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
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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
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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
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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
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-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
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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
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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
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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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PROPERTY SERVICES MIDDLE EAST & AFRICA Jay Grant MSc IRRV (Hons) Managing Partner M: +971 50 192 1658 E: jay.grant@cavendishmaxwell.com
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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
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Dima Isshak BSc
Research Manager
M: +971 50 482 7938 E: dima.isshak@cavendishmaxwell.com
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