Q1 2016 Abu Dhabi Residential Market Report

Page 1

Abu Dhabi Residential Market Report

Q1

2016


Dubai Residential Market Report - Q3 2015

2

Š Cavendish Maxwell 2015 | www.cavendishmaxwell.com


Content • Abu Dhabi residential market highlights • Macro-economic factors • Sale price performance • Rent performance • Residential supply © Cavendish Maxwell 2015 | www.cavendishmaxwell.com

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Abu Dhabi Residential Market Report - Q1 2016

Abu Dhabi residential market highlights Average price movement

Residential supply (investment zones)

2 0 1 6 Pip e l in e

Q 4 20 1 5 - Q 1 2 0 1 6

-1%

-2%

2 , 4 0 0 ad d it io n al u n it s (may be subject to delays)

Q 1 20 1 5 - Q 1 2 0 1 6

-4%

Un it t yp e s

-4%

80% ap ar t me n t s

20% vil las

UAE real estate market SWOT

4

Strengths

Weaknesses

• • • • • •

• • • • • •

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

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

Opportunities

Threats

• • • • • •

• • • • • •

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

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

© Cavendish Maxwell 2016 | www.cavendishmaxwell.com


Macro-economic factors “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.

Figure 1

• 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.

Figure 2

Abu Dhabi CPI and annual inflation rate

UAE petrol prices

140

6%

2.4

135

5%

2.2

125 3% 120 2%

115 110 105 2009 2010 2011 2012 2013 CPI

2 AED / litre

4%

Annual inflation rate

130

CPI

• 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.

1.8 1.6 1.4

1%

1.2

0%

1

2014 2015

Annual inflation rate

Aug Sep Oct 15 15 15 Unleaded Petrol 98 Unleaded Petrol 91

Source: Abu Dhabi Statistics Centre

© Cavendish Maxwell 2016 | www.cavendishmaxwell.com

Nov 15

Dec Jan Feb 15 16 16 Unleaded Petrol 95

Mar 16

Apr 16

Diesel Source: UAE Ministry of Energy

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Abu Dhabi Residential Market Report - Q1 2016

Sale price performance Apartments:

Villas:

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

“Villa prices declined between 1% and 2%”

• 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.

• 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.

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

• 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.

Figure 3

Figure 4

Apartment price performance

Villa price performance

1,800

1,800

0%

1,600

1,600 -1%

-1%

-1%

-1%

-1%

-1%

-1%

-1%

-3%

-3%

800 -4%

600

-4%

-4%

-4%

1,200

-2%

-2%

1,000 -3%

-3%

800 600

% change

1,000

Average price AED / sq ft

-2% % change

Average price AED / sq ft

1,200

-4%

400

400 -5%

-5%

-5%

-5%

-5%

200

200 r ee ad Gh l A

Q4 2015

h ac Be ha a R Al

Al

wn to wn o D ef Re

Q1 2016

QoQ % change Q4 2015 - Q1 2016

em Re Al

s ce en sid e hR ac Be at y i ad Sa

nd Isla

-6%

12 Month % change Q1 2015 - Q1 2016 Source: Property Monitor Index

6

-1%

1,400

1,400

0

0%

0

s en rd Ga a h Ra Al

Q4 2015

Al

las Vil ef Re

s illa hV ac e tB iya ad Sa

-6%

Q1 2016

QoQ % change Q4 2015 - Q1 2016

12 Month % change Q1 2015 - Q1 2016 Source: Property Monitor Index

© Cavendish Maxwell 2016 | www.cavendishmaxwell.com


© Cavendish Maxwell 2016 | www.cavendishmaxwell.com

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Abu Dhabi Residential Market Report - Q1 2016

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

• 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.

• 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.

• 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.

Figure 5

A pa rtm ent re n t s - Q 1 2 0 1 6 180,000

3%

160,000 2% 1%

120,000 100,000

0%

80,000 60,000

-1%

-1%

-1%

-1%

-1%

-1%

-1%

-1%

-1%

40,000 -2%

20,000 -

Studio

-2%

-2%

-2%

% change

AED per annum

140,000

-2%

-2% -3%

Al Ghadeer

1 bed

Al Raha Beach

2 bed

Al Reef Downtown

Al Reem Island

Saadiyat Beach Residences

QoQ % change Q4 2015 - Q1 2016

Source: Property Monitor Index

8

© Cavendish Maxwell 2016 | www.cavendishmaxwell.com


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

• 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.

• 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.

• 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.

• 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.

Figure 6

600,000

3%

500,000

2%

400,000

1%

300,000

0%

200,000 100,000 -

3 bed

-1%

-2%

-2%

-2%

-2%

-2%

-1%

% change

AED per annum

V il l a rents - Q 1 2 0 1 6

-1% -2%

-2%

-3% Al Raha Gardens

4 bed

5 bed

Al Reef Villas

Saadiyat Beach Villas

QoQ % change Q4 2015 - Q1 2016

Source: Property Monitor Index

© Cavendish Maxwell 2016 | www.cavendishmaxwell.com

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Abu Dhabi Residential Market Report - Q1 2016

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

• 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.

Figure 7

A bu D habi in v e s t m e n t z o n e s re sid e n t ial su p p ly 2 0 1 5 - 2 0 1 8 10,000

255 250

Additional units

245 6,000

240 235

4,000

2,000

-

Delivered

230 225 220

2015

Cumulative supply

Cumulative supply (‘000)

8,000

2016

2017

2018

Pipeline supply

Source: Cavendish Maxwell research

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© Cavendish Maxwell 2016 | www.cavendishmaxwell.com


© Cavendish Maxwell 2016 | www.cavendishmaxwell.com

11


PROPERTY SERVICES MIDDLE EAST & AFRICA Jay Grant MSc IRRV (Hons) Managing Partner M: +971 50 192 1658 E: jay.grant@cavendishmaxwell.com

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

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

Jonathan Brown BSc (Hons) FRICS Head of Abu Dhabi Office M: +971 50 940 3540 E: jonathan.brown@cavendishmaxwell.com

Amit Shukla Senior Associate Development Advisory and Real Estate Research M: +971 56 360 3540 E: amit.shukla@cavendishmaxwell.com

Dima Isshak BSc

Research Manager

M: +971 50 482 7938 E: dima.isshak@cavendishmaxwell.com

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