Q1 2017 Residential Market Report - Dubai
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Š Cavendish Maxwell 2017 | cavendishmaxwell.com
Q1 2017 Residential Market Report - Dubai
Foreword Cavendish Maxwell is a highly respected independent firm of chartered surveyors and property consultants, focusing on property services throughout the Middle East and Africa. Established in 2008, Cavendish Maxwell is now one of the region’s most influential property consultancies across the UAE. Our experience covers property, land and business asset valuations; investment; asset management; disposals and acquisitions; rent reviews; lease renewals; development appraisals; advisory services; market research; feasibility studies; project management and building consultancy. The Cavendish Maxwell Quarterly Residential Market Report for Dubai provides analysis and summary for both apartment and villa product types, highlighting the price movement, rent and yield scenario, residential supply pipeline as well as the macro-economic factors impacting this market segment. The report also incorporates the Cavendish Maxwell Residential Survey conducted among agents operating within Dubai. The survey showcases how new enquiries, leasing activity and transactions, among other metrics, changed over the previous quarter and also provides an outlook on the following quarter, with predictions by professionals being studied against real performance.
Contents • Dubai House Price Index • Macro-economic factors • Price performance • Rent performance • Transactions overview • Supply overview • Cavendish Maxwell Residential Survey
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Q1 2017 Residential Market Report - Dubai
Dubai House Price Index Dubai House Price Index - Sales Price (AED) from the period January 2008 to March 2017
Average Sale Price AED
5M
4M
3M
2M
1M
Villa/Townhouse
Apartment
Q1-2017
Q4-2016
Q3-2016
Q2-2016
Q1-2016
Q4-2015
Q3-2015
Q2-2015
Q1-2015
Q4-2014
Q3-2014
Q2-2014
Q1-2014
Q4-2013
Q3-2013
Q2-2013
Q1-2013
Q4-2012
Q3-2012
Q2-2012
Q1-2012
Q4-2011
Q3-2011
Q2-2011
Q1-2011
Q4-2010
Q3-2010
Q2-2010
Q1-2010
Q4-2009
Q3-2009
Q2-2009
Q1-2009
Q4-2008
Q3-2008
Q2-2008
Q1-2008
0K
Source: propertymonitor.me
Note: Dubai House Price index tracks residential property prices across the emirate to derive average sales prices for apartments and villas/townhouses taking into account new supply that gets added each quarter. In Q1 2014, average residential prices surpassed the AED3.0 million mark for the first time since 2008, and have since averaged between AED2.5 million to AED3.7 million. However, in Q1 2017, the average villa/townhouse price stood at AED2.2 million as a result of significant lower priced villa inventory (starting prices at AED1.0 million) coming to market in areas such as Reem and Dubailand. By contrast, average apartment prices have traded within a close range of AED1.0 million to AED1.5 million since 2010 even with new supply being added each quarter. The current gap in the Dubai residential market is for affordable housing, especially catering to salaried inviduals in the AED8,000 to AED12,000 per month income bracket. According to the Dubai Statistics Center the population of the emirate of Dubai was estimated to be 2.4 million in 2015. An additional 1.1 million individuals make up a total of 3.5 million active individuals within the emirate of Dubai during peak hours. This includes workers and temporary residents, with the non-resident worker population historically choosing to live in the neighboring emirates due to availability of cheaper accommodation.
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Average sale price in Q1 2017 AED
2.2 Million
VILLAS & TOWNHOUSES
AED APARTMENTS
1.3 Million
Š Cavendish Maxwell 2017 | cavendishmaxwell.com
Q1 2017 Residential Market Report - Dubai
Consumer prices expected to be pushed higher in 2017
Macro-economic factors
Source: Dubai Statistics Centre
Inflation rate
4.5% 4.0% 3.5% 3.0% 2.5% 2.0% 1.5% 1.0% 0.5% 0.0% 2015
2016
2017E
2018E
2019E
2020E
Source: IMF, National Bureau of Statistics, Statistics Centre Abu Dhabi,Dubai Department of Economic Development
Barriers to investment inflow from traditional markets Currency movement 1.4%
70 69
1.2%
68 67 66
0.8%
65 0.6%
64
USD/INR
USD/GBP, EUR
1.0%
63
0.4%
62
0.2%
61 60
0.0% Jan-16 Mar-16 May-16 Jul-16
USD/EUR
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Inflation rate
Jan-2017
Dec-2016
Nov-2016
Oct-2016
Sep-2016
Aug-2016
0.0%
Jul-2016
102.0
Jun-2016
1.0%
May-2016
104.0
Apr-2016
2.0%
Mar-2016
106.0
UAE: Real GDP growth trend and estimates
Rent declines and a strong dollar could balance rising consumer prices, which are expected to be pushed higher this year as a result of rising utility and energy costs and school fees. This expected rise in inflation rates is forecast to continue throughout 2017 and spike further in 2018 with the planned introduction of the VAT system.
Positive signs at the start of the year have come from oil prices stabilizing close to the $50 a barrel mark after OPEC announced output cuts in November. This should have a positive impact on the UAE federal budget.
3.0%
CPI
Despite the increased infrastructure spending, the Dubai economy continues to be impacted by external macroeconomic factors, including barriers to investment inflow from traditional markets such as India, Turkey, Egypt, the UK and the EU, where currencies have depreciated against the dollar over the past 12-24 months. Additionally, increasing competition and a strong dollar is pressuring blue-chip companies in Dubai, prompting restructuring and job cuts.
Mortgage rates in the country are expected to rise in tandem with the U.S. Federal rate increases due to the dollar peg. The first of such increases was effected by the UAE Central Bank in March 2017. Current consensus predicts two more U.S. Federal rate hikes of 0.25% each in 2017. First time buyers taking out a mortgage will have to realign their budgets accordingly and banks in UAE have been offering incentives such as no-processing charges and current account linked mortgage to cater to a wider base of buyers.
108.0
Feb-2016
Real GDP growth in the emirate is forecast to rise to 3.1% this year, in comparison to the 2.7% growth in 2016 according to the Economic Development Committee. Infrastructure spending in preparation for Expo 2020 is expected to boost GDP growth, with a 27% rise in spending in this sector within the 2017 budget of AED47.3 billion.
4.0%
Jan-2016
CPI
Infrastructure spending to boost GDP growth in Dubai despite macro-economic headwinds
Dubai annual inflation
110.0
USD/GBP
USD/INR
Sep-16 Nov-16 Jan-17 Mar-17
Source: Cavendish Maxwell research
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Q1 2017 Residential Market Report - Dubai
Price performance Marginal price declines continue, averaging 1.0% year on year for apartments and villas in Q1 2017. Prices for apartments and villas in Dubai have continued to decline through 2016 into Q1 2017. Cedre Villas in Silicon Oasis, apartments in International City clusters, IMPZ and Jumeirah Lakes Towers all experienced year on year declines of 2.0% on an average in Q1 2017. The rate of decline has slowed significantly since last year and in some locations prices have shown no quarter on quarter change in Q1 2017. Apartment price performance - Q1 2017 0
-0.3 -1.4
Dubai Silicon Oasis
0.0 -0.8
Discovery Gardens
0.0
-1.4
Dubai Sports City
0.0
-1.4
Dubailand
0.0
-2.1
IMPZ
-0.1 -1.9
Jumeirah Village Circle
-0.1 -1.2
Uptown Motor City
-0.1
-1.2
Al Furjan
-0.1
-1.2
Jumeirah Village Triangle Jumeirah Lakes Towers
-0.5%
-1.0%
-1.5%
-2.0%
-2.5% -2.1
International City (Clusters)
-0.1
-2.2
-0.1 -1.1
The Greens
-0.1 -0.5
Business Bay -1.0
The Views Dubai Marina
0.0 -0.9
Jumeirah Beach Residences
0.0 -0.1 -0.1 -0.1
-1.0
DIFC
-0.1 -0.7
Palm Jumeirah
-0.1
-0.6
Downtown Burj Khalifa
QoQ% change Q4 2016 - Q1 2017
12 month change Q1 2016 - Q1 2017
1,000
500
0
Q1 2017 Price
1,500
2,000
2,500
Source: propertymonitor.me
Villa price performance - Q1 2017
0.0 -0.3 -0.2
Jumeirah Village Triangle Green Community Motor City
-1.4 -0.8
-0.3 -0.9
-0.2
-1.0
Victory Heights
-0.2
-1.2
-0.3 -0.9
The Lakes
-0.3 -0.7
Jumeirah Golf Estates
-0.3
-0.9
Jumeirah Islands The Fronds Garden Homes
-0.1
-1.3
Arabian Ranches The Meadows
0.0
-0.2
The Springs Jumeirah Park
0
-0.5%
-1.0%
-1.5%
-2.0%
-1.0
Al Furjan Villas Cedre Villas Silicon Oasis -2.0
-1.3
-0.1 -0.3 0
QoQ% change Q4 2016 - Q1 2017
6
12 month change Q1 2016 - Q1 2017
500
Q1 2017 Price
1,000
1,500
2,000
2,500
3,000
Source: propertymonitor.me
Š Cavendish Maxwell 2017 | cavendishmaxwell.com
Q1 2017 Residential Market Report - Dubai
Rent performance QoQ % change in rents averages -0.5% for apartments and -0.7% for villas in Dubai Apartment and villa rents across Dubai continued to decline in Q1 2017 and declines were more pronounced among studios in DIFC, International City clusters and Dubailand as well as 4 bedroom villas in Victory Heights. These categories of units exhibited QoQ% declines of more than 2.5%. In recent months tenants have been able to negotiate terms downwards on renewal and the number of landlords offering flexibility to pay annual rent through multiple cheques has increased. Employers are slowly replacing housing allowances with monthly salary components and hence tenants are likely to continue negotiating on both rent as well as multiple cheques. Apartment rent performance - Q1 2017 0.0
180000
0.0
0.0% -0.1%
160000
-0.2% 0.3
140000
0.3
-0.3%
-0.4 120000 100000
-0.4%
-0.5 -0.6
-0.5%
-0.6
-0.6
-0.6% -0.7%
80000
-0.8
-0.8% 0.9
60000
-1.0
-0.9% -1.0% -1.1%
40000 -1.2
-1.2%
20000
-1.3% -1.4%
Studio Rent
1 BR Rent
2 BR Rent
Average QoQ% change
Du ba ila nd
G In ar te de rn at ns io na lC ity (C lu ste rs)
Ci ty M ot or
Di sc ov er y
Ci ty Sp or ts
DI FC
Du ba i
Bu rj Kh ali fa
Do wn to wn
Bu sin es sB ay
Du ba Em iM ira ar te in sL a ivi ng (T Em he ira Vi te ew sL s) ivi ng (T he Ju G m re ei en ra s) h Be ac h Re sid en Ju m ce ei ra h La ke sT ow er s
0
Source: propertymonitor.me
Villa rent performance - Q1 2017 500,000
0.5
0.5
0.5
0.5
-0.5% -0.6%
-0.6
-0.7%
0.7 400,000
-0.8% 0.9
-0.9% -1.0%
-1.0
300,000
-1.1% -1.2% 200,000
-1.3% -1.4% -1.5%
100,000
-1.6% -1.7
-1.7% -1.8%
3 BR Rent
4 BR Rent
5 BR Rent
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Vi lla s Al Fu rja n
He ig ht s Vi ct or y
Sp rin gs
Ra nc he s Ar ab ian
Th e
Average QoQ% change
Th e
M ea do ws
La ke s Th e
Pa rk Ju m ei ra h
Isl an ds Ju m ei ra h
Ju m ei ra h
G ol fE sta te s
0
Source: propertymonitor.me
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Q1 2017 Residential Market Report - Dubai
1697 769
903
931
875
Jan 2017
Feb 2017
Mar 2017
510
Sales Volume (Off-Plan)
Dec 2016
Nov 2016
Oct 2016
Sep 2016
Aug 2016
615
648
801
988 878
1363
Sales Volume (Transferred)
Jun 2016
May 2016
Apr 2016
0
Mar 2016
250
Jul 2016 DLD data not available
429 475
500
1133
986
1110 923
1089 871
790
750
665
817 730
1000
1169 1302
1250
1514
1556
1500
Source: propertymonitor.me
Villa/Townhouse 1000
800
834
For non-occupier investors, locations with high net yields and/or low occupancy risk such as International City and Dubai Marina continue to remain attractive. First-time buyers/end users looking for homes are more likely to prefer taking out a mortgage. Since banks typically prefer lending against completed properties, areas where prices have stabilised are likely to remain attractive. Affordable options for self-use in completed buildings are available at AED700,000 and upwards in areas such as Dubailand, Silicon Oasis, Sports City and IMPZ, among others.
1750
Feb 2016
International City and Dubai Marina led the transferred sales table for apartments this quarter, while the top locations for off-plan apartment sales were Downtown, Lagoons, Dubailand and Dubai South. For villas, the majority of transferred sales were completed in Emirates Living and Reem (Mira). The most active villa communities for off-plan sales were Townsquare, Dubailand and Arabian Ranches II. With lower-priced villas entering the market this quarter, at average rates of AED2.2 million or even lower, investment and sales activity in this segment is expected to increase further.
2000
Jan 2016
Off-plan sales accounted for the majority of total transactions in Q1 2017
Apartment
Real GDP %
Transactions overview
600
Sales Volume (Transferred)
78 Mar 2017
Feb 2017
120
198
437 143 Jan 2017
137 98
Oct 2016
Dec 2016
89 131
Sep 2016
138 185
86 102
Sales Volume (Off-Plan)
Nov 2016
82 127 Aug 2016
Jul 2016 DLD data not available
181 226 Jun 2016
Apr 2016
May 2016
90 127
218 271
l94 Mar 2016
45 Feb 2016
37 0
Jan 2016
6,324
191
200
APARTMENTS VILLA & TOWNHOUSES
1,777
397
400
340
Real GDP %
Sales volume in Q1 2017*
Source: propertymonitor.me
Note: Data as of March 16, 2017
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Š Cavendish Maxwell 2017 | cavendishmaxwell.com
Q1 2017 Residential Market Report - Dubai
Residential supply Approximately 2,500 residential units have been handed over across Dubai during Q1 2017 Nearly 88% of the units handed over in Q1 were apartments in areas such as Jumeirah Village Circle, Upcoming supply (Q2 – Q4 2017) Sports City, Silicon Oasis, Dubailand, among others. New launches during Q1 2017 ranged from midscale units in Danube’s Resortz project in Arjan featuring 419 apartments, MAG 5 Boulevard third phase in Dubai South with studios starting at AED310,000 to villas in Dubai Properties’ La Quinta, the second phase of its Villanova residential master community and luxury villas in Al Barari’s The Nest project in Nad Al Sheba. As of March, approximately 35,000 units are scheduled for handover for the remainder of the year. Historically there has been a considerable gap between the number of units announced for completion and actual handovers. While some projects are delayed as a result of financing issues and extraneous factors impacting the residential market, the majority of delays over the last 12-18 months stem from a conscious staggered delivery schedule being set by developers. This acts as a supply control mechanism to align handovers with demand and project sales potential and to avoid flooding the market with units that cannot be absorbed. Developers are expected to continue phasing the delivery of projects by focusing on absorption of limited released units before more supply is brought to market.
VILLAS & TOWNHOUSES
APARTMENTS
6,750
28,250
Upcoming supply (Q2 – Q4 2017) Top five locations
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Q1 2017 Residential Market Report - Dubai
Cavendish Maxwell Residential Survey - Q1 2017 Looking back - Q1 2017 Predictions
Reality
The majority of agents surveyed had predicted apartment and villa prices to remain unchanged.
Apartment and villa prices have remained relatively stable in Q1 2017 with average declines of 0.1% and 0.2% respectively.
The majority of agents had predicted that apartment and villa rents would remain the same during Q1 2017.
vs
Apartment and villa rents have remained relatively unchanged with average declines of 0.5% and 0.7% respectively. According to the Dubai Land Department, transaction levels have increased in Q1 2017 compared to the previous quarter.
The majority of agents had predicted new buyer enquiries, seller instructions and agreed sales would increase in Q1 2017.
Looking forward – Q2 2017
Q2 2017 transaction outlook
Q2 2017 price outlook Apartments Percentage of agents who predicted apartment prices would: 12%
1%
Villas Percentage of agents who predicted villa prices would:
10%
16%
1%
Percentage of agents who predicted new buyer enquiries would: 22%
7%
64%
13% 26% 41% 51%
34%
Percentage of agents who predicted agreed sales would: 28%
Increase by more than 5%
Increase by up to 5%
Not change
Decrease by up to 5%
Decrease by more than 5%
Source: Cavendish Maxwell Residential Market Survey
Q2 2017 rents outlook
59%
Apartments Percentage of agents who predicted apartment rents would: 15%
1%
Villas Percentage of agents who predicted villa rents would: 1% 38%
7%
13%
Percentage of agents who predicted new seller instructions would:
23%
30%
38%
55%
40% 37% 34%
Increase by more than 5%
Increase by up to 5%
Not change
Decrease by up to 5%
14%
Decrease by more than 5%
Increase
Decrease
Remain the same
Source: Cavendish Maxwell Residential Market Survey
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Š Cavendish Maxwell 2017 | cavendishmaxwell.com
Q1 2017 Residential Market Report - Dubai
Methodology Sale Prices and rents are derived from Property Monitor (www.propertymonitor.ae), a comprehensive real estate platform established in 2014 to provide real-time, market-wide access to transactions and trends. Working with agencies, banks, developers and corporate investors, it provides a deeper insight into real estate advisory, investment, and lending activities. The average sales price per sq. ft. is based on the Property Monitor Index that incorporates signed contracts, registered transactions, valuations & listings verified by Cavendish Maxwell valuation department. Cavendish Maxwell’s Residential Market Survey is a quarterly survey aimed at agents operating in the UAE and is designed to identify market sentiment of the residential market in the region. Forming a part of the Quarterly Residential Market Report released by Cavendish Maxwell, the research showcases how new enquiries, leasing activity and transactions, among other metrics, changed over the previous quarter as per information from agents. The survey also provides an outlook on the following quarter, with predictions by key market players being studied against real performance.
Strategic Consulting and Research Cavendish Maxwell’s strategic consulting and research team uses its in-depth knowledge of the real estate sector and extensive network to support our clients through the development process, providing strategic consultancy and advice to guide and support investment decisions from concept to delivery. We have advised on schemes with a gross development value of over AED3 billion in the last year. Our reports are used internally for business planning purposes and to satisfy the criteria of external financiers and auditors. Our name is trusted by all major banks across the UAE, supported by our presence on over 35 bank panels across the region.
Supply projections for residential projects are based on regular tracking of construction status, new launches, delays, etc. This is carried out through site inspections as well as discussion with developers, contractors, in-house building consultancy team and related government entities.
Core Values
Our documents and advice meet banking and audit criteria, proven by our presence on over 35 bank panels across the UAE
Market Research
Due Diligence for Land Acquisition
Asset Management
Property Data
Buyer Profiling
Feasibility Studies
Joint Venture Structuring
Highest & Best Use Studies
Advisory Services
Site Analysis
Disclaimer © Cavendish Maxwell and Property Monitor 2017. The information and analysis contained in this report has been obtained from or is based on information from a variety of sources generally regarded to be reliable and assumptions which are considered reasonable, and which was current at the time of undertaking market research. However, no representation is made, or responsibility accepted by Cavendish Maxwell or Property Monitor in respect of the accuracy or currency of this information. Cavendish Maxwell and Property Monitor do not accept any liability in negligence or otherwise for any loss or damage suffered by any party resulting from reliance on this publication.
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Property Consultants Middle East and Africa Jay Grant MSc IRRV (Hons) Founder and Chairman M: +971 50 192 1658 E: jay.grant@cavendishmaxwell.com
Nigel Armstrong FMAAT Chief Executive Officer M: +971 54 355 0772 E: nigel.armstrong@cavendishmaxwell.com
Miles Phillips BSc (Hons) MRICS Senior Partner M: +971 56 604 2750 E: miles.phillips@cavendishmaxwell.com
Sofia Underabi MRICS AAPI Partner Head of Residential Valuation M: +971 50 435 6527 E: sofia.underabi@cavendishmaxwell.com
Kaveh Samsamy MEng Head of Regional Development M: +971 55 923 2932 E: kaveh.samsamy@cavendishmaxwell.com
Manika Dhama BA (Hons), MBA Senior Consultant, Strategic Consulting and Research M: +971 50 482 7938 E: manika.dhama@cavendishmaxwell.com
Lynnette Abad BBA (Hons) Partner, Head of Property Monitor M: +971 50 894 7880 E: lynnette.abad@propertymonitor.ae
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