Q3 2017 Dubai Residential Market Report

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Q3 2017 Residential Market Report - Dubai

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Š Cavendish Maxwell 2017 | cavendishmaxwell.com


Q3 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. We provide comprehensive and detailed reports prepared to internationally accepted standards that meet a diverse range of client requirements. As a fully qualified member firm of the Royal Institution of Chartered Surveyors (RICS), with extensive knowledge of the region, we have the necessary experience, expertise and insight to deliver property advice of the highest standard. Our experience covers property, land and business asset valuations; investment; disposals and acquisitions; rent reviews; lease renewals; development appraisals; advisory services; market research; feasibility studies; education advisory and valuation; project management; building consultancy and data analytics. Our Quarterly Residential Market Report for Dubai provides an analysis and summary of the apartment and villa/townhouse properties, as well as the factors affecting housing demand. Price movement, rent and yield statistics, residential transactions and upcoming supply of residential properties is provided through Property Monitor, a real estate data analytics and intelligence platform, powered by Cavendish Maxwell. The report also incorporates the Property Monitor Residential Survey, conducted among partner agents operating within Dubai. The survey showcases how new enquiries, leasing activity and transactions, among other metrics, changed over the previous quarter. It also provides an outlook on the following quarter, with predictions by professionals being studied against real performance.

Contents • Dubai House Price Timeline • Housing Demand • Price Performance • Rent Performance • Transactions Overview • Supply Overview • Property Monitor Residential Survey

© Property Monitor 2017 | propertymonitor.me

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Q3 2017 Residential Market Report - Dubai

Dubai House Price Timeline In 2017 residential property transaction prices traded within a close range of AED 1.25 to 1.5 million

Dubai House Price Timeline - Sales Price (AED) 4.0M

3.5M

Average sale price AED

3.0M

2.5M

2.0M

1.5M

1.0M

Villa/Townhouse

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

0.5M

Apartment

Note: Dubai House Price Timeline tracks residential property transactions from Dubai Land Department (off-plan and secondary) Lower priced inventory continues to enter the market in locations such as Dubailand for villas and Dubai South, Jumeirah Village Circle and Al Furjan for apartments, thus impacting price dynamics for existing developments. Developers are launching more efficient unit sizes to keep ticket prices attractive, along with offering incentives, such as Dubai Land Department (DLD) fee waivers and aggressive payment plans. For established developers with alternate sources of project financing (such as equity from conglomerate businesses or raising debt from the market), margins may be protected or enhanced through such payment plans, as these allow them to attract buyers without discounting prices. The majority of the new plans on offer are structured with post-handover payments such as 40/60 and 25/75

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schedules, where the bulk of the payment (e.g. 60% and 75% in the above examples) is due after construction completion. Additionally, mortgages have become more accessible as banks are also offering newer products to this segment. The DLD reported that for property transactions in Dubai, the value of mortgage transactions increased to AED 60 million in the first six months of 2017 from AED 48 million over the same period last year. These factors are together helping expand the buyer base for residential properties in Dubai.

Š Cavendish Maxwell 2017 | cavendishmaxwell.com


Q3 2017 Residential Market Report - Dubai

for apartments and AED 1.7 to 2.1 million for villas/townhouses on average.

from the period January 2008 to September 2017

Q3-2017

Q2-2017

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

Average villa/ townhouse prices reduced to AED 2.2 million due to the increased supply of lower priced units.

Source: propertymonitor.me

to derive monthly and quarterly average transacted prices for apartments and villas/townhouses.

Average Sales Price In Q3 2017

AED 1.34 Million

AED 2.02 Million

APARTMENTS

VILLAS/TOWNHOUSES

Š Property Monitor 2017 | propertymonitor.me

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Q3 2017 Residential Market Report - Dubai

Housing Demand Housing demand in Dubai is primarily a factor of affordability as well as population growth, particularly of the white-collar labour force, as blue-collar workers are housed in speciality accommodation in line with the 2014 decree and subsequent 2016 announcement. According to recently released data from Dubai Statistics Centre, the total population for the emirate in 2016 stood at 2.7 million, rising by nearly 16% since 2014, which was the last residential market peak. In comparison, the whitecollar population has increased by 5% over the same period to reach 1.1 million in 2016 and the percentage contribution of the white-collar workforce in the total population has declined from 44% in 2014 to 40% in 2016. While investor demand for residential properties in Dubai continues to remain strong, as witnessed in transactions levels over the last 18 months, the sluggish growth in the white-collar worker population combined with new supply is impacting rents and contributing to high vacancy levels in some emerging communities. Over the next two years, job creation ahead of Expo 2020 is expected to attract additional labour force to the emirate, though it remains to be seen what percentage of that will be white-collar population and hence translate into housing demand.

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Dubai Population 3,000,000

50%

Population

2,500,000

40%

2,000,000

30%

1,500,000 20% 1,000,000 10%

500,000 0

2011

Total population

2012

2013

2014

2015

0%

2016

White-collar workers as a % of total poplulation

Q3 2017 Residential Market Report - Dubai

Source: Dubai Statistics Centre

White-collar workers as a % of total poplulation

Dubai Land Department Residential Sales Volume - Secondary Market Transfers vs. Off-Plan Apartment Transactions

2,000

2,081

2,211

2,250

1,752 789

804

1,082

569

624

500

1,570

1,570 893

1,043

1,213

1,528

1,735

1,566 927

875

1,134

981 664

750

875

858

1,000

1,203

1,250

945

Number of transactions

1,500

1,342

1,588

1,750

250 0

Sep 2016

Oct 2016

Nov 2016

Dec 2016

Sales volume (secondary market transfers)

Jan 2017

Feb 2017

Apr 2017

May 2017

Jun 2017

July 2017

Aug 2017

Sep 2017

Source: propertymonitor.me

Villa/Townhouse Transactions 1,172

1250

1000

Sep 2016

Oct 2016

Nov 2016

Dec 2016

Sales volume (secondary market transfers)

Š Property Monitor 2017 | propertymonitor.me

Jan 2017

Feb 2017

Sales volume (off-plan)

Mar 2017

Apr 2017

May 2017

Jun 2017

July 2017

232 Aug 2017

65

63

67

221

188 80

209

245 124

146

122

135

121

130

187

133

136

89

0

118

250

150

349

500

465

585

750

92

Number of transactions

Mar 2017

Sales volume (off-plan)

Sep 2017

Source: propertymonitor.me

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Q3 2017 Residential Market Report - Dubai

Price Performance Prices in established communities with limited upcoming supply have held stronger than emerging locations even as marginal price declines continued in Q3. According to the Property Monitor Index, 12 month change in prices for key communities in Dubai registered marginal declines of 1.2% for apartments and 1.4% for villas/townhouses as of September. This downward trend over the last twelve months has created a wider gap in the price performance of quality stock in established areas with limited upcoming supply against that of newer developments in emerging locations. Factors such as proximity to central business district, social infrastructures like schools, supermarkets as well as build quality and developer track record will continue to play a larger role in maintaining price levels in the Dubai residential market. Apartment Price Performance

-0.9 -1.5

Discovery Gardens

-0.4 -0.5

Dubai Sports City

-0.6 -0.4

0.0

-1.0

IMPZ -1.8

Jumeirah Village Circle

-0.1

-1.1 -0.9

Uptown Motor City

Average price AED / sq ft

Dubai Silicon Oasis

-0.1

-0.2 -0.4

Al Furjan -1.2

Jumeirah Village Triangle

-0.6

-1.1

Jumeirah Lake Towers

-0.2 -0.9

The Greens

-0.3

-0.9

Business Bay

-0.2 -0.7

The Views

-0.3

-0.6

Dubai Marina -1.7

Jumeirah Beach Residences

-1.5

DIFC

-0.2

-0.6 -0.6 -1.0

Palm Jumeirah Downtown Burj Khalifa

0

-0.5%

-1.0%

-1.5%

-2.0%

-2.5%

-3.0%

-3.5%

-4.0%

-2.4

International City (Clusters)

-3.6

-0.4

-0.9 0

QoQ% change Q2 2017 - Q3 2017

12 month change Q3 2016 - Q3 2017

Q2 2017 Price

1,000

500

Q3 2017 Price

1,500

2,000

2,500

Source: propertymonitor.me

Villa/Townhouse Price Performance

-1.2 -1.2

-0.4 -0.4 -0.6

The Springs -1.5

Jumeirah Park -1.8

Victory Heights

-0.2 -0.2

-1.2

Arabian Ranches

-0.3 -0.4

-1.1

The Meadows

-0.4 -0.7

The Lakes -1.2

Jumeirah Golf Estates

Average price AED / sq ft

Jumeirah Village Triangle

Jumeirah Islands

-0.8

-1.4

Green Community Motor City

The Fronds Garden Homes

0

-2.5

-0.5%

-1.0%

-1.5%

-2.0%

-2.5%

3.0%

-1.2

Al Furjan Villas Cedre Villas Silicon Oasis

-2.1

-0.1 -0.4

-0.7 -1.3

-0.2 0

QoQ% change Q2 2017 - Q3 2017

8

12 month change Q3 2016 - Q3 2017

500

Q2 2017 Price

1,000

1,500

Q3 2017 Price

2,000

2,500

3,000

Source: propertymonitor.me

Š Cavendish Maxwell 2017 | cavendishmaxwell.com


Q3 2017 Residential Market Report - Dubai

Rent Performance Rent declines for residential properties in Dubai have been more pronounced than price declines over the last 12 months. Over the last 12 months, rents in Dubai have declined by 2.8% for apartments and 3.5% for villas/townhouses on average, according to the Property Monitor Index. This has resulted from a combination of factors including new project handovers, especially of lower priced inventory, as well as the readjustment of salaries and job losses in some key sectors. In response, to limit void periods on their properties, landlords have begun offering incentives such as the first month rent free as well as the option to pay through multiple cheques. According to Property Monitor, four cheques annually are now the average compared with the earlier practice of single cheque payments being prevalent in the Dubai residential market. Apartment Rent Performance -2.0

-2.0

-2.0

-2.0 -2.0%

180,000 160,000

-3.0

-3.0

-2.5%

-3.0

-3.0

-3.0% -4.0

-4.0

-4.0

-3.5%

-4.0

60,000

-5.0%

40,000

-5.5%

20,000

-6.0%

0

-6.5%

Studio Rent

1 BR Rent

2 BR Rent

Di sc ov er y

M ot or

Ci ty Sp or ts

DI FC

Du ba i

Do wn to wn

G In ar te de rn at ns io na lC ity (C lu ste rs)

-4.5%

Ci ty

80,000

Bu rj Kh ali fa

-4.0%

Bu sin es sB ay

100,000

12 month % change

120,000

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 ce m ei ra h La ke To we rs

Annual rent (AED)

140,000

12 month % change

Source: propertymonitor.me

Villa/Townhouse Rent Performance 700,000

0.0% -0.5%

600,000

-1.0%

-2.0%

400,000 300,000

-2.6 -3.2

-3.2

-3.3

-2.5%

-3.0

-3.2 -3.8

200,000

-3.5%

-4.1

100,000

-4.0%

-4.8

-4.5% -5.0%

4 BR Rent

5 BR Rent

Š Property Monitor 2017 | propertymonitor.me

12 month % change

Vi lla s Al Fu rja n

He ig ht s Vi ct or y

Ra nc he s Ar ab ian

Sp rin gs Th e

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

G ol fE sta te s

0

3 BR Rent

-3.0%

12 month % change

-1.5%

Ju m ei ra h

Annual rent (AED)

500,000

Source: propertymonitor.me

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Q3 2017 Residential Market Report - Dubai

Transactions Overview More than 8,900 residential property transactions were recorded in Q3, with July accounting for nearly 40%. Off-plan sales continued to drive residential market activity in the third quarter, accounting for 77% of the total with nearly 6,850 transfers. The current momentum in sales activity is driven by a larger proportion of end users than before, particularly firsttime buyers, who are entering the market enthused by lower prices and encouraged by attractive payment plans offered by some developers. The introduction of new innovative mortgage products by some local banks has also contributed towards this increased activity. Prices and accessibility criteria for a home mortgage, traditionally the two biggest barriers for new entrants to the property market, have been lowered, thus resulting in an uptick in market activity.

Sales Volume Q3 2017

7,992

APARTMENTS

948

VILLAS/TOWNHOUSES

10

Š Cavendish Maxwell 2017 | cavendishmaxwell.com


Q3 2017 Residential Market Report - Dubai

Top Five Locations For Apartment Transactions In Q3 Off-Plan Transactions

Secondary Market Transactions

1,000

350

300 800 Number of transactions

Number of transactions

250 600

400

200

150

100 200 50

0

Ci ty Sp or ts Du ba i

Du ba i

Bi n

In te rn at io na lC ity Di sc ov er yG ar de ns Ju m ei ra h La ke To we rs

M ar in a

Ci ty Ra sh id

Ci rc le M oh am m ed

Vi lla ge

Ju m ei ra h

Bu sin es sB ay

Bu rj Kh ali fa

Do wn to wn

Du ba i

So ut h

0

Source: propertymonitor.me

Top Five Locations For Villa/Townhouse Transactions In Q3 Off–Plan Transactions

Secondary Market Transactions

250

70

60 200 Number of transactions

150

100

40

30

20 50 10

0

W ad iA lS af a

Ci rc le Vi lla ge

Ju m ei ra h

Ra nc he s

Ar ab ian

(M ira ) Re em

Em ira te sL ivi ng

Se re na

W ad iA lS af a

Sq ua re To wn

M oh am Ra m sh ed id B Ci in ty

So ut h

0

Du ba i

Number of transactions

50

Source: propertymonitor.me

© Property Monitor 2017 | propertymonitor.me

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Q3 2017 Residential Market Report - Dubai

Residential Supply Approximately 11,800 residential units have been handed over across Dubai this year. As of September 2017, approximately 32,000 units are scheduled for handover for the remainder of the year, though actual completions may vary significantly. New supply continues to exert pressure on rents, which have been declining at a faster pace than prices over the last 12 months. Some developers have begun responding to this market reality by phasing the delivery of projects. Additionally, master developers are also differentiating among the various asset classes within their master plan, such as residential, retail, schools, hotels, etc., to launch and begin construction for projects in line with prevailing absorption trends. The profile of transacted properties is also driving unit size and mix optimisation within residential projects to match end user demand more closely than ever before. According to the Property Monitor Supply Tracker, the upcoming supply for the remainder of 2017 is largely concentrated in Dubai Marina, Jumeirah Village Circle, Dubai Sports City, Al Quoz and Business Bay. All these locations have more than 2,000 units projected to be handed over in the last quarter of the year.

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Š Cavendish Maxwell 2017 | cavendishmaxwell.com


Q3 2017 Residential Market Report - Dubai

Upcoming Supply (Q4 2017)

85%

APARTMENTS

© Property Monitor 2017 | propertymonitor.me

15%

VILLAS/TOWNHOUSES

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Q3 2017 Residential Market Report - Dubai

Property Monitor Residential Survey – Q3 2017 Looking back – Q3 2017 Predictions

Reality

The majority of agents surveyed had predicted apartment and villa/ townhouse prices would remain unchanged.

Apartment and villa/townhouse prices have remained largely stable in Q3 2017 with a 12 month decline of 1.0% on average.

The majority of agents had predicted that apartment and villa/ townhouse rents would remain the same during Q3 2017.

vs

Apartment and villa/townhouse rents have remained largely unchanged QoQ though 12 month decline is around 4% on average. According to data from real estate agencies, transaction levels for Q3 2017 are higher than Q2.

The majority of agents had predicted new buyer enquiries, seller instructions and agreed sales would increase in Q3 2017.

Looking Forward – Q4 2017

Q4 2017 Transaction Outlook

Q4 2017 Price Outlook Apartments Percentage of agents who predicted apartment prices would:

Villas/Townhouses Percentage of agents who predicted villa/ townhouse prices would: 0%

0% 3%

5%

18%

Percentage of agents who predicted new buyer enquiries would: 23.4%

17%

33%

62.9%

13.7%

42%

Increase 36%

46% Increase by more than 5%

Increase by up to 5%

Not change

Decrease by up to 5%

Decrease by more than 5%

Decrease

Remain the same

Percentage of agents who predicted new seller instructions would: 37.1%

Source: Property Monitor Residential Survey

Q4 2017 Rent Outlook

51.6%

Apartments Percentage of agents who predicted apartment rents would: 0% 3%

Villas/Townhouses Percentage of agents who predicted villa/ townhouse rents would: 0% 3%

11%

11.3% 16%

Increase

Decrease

Remain the same

Percentage of agents who predicted agreed sales would: 43%

49%

31.5%

43%

32% 56.4%

Increase by more than 5%

Increase by up to 5%

Not change

Decrease by up to 5%

Decrease by more than 5%

12.1%

Source: Property Monitor Residential Survey Increase

14

Decrease

Remain the same

© Cavendish Maxwell 2017 | cavendishmaxwell.com


Q3 2017 Residential Market Report - Dubai

Methodology Sale prices and rents are derived from Property Monitor (www.propertymonitor.me), a comprehensive real estate data analytics platform established by Cavendish Maxwell in 2014. Property Monitor provides real-time, market-wide transactional data and trends. Working with agencies, banks, developers and corporate investors, it provides deeper insight into real estate advisory, investment, and lending activities. The average sales price per sq ft is based on the Property Monitor Index which incorporates signed contracts, registered transactions, valuations and listings verified by Cavendish Maxwell’s market leading valuation department. Property Monitor Residential Survey is a quarterly study of agent opinion designed to identify residential market sentiment. This research highlights how new enquiries, leasing activity and transactions, among other metrics, changed from quarter to quarter with agent predictions compared to actual real market 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 AED 3 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 the regular tracking of construction projects, new launches and delays etc. This is achieved through site inspections as well as regular feedback from developers, contractors, Cavendish Maxwell’s building consultancy team and related government entities.

Key Services

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

Education Advisory and Valuation

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.

© Property Monitor 2017 | propertymonitor.me

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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

Sathya Srinivasan Msc MRICS Head of Strategic Consulting and Research M: +971 54 442 0384 E: sathya.srinivasan@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

Dubai 2205 Marina Plaza Dubai Marina P.O. Box 118624 Dubai United Arab Emirates T: +971 4 453 9525 E: info@cavendishmaxwell.com sales@propertymonitor.ae

Abu Dhabi 605 West Tower, Abu Dhabi Mall Tourist Club Area P.O. Box 126609 Abu Dhabi United Arab Emirates T: +971 2 448 4677 E: info@cavendishmaxwell.com sales@propertymonitor.ae

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