Q1 2016 Dubai Residential Market Report by cavendish_maxwell

Dubai Residential Market Report

2016

Dubai Residential Market Report - Q1 2016

ÂŠ Cavendish Maxwell 2016 | www.cavendishmaxwell.com

Content • Dubai residential market highlights • Macro-economic factors • Sale price performance • Rent performance • Residential supply • Cavendish Maxwell Residential Market Survey Q1 2016 © Cavendish Maxwell 2016 | www.cavendishmaxwell.com

Dubai Residential Market Report - Q1 2016

Dubai residential market highlights Average price movement

Residential supply 2 0 1 6 Pip e l in e

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

-3%

3 6 , 0 0 0 sc h e d u le d u n it s (may be subject to delays)

Q 1 2 0 1 6 Co mp le t io n s

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

-7%

-8%

4,600 units

UAE real estate market SWOT

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

Macro-economic factors “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.

• 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.

• 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.

• 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 1

Figure 2

Dubai CPI and annual inflation rate 126 124

UAE petrol prices

2.4

2.2

118

116

114

112 110 108 2009 2010 2011 2012 2013 CPI

AED / litre

CPI

120

Annual inflation rate

122

1.8 1.6 1.4

-1%

1.2

-2%

2014 2015

Annual inflation rate

Aug Sep Oct 15 15 15 Unleaded petrol 98 Unleaded petrol 91

Source: Dubai Statistics Centre

Nov 15

Dec Jan Feb 15 16 16 Unleaded petrol 95

Mar 16

Apr 16

Diesel Source: UAE Ministry of Energy

Dubai Residential Market Report - Q1 2016

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

• 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.

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

• 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.

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

• 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%.

• 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.

Figure 3

A pa rtm ent p r i ce p e r f o r m a n c e 0%

-2%

2,000

-2%

-3%

-4% 1,500

-5%

-5% -6%

-6%

-5%

-6%

-7%

1,000 -8%

500

-6%

% change

Average price (AED / sq. ft.)

2,500

-8%

-9%

-10% -11%

Q4 2015

-12% Business Bay

Discovery Gardens

Q1 2016

Downtown Burj Khalifa (excluding Burj Khalifa)

Dubai Marina

Dubai Sports City

QoQ % change Q4 2015 - Q1 2016

Emirates Living (Views and Greens)

International City (Clusters)

Jumeirah Beach Residences

Uptown Motor City

Palm Jumeirah (Shoreline Apartments)

12 Month % change Q1 2015 - Q1 2016

Source: Property Monitor Index

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

• 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.

Figure 4

V il l a pri c e p e r f o r m a n c e 1,800

1,400

-2%

-4% -5%

-5% -6%

-6%

-7%

1,000 -9%

-10%

400

-12%

200

Q4 2015

-6% -8%

-8% -9%

600

-2%

-3%

-4%

1,200

800

-2%

-3%

% change

Average price (AED / sq. ft.)

1,600

-14%

-16% Al Furjan Villas

Arabian Ranches

Q1 2016

Jumeirah Golf Estates

Jumeirah Islands

Jumeirah Park

QoQ % change Q4 2015 - Q1 2016

Jumeirah Village Triangle

The Lakes

The Meadows

The Springs

Victory Heights

12 Month % change Q1 2015 - Q1 2016

Source: Property Monitor Index

Dubai Residential Market Report - Q1 2016

ÂŠ Cavendish Maxwell 2016 | www.cavendishmaxwell.com

Â© Cavendish Maxwell 2016 | www.cavendishmaxwell.com

Dubai Residential Market Report - Q1 2016

Rent performance Figure 5

Studio rents - Q1 2016

Apartments:

100,000

90,000 0%

80,000 70,000 AED per annum

• 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.

-1%

50,000

-1%

-2%

40,000 -3%

-3%

20,000

-4%

10,000 -

s s s * y d ty ty rs) na ws er FC ce en lifa Ba an Ci Ci te ari DI re Vie en ail ow ha ss or lus rts M sT ub sid ot he (C ine eG ai rj K po e e s T D h u b y M S k u R t T i B B h La Ci Du ba ac wn al ah Du to Be on eir ati wn m ah r n u o i r J e D e m Int Ju

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

Min

Max

-5%

QoQ % change Q4 2015 - Q1 2016

*Excluding Burj Khalifa

Figure 6

60,000

30,000

• 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.

% change

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

Source: Property Monitor Index

Figure 7

One bedroom apartment rents - Q1 2016

Two bedroom apartment rents - Q1 2016

180,000

250,000

160,000

-1%

100,000 -2%

-2%

80,000 -3%

60,000

-3%

-2%

% change

AED per annum

120,000

-3%

40,000 -4%

-4%

200,000

-4%

-1%

150,000 -2%

-2%

100,000 -3%

% change

AED per annum

140,000

-3%

50,000

-4%

20,000 -

s s s * y d ty ty rs) na ws er FC ce en lifa Ba an Ci Ci te ari DI re Vie en ail ow ts ha ss or lus M or sT ub sid ot he (C ine eG ai rj K p e e s T D h u b y M S k t T i B Bu hR La Ci Du ba ac wn al ah Du to Be on eir ati wn m ah r n u o i J e D er m Int Ju

Min

Max

*Excluding Burj Khalifa

-5%

QoQ % change Q4 2015 - Q1 2016 Source: Property Monitor Index

Min

Max

*Excluding Burj Khalifa

-5%

QoQ % change Q4 2015 - Q1 2016 Source: Property Monitor Index

Figure 8

Villas:

Three bedroom villa rents - Q1 2016

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

300,000

3% 2%

250,000 1% 0%

-1%

150,000 -2% -3%

100,000

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

-3%

% change

200,000

AED per annum

• 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.

-3% -4%

50,000 -5%

s te sta lf E o G ah eir m Ju

rk Pa ah eir m Ju

Average rent

es ak eL Th

ws do ea M e Th

-5%

s s he ing nc pr Ra eS n h ia T ab Ar

s illa nV rja u F Al

-6%

QoQ % change Q4 2015 - Q1 2016 Source: Property Monitor Index

Figure 9

Figure 10

300,000

500,000

450,000

1% 250,000 0%

200,000

0% -1%

-1% -2%

150,000 100,000

-3%

-3% -4%

50,000 -

-5%

s s rk te nd Pa sta Isla ah lf E ah eir o r i m G e m Ju ah Ju eir m Ju

Average rent

350,000 % change

AED per annum

es ak eL Th

s s ts ws he ing igh do nc pr He ea Ra eS a i M n h r ia T e to ab Th Vic Ar

200,000 150,000

-5%

50,000

-6%

Source: Property Monitor Index

0% -1%

-1%

250,000

100,000

2% 1%

300,000

-4%

QoQ % change Q4 2015 - Q1 2016

400,000

AED per annum

350,000

Five bedroom villa rents - Q1 2016

-2%

-2% -3%

-3% -4%

-4% -5%

s s rk te nd Pa sta Isla ah lf E ah eir o r i m G e m Ju ah Ju eir m Ju

Average rent

-2%

% change

Four bedroom villa rents - Q1 2016

es ak eL Th

s s ts ws illa he igh do nc nV He ea Ra rja a i M u n r F ia e to ab Th Al Vic Ar

-6%

QoQ % change Q4 2015 - Q1 2016 Source: Property Monitor Index

Dubai Residential Market Report - Q1 2016

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

• 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.

2015 Completions - Top 10 locations Figure 11

Range 400 - 500 501 - 600 601 - 700 701 - 800 801 - 900 3

901 - 1,000

1,001 - 2,000

1 10 21

8 6

7 5

1 2 3 4 5

Al Jaddaf Business Bay 7 DIFC 6 Dubai Investment Park Dubai Silicon Oasis 5

6 Dubai Sports City 7 Dubailand 8 IMPZ 9 Jumeirah Park 10 Jumeirah Village Circle

Source: Cavendish Maxwell research

4 3

2 1

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.”

• 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 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.

• 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.

2016 Pipeline - Top 10 locations Figure 12

Range 1,001 - 1,500 1,501 - 2,000 2,001 - 2,500 2,501 - 3,000 3

3,001 - 3,500 3,501 - 4,000

4,001 - 4,500 4,501 - 5,000 >

- 5,001

21 8

5 9

6 4

1 2 3 4 5

Al Furjan 9 Business Bay 8 Dubai Marina 7 Dubai Silicon Oasis Dubai Sports City 6

6 Dubailand 7 International City 8 Jumeirah Village Circle 9 Mohammed Bin Rashid City 10 Reem

Source: Cavendish Maxwell research

5 4 3

Dubai Residential Market Report - Q1 2016

Cavendish Maxwell Residential Market Survey Looking back - Q1 2016

predictions

reality

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

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

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

Rents have declined across most unit types and areas.

Looking forward - Q2 2016

Figure 13

Q2 2 0 1 6 s a le s o u t lo o k Apartments Percentage of agents who predicted apartment prices would: 2% 9%

Villas Percentage of agents who predicted villa prices would: 1%

35%

13%

46%

increase by more than 5%

increase by up to 5%

43%

37%

not change

decrease by up to 5%

decrease by more than 5%

Source: Cavendish Maxwell Residential Market Survey

Figure 14

Q2 2 0 1 6 re n t s o u t l oo k Apartments Percentage of agents who predicted apartment rents would: 0% 14%

Villas Percentage of agents who predicted villa rents would: 0%

15%

41% 34%

increase by more than 5%

46% 41%

increase by up to 5%

not change

decrease by up to 5%

decrease by more than 5%

Source: Cavendish Maxwell Residential Market Survey

ÂŠ Cavendish Maxwell 2016 | www.cavendishmaxwell.com

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

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

Also contact us for:

Residential Valuation

Machinery and Business Assets Valuation

Commercial Valuation

Investment and Commercial Agency

Project and Building Consultancy

Development Advisory and Real Estate Research

Hotels, Hospitality and Leisure

Property Monitor

CavendishMaxwell.com T: +971 (0) 4 453 9525 E: info@cavendishmaxwell.com 2205 Marina Plaza, Dubai Marina, P.O. Box 118624, Dubai, United Arab Emirates 1006 Corniche Bakery Building, Al Firdous Street, Tourist Club Area, Abu Dhabi, United Arab Emirates