 1 (Zahra), Dubailand. 306 apartments launched by Nshama. Launch Date: Feb - Mar 2015. • Downtown Views, Downtown Burj Khalifa. 418 units launched by Emaar. Launch Date: April 2015

• Akoya Project, Dubailand. 2,182 units launched by Damac Properties. Launch Date: Various dates. • Villa Lantana, Al Barsha South. 438 villas launched by Tecom Investments. Launch Date: January 2014. • Mira Oasis, Phase 1, Dubailand. 411 units launched by Emaar. Launch Date: Feb 2014. • Mira Oasis, Phase 2, Dubailand. 480 units launched by Emaar. Launch Date: April 2014. • Polo Residence, Mohammad Bin Rashid (MBR) City. 29 Apartment buildings launched by Invest Group Overseas (IGO). Launch Date: May 2014. • The Vertex Towers, Phase 1, Motor City. 45 & 30 storey apartment towers launched by Union Properties. Launch Date: Sep 2014.

Track record and marketing exposure is said to have driven strong absorption at the above schemes. Developers have, however, had to encourage demand with very flexible payment plans which, in some cases, exceed the project delivery date.

4.6 Investment performance capital appreciation vs. investment yield* Investment performance - Capital appreciation vs. investment yield* source: Property Monitor Indices

10% 8% 6% 4% 2% 0% -2% -4% -6% -8% -10%

figure 6

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-12%

GROSS RENTAL YIELD

CAPITAL APPRECIATION

* representation of gross investment yield ** Ranking basis on a 50/50 weighting of rental yield/capital appreciation

Residential Market Report | © Cavendish Maxwell 2015

DUBAI MARKET TRENDS: CURRENT ACTIVITY

Residential Market Report | Â© Cavendish Maxwell 2015

DUBAI MARKET TRENDS: FACTORS AFFECTING THE MARKET

5.0 Supply

“Supply will continue to have an impact on price with opportunities for residents to upgrade in emerging locations in the sale and rental markets.”

Pipeline supply, Dubai

Commulative Supply

Yearly Supply

Q1 2015

Source: Property Monitor

560,000

30,000

Units: Yearly Increase

540,000

1,464

25,000

23,304

520,000

18,990

20,000

17,512 15,000

500,000

12,950

12,214

480,000

10,000

460,000 4,260

5,000

440,000 420,000

2013

Figure 7

2014

2015

2016

2017

2018

Key points • 23,000+ additional units to enter market in 2015, 4.5% net addition. • 7,885 additional luxury units over the coming three years - 11% of the total 71,848 pipeline in 2015-2017.

• Significant additions in secondary areas in 2015 - 2018. Including: JVC (6.2% of pipeline), Sports City (11.5% of pipeline), DIP (2.9% of pipeline) and Dubailand (43%% of pipeline).

Existing supply, Dubai MHI 8: EXISTING SUPPLY

24 10

26 22 21 21

27 17

NUMBER OF DWELLINGS

12 23

- 1,000

1,001

- 5,000

5,001

- 10,000

10,001 - 15,000 15,001 - 20,000 9

15 11

20,001 - 25,000 25,001 - 30,000 30,001 - 35,000 35,001 - <

figure 8 1

AL FURJAN

DOWNTOWN BURJ KHALIFA

11 DUBAI SILICON OASIS

16 JUMEIRAH BEACH RESIDENCES

21 JUMEIRAH VILLAGE CIRCLE

26 CULTURE VILLAGE

ARABIAN RANCHES

DUBAI FESTIVAL CITY

12 DUBAI SPORTS CITY

17 JUMEIRAH GOLF ESTATES

22 JUMEIRAH VILLAGE TRIANGLE

27 DUBIOTECH

BUSINESS BAY

DUBAI INVESTMENTS PARK

13 EMIRATES LIVING

18 JUMEIRAH ISLANDS

23 3MOTOR CITY

28 UMM SUQEIM

DIFC

DUBAI LAND

14 IMPZ

19 JUMEIRAH LAKES TOWERS

24 PALM JUMEIRAH

29 AL BARSHA

DISCOVERY GARDENS

0DUBAI MARINA

15 INTERNATIONAL CITY

20 JUMEIRAH PARK

10 5

Residential Market Report | © Cavendish Maxwell 2015 25 TECOM 30 MIRDIF

DUBAI MARKET TRENDS: FACTORS AFFECTING THE MARKET

Pipeline supply massing, Dubai Area

Market heat indices - pipeline supply 8

Dubai Investments Park

13 Emirates Living

21 Jumeirah Village Circle

Dubai Land

14 IMPZ

24 Palm Jumeirah

10 Dubai Marina

17 Jumeirah Golf Estates

26 Jumeirah Golf Estates

12 Sports City

19 Jumeirah Lakes Towers

figure 9

Residential Market Report | Â© Cavendish Maxwell 2015

Pipeline sample 2015-2018

Palm Jumeirah

1570

Dubai Marina

3631

JLT

2644

Dubailand

6895

Emirates Living

656

IMPZ

2317

JVC

4476

JVT

279

Sports City

7971

Dubai Investment Park

2098

Arabian Ranches

1651

MBR City

4107

Jumeirah Golf Estates

486

DUBAI MARKET TRENDS: FACTORS AFFECTING THE MARKET

6.0 Regulation The following details a series of regulations that have impacted the residential market dynamics in Dubai.

Real estate regulations & practices Dubai source: cavendish maxwell

REGULATION (REGULATOR, DATE)

REGULATION

CURRENT IMPACT & FUTURE OPTIONS

Mortgage law

UAE National:

Current impact:

(Central Bank,

Property valued at AED 5 Million or less: LTV = 80 %

Reduction in demand in end user led locations

circular No: 31/2013)

Property valued at more than AED 5 Million: LTV = 70%

such as Emirates Living.

Non UAE National:

Future options:

Property valued at AED 5 Million or less: LTV = 75%

Central Bank could change LTVs to simulate the

Property valued at more than AED 5 Million: LTV = 65%

market in run up to the EXPO.

Limit of exposure to real

Limits developers exposure to real estate within lending

Current impact:

estate (Central Bank)

portfolios.

Led to a more selective approach to project financing. Future options: Not likely to see a change in the short to medium term.

Transfer fees

Doubling the transfer fee subjected on each sale to 4% of

Current impact:

(DLD, Executive Council

the property’s value.

Introduced at a time of high price hikes and

resolution No. (30) of 2013)

helped to cool demand and price escalation. Future options: A return to pre 2013 rates of 2% unlikely.

Disclosure of personal debt

Requires banks to share information on request regarding

Current impact:

(Central Bank)

personal debts during loan applications.

Improved transparency of personal debt and lending placed restrictions on those over leveraged. Future options: Here to stay.

Restrictions on investors of

Emaar led initiative requiring 40% payment on off-plan

Current impact:

off-plan projects

projects prior to re-sale. Majid Al Futtaim implemented

Contributed to stablising prices in the off-plan

(Developers)

similar terms on their developments.

market and reduced the activity of ‘flippers’. Future options: Other developers following suit.

figure 10

DUBAI MARKET TRENDS: FACTORS AFFECTING THE MARKET

7.0 Economic factors Dubai inflation

GDP distribution: Dubai H1 2014

Source: Dubai Statistics Center & Cavendish Maxwell Projections

0,1%

0,1

Rate 2014: 3.37%

11% 1%

Q1 2015: 4.42%

7% 11%

24%

12%

13%

Agriculture, Live Stock and Fishing Mining and Quarrying Manufacturing

Electricity, Gas & Water Construction Wholesale, Retail Trade and Repairing Servises

Dubai Population (as of April 11, 2015) 2,355,287 Grant of New Visa 570,917 new residency visas issued in the first half of 2014 (30% higher than then first half of 2013)

figure 11

Population, Dubai

Nationals

Expats

Source: Dubai Statistics Center & Cavendish Maxwell Projections

CAGR (2007-2016): 5.3% 8%

2 Millions

6% 5%

4% 1

3% 2%

Percentage Growth

1% 0%

0 2007

2008

2009

2010

2011

2012

2013

2014

2015

2016

figure 12

8.1 Development finance • Major banks’ finance appetite for real estate still limited outside of one-off client relationships and top tier developers*. • This would exclude industry projects (schools, hospitals etc.) and built to-suit opportunities with pre-lets and secure income. • Encouraging signs that some major banks entering the market with more favourable real estate project finance products.

• *Tier 1. Government subsidiaries, track record in large scale projects and large land banks. • Tier 2. Established developers with track record & expertise. • Tier 3. Private parties with land plots, limited experience in development. Project finance rate: 5-6% constriction period / 4-5% investment period* *dependant upon borrower

“Regulatory measures have acted to cool the market and curb speculation. Increasing LTVs remains an option to stimulate the market in the run up to EXPO 2020.”

Debt Equity Ratios: 60*/40 * inclusive of land, exclusive of soft costs

DUBAI MARKET TRENDS: FACTORS AFFECTING THE MARKET

8.2 Mortgage finance The following details a series of regulations that have impacted the residential market dynamics in Dubai. Real estate regulations & practices Dubai

Primary Axis: # of valuations Secondary Axis: Average price/sq.ft. (AED)

Source: Cavendish maxwell*

610

1500 1400

510

1300 410 Feb 2013 = 100

1200 310

1100 1000

210

900 110 800 10

700 600

figure 13

Dubai marketwide average price/sq.ft

Refinance

Mar - 15

Jan - 15

Nov - 14

Sep - 14

Jul - 14

May - 14

Mar - 14

Jan - 14

Nov - 13

Sep - 13

Jul - 13

May - 13

Mar - 13

-90

Sales

* the indices details activity of major UAE banks for whom Cavendish Maxwell have consistently conducted mortgage valuations during this time.

Key points • Volume of mortgage deals at the end of Q1 2015 are back down to levels recorded in March 2013, having peaked in between around Q1 2014.

• Around the peak we witnessed a spike in the level of refinanced mortgages following a drive from local banks with new products targeting this segment.

DUBAI MARKET TRENDS: FACTORS AFFECTING THE MARKET

9.0 Sentiment Cavendish Maxwell’s first Residential Market Sentiment Survey, taking the temperature of the market to inform future movements.

Q1: Sale listings (Supply) vs. buyer enquires (demand) - Last 3 months • Majority of agents (58%) observed an increase in new seller instructions - increase in supply availability & willing sellers… • Majority of agents (44%) have seen a drop in new buyer enquiries lower buyer demand…

• Vast majority of agents (68%) feel that sales values will decline in Q2. Most agents (48%) indicated that this decrease in value would occur alongside an increase in sales activity. • With regards to the rate of decline, the majority of the agents (45%) expect a drop of 1% to 5% in the Q2 2015.

“The market has changed significantly- buyers are more sophisticated and speculators no longer have much opportunity for an easy profit.” Agent Comment

Sales Price & volumes in next 3 Months source: Property Monitor

80.00% 70.00% 60.00%

Above supportive of further reduction in prices.

50.00%

Q2: Buyer & seller expectations

40.00%

• Sellers: 51% have expectations that are above the achievable market price.

30.00%

• Buyers: 56% have expectations that are below the achievable market price. Gap to narrow which should increase transactional activity.

20.00% 10.00% 0.00%

Decrease

Sales price figure 14

Increase

Remain the same

sales volume

“ The market has been on a roller-coaster ride from an incomparable boom to a free-fall after the Lehman Brother crisis. It’s in everybody’s interest – investors, landlords, the government and real estate professionals, to make sure that we witness a steady sustainable growth and prevent an overheating of the prices.” Agent Comment

DUBAI MARKET TRENDS: FACTORS AFFECTING THE MARKET

“The market is more mature and different fundamentals have kicked in compared to the boom and bust years. Better investor protection will help to reinforce confidence in ‘under construction’ projects.” Agent Comment

9.0 Sentiment (cont.)

Rental price & volumes in next 3 months source: Property Monitor

80.00%

• Vast majority of agents (46%) feel that rental values will decline in Q2 2015. Most agents (58%) indicated that this decrease in value would occur alongside an increase in rental activity.

Q5: The EXPO Impact - Residential sale prices • 1 year impact (2015 - 2016): 81% of the agents see no impact • 3 year impact (2015 - 2018): 74% of the agents expect a positive impact • 5 year impact (2015 - 2020): 93% of the agents expect a positive impact

Q6: Trends post 2008 vs. trends post 2014 • 76% think that it is different this time around.

70.00% 60.00% 50.00% 40.00% 30.00% 20.00% 10.00% 0.00%

Decrease

rental price

Increase

Remain the same

rental volume

figure 15

The market sentiment survey was participated by well reputed and established real estate agencies in the market including: - Ascot and Co - Real Estate - Bavarian Real Estate Brokers LLC - Better Homes Properties - Dacha Real Estate - Dart Link Real Estate Brokers LLC - Escola Real Estate - Exclusive Links Real Estate - Fine & Country UAE - Fortune 5 Real Estate - GGICO Properties - GIM Real Estate Broker - Gulf Platinum Properties - House Hunters Real Estate LLC - Kensington Real Estate - Ocean View Real Estate Dubai - Prime Places Real Estate - Q Properties - We Buy Your -Property.

“I very much believe end users are still in the market, however they are extremely educated and are shopping around before making any choices. It is definitely a buyer’s market and there are some great deals to be had.” Agent Comment

Key facts: Q1 2015 Sales • Market average sales price: AED 1,344 per sq. ft.

• Lowest performing apartment area, gross rental yield (Q1 2015): Downtown Burj Khalifa, 5.57%

• Highest performing apartment area, sale price (YTD): Dubai Marina, Emirates Living, 2.60 %

• Lowest performing villa area, gross rental yield (Q1, 2015): Palm Jumeirah (Fronds) 3.67%

• Highest performing villa area, sale price (YTD): Jumeirah Golf Estates, 1.70% • Lowest performing apartment area, sale price (YTD): International City, -11.20% • Lowest performing villa area, sale price (YTD): Al Furjan, -11.23%.

Rental performance • Highest performing apartment area, gross rental yield (Q1 2015): International City, 9.26%

Supply • Largest supply pipeline, 2015: Dubai Sports City, 2,299 units.

Sentiment • 68% of agents feel that sales values will decline in the next 3 months • 48% of agents indicated that this decrease would occur alongside an increase in transactional activity. • 45% of agents expect a drop of 1% to 5% in the next 3 months.

• Highest performing villa area, gross rental yield: (Q1 2015): Victory Heights, Dubai Sports City, 5.42%

Residential Market Report | ÂŠ Cavendish Maxwell 2015

Jay Grant MSc IRRV (Hons) Managing Partner M: +971 50 192 1658 E: jay.grant@cavendishmaxwell.com

Adam Wellfair BSc (Hons) MRICS Managing Partner M: +971 50 192 1659 E: adam.wellfair@cavendishmaxwell.com

Miles Phillips BSc (Hons) MRICS ACIArb Partner Head of Operations - UAE M: +971 56 604 2750 E: miles.phillips@cavendishmaxwell.com

James Cresswell BA (Hons) MSc MRICS Partner Head of Commercial Valuation M: +971 56 690 1186 E: james.cresswell@cavendishmaxwell.com

Paul Barker BSc (Hons) MRICS Partner Head of Commercial Valuation M: +971 56 690 3186 E: paul.barker@cavendishmaxwell.com

Sofia Underabi BPropEc AAPI Partner Head of Residential Valuation M: +971 50 435 6527 E: sofia.underabi@cavendishmaxwell.com

Mike Kenyon MRICS AAPI CPV (P&M) Partner Head of Machinery & Business Assets M: +971 56 934 0078 E: mike.kenyon@cavendishmaxwell.com

Andrew Love MA (Hons) MRICS Partner Head of Investment & Commercial Agency M: +971 50 859 2734 E: andrew.love@cavendishmaxwell.com

Adam Wisher BSc (Hons) MRICS Partner Head of Development Advisory & Real Estate Research M: +971 56 139 4315 E: adam.wisher@cavendishmaxwell.com

Craig Ross BSc (Hons) MRICS Partner Head of Project & Building Consultancy M: +971 56 139 4311 E: craig.ross@cavendishmaxwell.com

Giuliano Gasparini MSc FRICS Head of Hotels, Hospitality & Leisure M: +971 50 818 6845 E: giuliano.gasparini@cavendishmaxwell.com

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