Abu Dhabi Residential Market Report
Q3
2015
Content • Cavendish Maxwell • Property Monitor Index • Abu Dhabi residential market headlines • Macro-economic factors • Legal framework • Residential market overview • Sales price performance • Rental rates performance • Residential supply
Abu Dhabi Residential Market Report - Q3 2015
MILLION SQ.FT Cavendish Maxwell has grown into one of the
REGION’S LARGEST and
HIGHEST PROFILE property companies
live transactional data from over
42
master planned developments across Dubai and Abu Dhabi
350 over AED
MILLION
of commercial land and buildings currently under instruction
worth of completed property transactions
Cavendish Maxwell - Chartered Surveyors and Property Consultants 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 has grown into one of the region’s largest and highest profile property companies, employing over 60 people across 8 departments.
As a fully qualified member firm of the Royal Institution of Chartered Surveyors (RICS), and with extensive knowledge of the region, we have the necessary experience, expertise and insight to deliver property advice of the highest standard. Our reports are used for loan security, audit, insurance reinstatement, dispute resolution, risk management, debt recovery and performance analysis.
Our experience covers property, land and business asset valuations; investment; asset management; fund management; disposals and acquisitions; rent reviews; lease renewals; development appraisals; advisory services; market research; feasibility studies; project management and building consultancy.
We provide a comprehensive range of property services across all our departments, each of which is headed by highly skilled, experienced and fully qualified RICS chartered surveyors. Our various teams provide valuation, agency, advisory, research and building consultancy services across all property types and sectors.
60+ people across 8 departments
We undertake valuations for over 30 banks across the UAE
We have built a first class reputation on the quality of our reporting, certainty of timing and thoughtful approach to helping clients add value to their land and property portfolios 4
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Over
AED
RICS
regulated company
30
B IL L ION worth of commercial property valued in the last 12 months
Advised on over
7
AED BILLION
worth of projects in the last year
Building surveys of
527
highrise tower floors undertaken in the last 6 months
Specialist sectors H
Airports
Student Housing
Media
Corporate
Commercial
Industrial
Leisure
Education
Labour Accommodation
Logistics
Plant & Machinery
Institutional
Insurance
Hotels & Resorts
Advising clients throughout the Middle East and Africa
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Abu Dhabi Residential Market Report - Q3 2015
Property Monitor Index Cavendish Maxwell’s Property Monitor Index (PMI) offers a unique perspective on the market due to the unique and exclusive access to real-time data, fueled by the Property Monitor data service. The figures in our Q3 2015 residential market report represent a consensus view of Cavendish Maxwell’s market leading team of chartered surveyors and residential valuers. (www.propertymonitor.ae).
In formulating the index our valuers have access to various data sources that should provide users with confidence in the results: • Property Monitor, Approved Partner data: includes an expanding number of reputable agencies and developers, capturing data in realtime • Agent consultation: evidence sourced from reputable and active agents to support our valuation business. • Publically available evidence: variety of published data sources.
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Abu Dhabi residential market headlines • A relatively stable quarter in terms of price movements, recording an overall market decline of 1%. • Both apartment and villa prices dropped by an average of 1% in Q3 2015. • Rents remain stable across both the apartment and villa markets.
Q2 2015 - Q3 2015
-1%
-1%
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• Abu Dhabi government initiatives and the recent property registration laws to be implemented as of January 2016, should have a positive impact the real estate market bringing more transparency which in turn should increase confidence to both foreign and domestic investors. • Approximately 15,000 residential units to enter the market over the next four years in the major investment zones of Abu Dhabi.
Q3 2014 - Q3 2015
-4%
-4%
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Abu Dhabi Residential Market Report - Q3 2015
Macro-economic factors “The contribution of the oil industries to GDP has decreased to 51% in 2014 from 55% in 2012 as Abu Dhabi government initiatives focus on growing other sectors such as construction and manufacturing.”
“Petrol prices in the UAE have dropped by approximately 16% in October 2015 from the hiked prices of August.”
Figure 1
• Abu Dhabi inflation rate has increased to its highest levels to 6.1% as of August 2015. This hike was mainly driven by the increase in transportation cost by 12% in August due to the deregulation of gasoline prices.
A b u Dh ab i GDP b y e c o n o mic ac t ivit y 2 0 1 4 . To p se ve n sectors
51+10+76516
• Following the hike in gasoline prices in August of this year, the Fuel Prices Committee reduced prices by 8% in September and a further 9% with the recently released gasoline prices for the month of October 2015.
Mining and quarrying Public administration and defence
16.3%
Financial and insurance
4.6%
5.5%
• According to the Urban Planning Council’s Abu Dhabi 2030 Plan, the population in the Abu Dhabi region (including the Mainland, Islands and North Coast) is expected to grow to 3 million by the year 2030.
Manufacturing
51.0%
5.8%
Construction
7.2%
Real estate
9.6%
• Expats make up approximately 80% of the total Abu Dhabi emirate population. • As of 2014, the population in the Abu Dhabi Region alone (excluding Al Ain and the Western Region) was approximately 1.5 million.
Other
Source: Property Monitor Index
Figure 2
Ab u D habi E m ir a t e p o p u l a t i on : 2 0 0 6 - 2 0 1 4 * 10%
8%
8%
8%
8%
8%
8%
6% 5%
2006
Nationals
2007
Expats
2008
2009
Growth Rate
2010
2011
2012
2013
506
2.150
1,957
495
1,857
476
439
1,681
1,533
433
414
1,412
395
1,300
2% 377
200,000 1,196
4%
360
400,000
0
8
8%
600,000
1,101
Population
800,000
10%
Growth Rate
1.000,000
2014
0%
*Figures include Abu Dhabi region (mainland, islands and north coast), Al Ain, Al Gharbia. Source: Statistics Centre - Abu Dhabi
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Legal framework Given the upcoming implementation of the new Abu Dhabi real estate law, Cavendish Maxwell has consulted with the law firm of Berwin Leighton Paisner to summarise the law as stated below.
9.
After much consultation and consideration, the long awaited new Abu Dhabi real estate law has at last become a reality with the issue of Abu Dhabi Law No. (3) of 2015 (the “New Law”).
10.
Whilst the New Law has yet to be published in the Gazette, we understand that it will take effect in or around January 2016 and that all of the supporting executive regulations envisaged by the New Law will be published simultaneously with the substantive law itself. The intention appears to be that, in contrast with the ‘piecemeal’ approach taken by other Emirates, Abu Dhabi will, when the New Law comes into force with immediate effect have a modified real estate system which is fully integrated, articulated and functional.
11.
As expected, the New Law resembles various Dubai laws passed since 2007 and, among other things, provides for: 1.
2. 3.
4. 5. 6.
7. 8.
the overall (and detailed) supervisory control of the market by the Abu Dhabi Department of Municipal Affairs (“DMA”) (whose role will be broadly similar to that of RERA in Dubai); a regime to enable the DMA to compile records of a wide range of relevant information relating to real estate development projects; a licensing regime for all relevant market participants (i.e. developers, brokers, brokers’ employees, auctioneers, directors of owners’ associations, valuers and surveyors) prohibiting them from carrying on business unless they are duly licenced; various obligations and restrictions in relation to activities carried on by brokers; rules governing the manner in which valuers undertake the valuation of properties; a regime for the registration of real estate development projects and restricting the marketing of new projects ‘off-plan’ without prior authorisation from the DMA; rules to do with the termination of off-plan sale contracts; an ‘escrow account’ regime requiring monies (including mortgage proceeds and interim payments from buyers) to be deposited in a restricted account, from which sums may only be released (subject to various conditions) for the purposes of funding the relevant works and paying for the project;
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12.
13.
the creation of an entirely new registry (a ‘preliminary real estate registry’) for the registration of new development projects and off-plan contracts, and providing that such sale contracts will be non-binding unless duly registered in the new register; detailed arrangements concerning real estate mortgages which include the introduction of the concept of ‘priorities’ between mortgagees and creation of a right for contractual purchasers to ‘mortgage’ their contractual rights; recognition of the concept of a mortgageable ‘long lease’ (an entirely new concept under Abu Dhabi law); for the implementation of jointly owned property arrangements, through Owners’ Associations, in relation to estate developments with shared common areas and in which the units are to be sold off; the imposition upon developers of a form of ‘decennial’ liability for 10 years from the final completion certificate issued by the Municipality in relation to the structural and common parts of a development, as well as a liability to put right all defects affecting the construction works which appear within one year from the completion certificate issued by the Municipality.
As will be apparent, the law is intended to cover all material concerns and issues which have already been addressed under Dubai law, in a single piece of legislation. It also appears that the Abu Dhabi authorities have taken the opportunity to learn from the Dubai experience and to avoid some of the issues experienced in Dubai. Although it remains to be seen what the detailed regulations will bring once they are published and how the New Law will operate in practice, it is encouraging to see that many important concerns have been addressed in the law which are important to ensure the smooth and efficient operation of the market. The above legal information is supplied courtesy of Berwin Leighton Paisner. (For more information go http://www.blplaw.com.)
David Nunn Partner, Commercial Real Estate Berwin Leighton Paisner
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Abu Dhabi Residential Market Report - Q3 2015
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Residential market overview Abu Dhabi vs Dubai:
VS
“The peak in the Abu Dhabi market typically lags Dubai by approximately 3 months in time.”
• Whilst real estate is one of the top five contributing economic activities to Dubai’s economic growth, it is still a growing sector in Abu Dhabi’s economy. • During the first real estate market boom of 2008, the overall market prices in Abu Dhabi were higher than those in Dubai. Whilst Dubai reached the peak in Q3 2008, there was approximately a quarter lag to Abu Dhabi peak in Q4 2008. • Following the market crash in Dubai towards the end of Q4 2008, Abu Dhabi prices dipped drastically in Q1 2009 and continued to decline through mid 2012.
•
The market bottomed out in Abu Dhabi around Q2 2012, reflecting approximately a nine month lag from Dubai’s market bottom in Q3 2011. During this price compression both markets declined in the range of 60% to 70% from the peak in 2008.
•
As both markets began to recover from the declines throughout 2012 and 2013, the Abu Dhabi market grew at a rate three times slower, than the Dubai market.
•
Prices in Abu Dhabi began to increase in Q3 2013 and throughout the first half of 2014, reaching the second market peak in Q3 2014.
•
Abu Dhabi is traditionally less driven by investors and more by the decisions of end users which leads to a market less responsive to speculative trends and more controlled.
Figure 3
Ab u D habi v s D u b a i re a l e s t at e mar k e t t re n d Abu Dhabi market peak
1800
Dubai market peak Dubai 2nd market peak
1400
Abu Dhabi 2nd market peak
1200
Current Dubai market
Current Abu Dhabi market
1000 Abu Dhabi market low
800
3 months lag
600
9 months lag
Dubai market low 3 months lag
Average sale price (AED per sq.ft.)
1600
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
400
Source: Property Monitor Index
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Abu Dhabi Residential Market Report - Q3 2015
Sale price performance Villas:
Apartments:
“Villa prices declined on average by 1% during Q3 2015.”
“Slight drops in apartment prices by 1% in Q3 2015.”
• Villa prices in Q3 2015 have declined between 1% at Saadiyat Beach villas to 1.3% at Al Raha Gardens.
• Apartment prices have relatively remained stable, dropping minimally by 1% in Q3 2015 from Q2 2015.
• With limited supply and high demand for quality villas in the market, prices have remained stable with minimal drops quarter on quarter throughout this year.
• Over a 12 month period (Q3 2014 to Q3 2015) apartment prices have dropped between 3% to 4% across the investment areas. • The handover of stock in the first half of 2015 has placed a slight pressure on the prices in Q3 2015. Additionally, new launches have shifted buyer attention towards the off-plan market, especially with investors looking for a high yield.
• When looking at villa prices during a 12 month period (Q3 2014 to Q3 2015), there has been a significant variance in price compression throughout the Abu Dhabi villa market. Villa prices dropped by an average of 4% in Al Raha Gardens to 7% in Al Reef.
Figure 4
-1%
-1%
-1%
Average price (AED/sq. ft.)
1,600 -3%
1,400 1,200
-1%
1,800
-2%
1,600
-3% -4%
-4%
1,000
-5%
800
-6%
600
-7%
-7%
0% -1%
-1%
-1%
-1%
-1% -2%
1,400 1,200
-1%
-3%
-3%
-3% -4%
-4%
-4%
-4%
1,000
-5%
800
-6%
600
-7%
400
-8%
400
-8%
200
-9%
200
-9%
-10%
0 Al Raha Gardens
Q2 2015
12
2,000
Average price (AED/sq. ft.)
1,800
0%
% change
2,000
A p ar t me n t sale p e r fo r man c e
Al Reef
Q3 2015
Saadiyat Beach Villas
QoQ % change Q2 - Q3 2015
% change
V i l l a s al e p e r f o r m a n c e
-10%
0 Al Ghadeer
12 Month % change Q3 2014 - Q3 2015
Al Raha Beach
Al Reef Downtown
Al Reem Island
Saadiyat Beach Residences
Source: Property Monitor Index
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Rent rates performance Rents: “Rents remain relatively stable across both the apartment and villa markets.”
Figure 5
“Rents remain relatively stable across both the apartment and villa markets.” Apartments
Rental rate/sq.ft./annum September 2015
Villas
Studio
Rental rate/sq.ft./annum September 2015 3 bed
Al Raha Gardens Al Reef
4 bed
67
63
57
Saadiyat Beach Villas
-
93
70
Al Ghadeer
5 bed
Al Raha Beach
1 bed
2 bed
76
70
65
-
125
108
60
Al Reef Downtown
77
74
65
53
Al Reem Island
125
104
103
62
Saadiyat Beach Residences
-
126
98
Source: Property Monitor Index
• An average three bed villa in Saadiyat Beach remains significantly higher than other villa locations.
• Rents in prime locations such as Al Reem Island, Al Raha Beach and Saadiyat Beach continue to command the highest rents.
Figure 6
Ave r ag e an n u al re n t 2 b e d ro o m ap ar t me n t
500,000
200,000
450,000
180,000
400,000
160,000
Average annual rent AED
Average annual rent AED
Av era g e a n n u a l re n t 3 b e d ro o m v i l la
350,000 300,000 250,000 200,000 150,000
140,000 120,000 100,000 80,000 60,000
100,000
40,000
50,000
20,000
0
0 Al Raha Gardens
Al Reef
Saadiyat Beach Villas
Al Ghadeer
Al Raha Beach
Al Reef Downtown
Al Reem Island
Saadiyat Beach Residences
Source: Property Monitor Index
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13
Abu Dhabi Residential Market Report - Q3 2015
Residential supply Pipeline Supply: “Approximately 15,000 residential units scheduled for delivery through the year 2018.”
• Abu Dhabi developers have ramped up the number of launched projects to be delivered in the coming four years in the major investment locations, supporting the city’s 2030 plan.
• The bulk of the pipeline supply is on Al Reem Island with over 6,000 units, followed by Saadiyat Island with over 3,500 units and Yas Island with over 2,000 units scheduled for delivery over this time period.
• Approximately 80% of the upcoming supply will be apartment units and 20% villa units.
Figure 7
Range >
- 500
501 - 1,000
1. 2. 3. 4. 5. 6. 7. 8.
14
Masdar City Yas Island Saadiyat Island Shams Abu Dhabi City of Lights Najmat Abu Dhabi Al Maryah Island Al Raha Beach
1,001 - 1,500 1,501 - 2,000 2,001 - 2,500 2,501 - 3,000 3,001 - 3,500
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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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Adam Wisher BSc (Hons) MRICS Partner Head of Development Advisory and Real Estate Research M: +971 56 139 4315 E: adam.wisher@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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