Q3 2015 Dubai Residential Market Report by cavendish_maxwell

Dubai Residential Market Report

2015

Dubai Residential Market Report - Q3 2015

ÂŠ Cavendish Maxwell 2015 | www.cavendishmaxwell.com

Content • Dubai residential market headlines • Macro-economic factors • Sale price performance • Rental rates performance • Residential supply • Cavendish Maxwell Residential Market Survey Q3 2015 © Cavendish Maxwell 2015 | www.cavendishmaxwell.com

Dubai Residential Market Report - Q3 2015

Dubai residential market headlines • As the Dubai market continues to go through a correction phase, overall market prices have continued to decline by 2% throughout Q3 2015.

• Approximately 6,000 residential units have been introduced into the market in Q3 2015, in areas such as Dubai Sports City, Dubailand, International City, Jumeirah Golf Estates and Jumeirah Village Circle.

• Apartment and villa prices have both dropped by an average of 2% in Q3 2015, consistent with the declines in the previous quarter.

• Cavendish Maxwell Residential Market Survey Q3 2015 results show that buyer inquires continued to decrease whilst seller instructions increased. The number of agreed sales, however, has remained the same.

• Apartment rents have remained stable in Q3 2015, whilst villa rents decreased in most of the major villa communities.

Q2 2015 - Q3 2015

-2%

Q3 2014 - Q3 2015

-6%

-9%

Macro-economic factors “Inflation rate as of August 2015 stood at 4.41, the highest level since 2008.”

“Petrol prices in the UAE have dropped by approximately 16% in October 2015 from the hiked prices of August.”

• Dubai Consumer Price Index (CPI) and inflation rate increased during August to the highest levels in years. This was mainly driven by a 10% increase in transportation cost in August, due to the deregulation of petrol prices.

• Following the hike in petrol prices in August, the Fuel Prices Committee reduced prices by 8% in September and a further 9% with the recently released petrol prices for the month of October 2015. • Over the course of 2015, food and non-alcoholic beverages prices have increased by 5.14% from January to August 2015, followed by an increase of 2.59% during the same period in the housing, water, electricity, gas and other fuels category.

• CPI represents the prices paid by consumers for a select basket of goods allocated into 12 categories, including food, clothing, housing, transport, etc. The three categories with the highest weight are housing and utilities, transportation and food and non alcoholic beverages.

Figure 1

128.00

126.00

124.00

CPI

120.00

118.00 0%

116.00 114.00

% inflation

122.00

-1%

112.00

-2%

110.00

-3%

108.00 2009

2010

2011

2012 CPI

2013

2014

Inflation rate

June

August

Source: Dubai Statistics Centre

Dubai Residential Market Report - Q3 2015

Sale price performance Apartments: market wide “Apartment prices declined by 2% in Q3 2015”

• As overall apartment prices continue to drop, the rate of decline in prime locations such as Business Bay, Downtown Burj Khalifa and Palm Jumeirah has decreased. • In Q3, prices continued to drop at the same rate as Q2 2015 in Dubai Marina, the Greens and Views, Jumeirah Beach Residence and International City, whilst prices in Dubai Sports City and Motor City declined at a more accelerated rate throughout this quarter.

• Prices in secondary locations such as International City, Motor City and Discovery Gardens have declined the most at 10%, 10% and 9% respectively over a 12 month period from Q3 2014. In the more central and established areas, prices have dropped between 4% and 5% during the same period. • These slower rates of decline may suggest that prices will level out and stabalise leading to the end of this year.

Figure 2

A pa rtm ents p r ic e p e r f o r m a n c e 3,000

0% -1%

-1%

-2%

2,500 Average price (AED / sq. ft.)

-1%

-2%

2,000

-4% -5%

-5%

-2%

-2% -4%

-4%

-5%

1,500

-6%

-6% -7%

-8%

1,000 -9%

500 0

Q2 2015

-2%

% change

-1%

-10%

-10% -12%

Dubai Marina

Emirates Living (Views and Greens)

Q3 2015

Business Bay

Jumeirah Beach Residences

QoQ % change Q2 – Q3 2015

Downtown Burj Khalifa

Palm Jumeirah (Shoreline Apartments)

Dubai Sports City

12 Month % change Q3 2014 - Q3 2015

Motor City

Discovery Gardens

International City

Source: Property Monitor Index

Villas: market wide “Average villa prices declined at a rate of 2% in Q3 2015, consistent with the decline in Q2.”

• The decline in villa prices slowed in Q3 2015 in communities such as Jumeirah Golf Estates, the Meadows, Springs and Lakes. • Price declines accelerated significantly in Jumeirah Islands, Victory Heights, Arabian Ranches and Al Furjan during the third quarter in comparison to Q2 2015.

• Jumeirah Golf Estates villa prices dropped by 1% in Q3, a notable improvement from the 3% in the previous quarter. The Meadows and Springs prices declined at a slower rate in Q3 than in Q2 2015 • The villa market prices have dropped by approximately 4.4% throughout the first three quarters of 2015 and 9% over a 12 month period with further supply of these units being launched and completed during this time period.

Figure 3

V il l as pri c e p e r f o r m a n ce -1%

Average price (AED / sq. ft.)

1,600 1,400

-6%

-2%

-1%

-2%

-3%

-2%

-5%

-2%

-5% -7%

-7%

-8%

1,200

-2%

-3% -6% -9%

-12%

1,000

-12%

800

-15%

600

-18% -20%

400

-21% -24%

200

-28%

0 Jumeirah Golf Estates

Q2 2015

% change

1,800

Jumeirah Islands

Q3 2015

The Lakes

Jumeirah Park

QoQ % change Q2 – Q3 2015

Victory Heights

The Meadows

Arabian Ranches

12 Month % change Q3 2014 - Q3 2015

The Springs

Jumeirah Village Triangle

Al Furjan Villas

Source: Property Monitor Index

Dubai Residential Market Report - Q3 2015

ÂŠ Cavendish Maxwell 2015 | www.cavendishmaxwell.com

Â© Cavendish Maxwell 2015 | www.cavendishmaxwell.com

Dubai Residential Market Report - Q3 2015

Rental rates performance Figure 4

Apartment rents by unit type Q3

Apartments: “Apartment rents remained stable in most locations in Q3 2015.”

Rental rate/sq.ft./annum September 2015 Studio

• Whilst rents remained stable in most locations across Dubai, rents in Business Bay dropped by approximately 2% and by 3% in Dubai Sports City. • Prime locations still demand premium rents with a one bed apartment in Downtown Burj Khalifa ranging from AED 110,000 to AED 125,000 per annum. Similarly a one bed in the Views or Greens ranges from AED 95,000 to AED 110,000.

1 bed

2 bed

Dubai Marina

114

106

The Views

149

122

110

The Greens

148

112

100

Business Bay

Jumeirah Beach Residence

110

114

112

Downtown Burj Khalifa

180

138

118

Dubai Sports City

Motor City

Discovery Gardens

International City

Source: Property Monitor Index

Figure 5

Av erage a n n u a l re n t - 2 b ed ro o m ap ar t me n t 250,000

Average annual rent (AED)

200,000

150,000

100,000

50,000

0 Dubai Marina

The Views

The Greens

Business Bay

Jumeirah Beach Residences

Downtown Burj Khalifa

Dubai Sports City

Motor City

International City

Source: Property Monitor Index

Figure 6

Villa rents by unit type Q3

Villas: “Villa rents have marginally declined in most of the major villa communities in Q3 2015.”

Rental rate/sq.ft./annum September 2015 3 bed

• Rents have declined on average by 1% in the Meadows, Springs and Lakes. These communities continued to have strong rental activity throughout this year. • In locations such as Victory Heights and Jumeirah Park, rents have dropped by up to 3% in Q3 2015 from the previous quarter.

4 bed

5 bed

Jumeirah Golf Estates

Jumeirah Islands

The Lakes

Jumeirah Park

Victory Heights

The Meadows

Arabian Ranches

The Springs

Jumeirah Village Triangle Al Furjan Villas

Source: Property Monitor Index

Figure 7

Av erage an n u a l re n t - 4 b e dro o m vil la 400,000 350,000

Average annual rent (AED)

300,000 250,000 200,000 150,000 100,000 50,000 0 Jumeirah Golf Estates

Jumeirah Islands

The Lakes

Jumeirah Park

Victory Heights

The Meadows

Arabian Ranches

The Springs

Jumeirah Village Triangle

Source: Property Monitor Index

Dubai Residential Market Report - Q3 2015

Residential supply Completions: “Approximately 6,000 residential units have been completed in the first three quarters of 2015.”

• During the first three quarters of this year, 6,000 residential units have been introduced into the market. These figures exclude any serviced/ hotel apartments.

• Over 70% of the completed developments in 2015 have been apartment units, the remaining percentage are villas and townhouses. • Some of the most densely developed areas such as Dubai Marina, Jumeirah Lakes Towers and Downtown Burj Khalifa have had a limited number of newly launched residential developments during this year as the reach their development capacity.

• The completed developments in the first three quarters of 2015 are in locations such as Dubai Sports City, Dubailand, International City, Jumeirah Golf Estates and Jumeirah Village Circle.

Figure 8

Range <

- 2,000

2,001 - 6,000

6,001 - 10,000

10,001 - 14,000 14,001 - 18,000

23 5

18,001 - 22,000 22,001 - <

1 2 26 25 21

14 16

19 13

1 2 3 4 5 6

Al Furjan Al Jaddaf 7 Arabian Ranches Business6 Bay DIFC 5 Discovery Gardens 4

7 Downtown Burj Khalifa 8 Dubiotech 9 Dubai Creek Harbour 10 Dubai Festival City 11 Dubai Investment Park I and II 12 Dubai Marina

13 Dubai Silicon Oasis 14 Dubai South 15 Dubai Sports City 16 Dubailand 17 Emirates Living 18 IMPZ

19 International City 20 Jumeirah Beach Residences 21 Jumeirah Golf Estates 22 Jumeirah Islands 23 Jumeirah Lake Towers 24 Jumeirah Park

25 Jumeirah Village Circle 26 Jumeirah Village Triangle 27 Mohammed Bin Rachid City 28 Motor City 29 Palm Jumeirah

2 1

Pipeline Supply: “Whilst a number of residential projects entered the market during the first three quarters of this year, other projects have been delayed to 2016 and 2017.”

• There were approximately 18,000 residential units scheduled to enter the market in 2015. Of those 6,000 units have been completed so far. We have seen many developments initially scheduled to be completed at the end of 2015, delayed to the first half of 2016 or to a later date in 2017. • The recently launched community The Villages in Dubai South is set to deliver 20,000 residential units with Cluster 1 providing 6,000 units to be completed by 2019, ahead of the Expo 2020.

• A number of residential developments have been launched in Mohammed Bin Rashid City and Dubai Creek Harbour over the past two quarters. We see areas such as these being a focus of development moving forward as new communities are created. • Additional supply entering the market could place further pressure on prices to the end of 2015 and through 2016. Factors such as the estimated population and job growth leading to the year 2020, alongside the UAE’s initiatives to encourage investment, should help support the absorption of this upcoming supply.

Figure 9

Range <

- 2,000

2,001 - 4,000 29

4,001 - 6,000 12

6,001 - 8,000 8,001 - 10,000

10,001 - < 4

1 2 25 21

15 27

14 16

19 13

1 2 3 4 7 9

Al Furjan Al Jaddaf Arabian6 Ranches Business Bay 5 Downtown Burj Khalifa 4 Dubai Creek Harbour

11 Dubai Investment Park I and II 12 Dubai Marina 13 Dubai Silicon Oasis 14 Dubai South 15 Dubai Sports City 16 Dubailand

19 International City 23 Jumeirah Lake Towers 25 Jumeirah Village Circle 27 Mohammed Bin Rachid City 29 Palm Jumeirah

Dubai Residential Market Report - Q3 2015

Cavendish Maxwell Residential Market Survey Looking back - Q3 2015

predictions

reality Apartment and villa prices fell by 2% during Q3 2015.

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

Figure 10

Q 4 2 0 1 5 sale s o u t lo o k Apartments Percentage of agents who predicted apartment prices would: 0% 4%

Villas Percentage of agents who predicted villa prices would: 0% 4%

28%

28% 32%

40%

28%

increase by more than 5%

36%

increase by up to 5%

not change

decrease by up to 5%

decrease by more than 5%

Source: Cavendish Maxwell Residential Market Survey

Figure 11

Q 4 2 0 1 5 re n t s o u t lo o k Apartments Percentage of agents who predicted apartment rents would: 4% 12%

Villas Percentage of agents who predicted villa rents would:

4% 20%

16% 24%

64%

increase by more than 5%

increase by up to 5%

not change

decrease by up to 5%

44%

decrease by more than 5%

Source: Cavendish Maxwell Residential Market Survey

ÂŠ Cavendish Maxwell 2015 | 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

Adam Wisher BSc (Hons) MRICS Partner Head of Development Advisory and Real Estate Research M: +971 56 139 4315 E: adam.wisher@cavendishmaxwell.com

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