Dubai Summer Market Report 2014 by Kensington Finest Properties International

Dubai Summer Market Report 2014

Market Report Summer 2014

Dear valued client and business partner, We are pleased to share with you our latest Summer Dubai Property Market Report. Whoever followed the Dubai real estate market over the past couple of years will agree that the market has been on a roller-coaster ride from an incomparable speculative boom to a free-fall after the Lehman Brother crisis, only to see a strong recovery now. But what´s different this time is growth is demand driven! But also we recognize a slow down of sales prices and demand in the first quater of 2014. This is in my opinion very healthy for the market and shows that Dubai has matured, a real estate market where inverstors are not willing anymore to buy everything for every price. Looking at the next five to six years, we therefore see a bright future for Dubai´s property market. It will probably be one of the best performing markets in the world - not only because Dubai won the EXPO 2020 bid. But caution is to be observed: It is in everybody’s interest – investors, end-users, tenants, landlords, the government, market regulators and real estate professionals alike – to make sure we prevent an overheating of prices. A steady and sustainable growth is what every participant in the market will benefit from. This is how Dubai can continue its success story. Please enjoy our analysis of Dubai´s property market, with a summary of where the market stands at the moment and where we see it in the future. In addition, we will give you a more detailed analysis of the residential, commercial and rental market. With Kind Regards, Christoph Engels Sales Director

Market Report Summer 2014

Demand is driving Dubai´s property market growth For many of our clients, business partners and for us, Dubai is the “Switzerland of the Middle East”. It has smartly positioned itself in the region as a safe haven and business hub for residents and businesses alike. A lot of the demand in the last two years was triggered through the developments of the Arab Spring, with Dubai benefiting very much from the upheaval in the region. People seek Dubai as their safe base and a retreat for their families. It offers them a politically stable and safe environment, employment and business opportunities, a cosmopolitan lifestyle, many leisure facilities, international education and connectivity to the world. Like no place else in the world, Dubai offers a great balance between the orient and the occident and a perfect mix of Arabic culture and traditions with a modern lifestyle for a young generation. And then of course there is the EXPO 2020! The excitement that Dubai will host this mega event is a great achievement of the rulers of this country. It will definitely have a long-term impact on Dubai´s business environment and its position as a hub for international commerce and trade. So, what does EXPO 2020 mean for real estate investors? Well, too much excitement can of course overinflate prices. However we believe the “Expo Hype” was already priced into the market before Dubai actually won the bid. This does not mean of course that some participants in the real estate market don´t try to use the EXPO argument to push up prices even more. However we believe that people will quickly realize the EXPO is still six years away. We believe the market will cool down in the short term and grow at a healthy pace the next couple of years. One of the main reason we believe that growth will be sustainable this time, is that growth is based on completely different fundamentals. Whereas sales before 2008 were mainly off-plan and for uncompleted projects, sales after the crisis focused only on completed properties. However, a couple of months ago - with confidence in the Dubai market returning - the off-plan sales have started again. Speculative investments returned to the market and we again witness the flipping of properties

only a couple of months or even weeks after the initial launch. As everyone will benefit the most when the practice of flipping is well regulated, the regulators in Dubai became active and put measures in place to calm down prices. We can already witness the impact of these measures. The numbers of inquiries have gone down, while the quality of inquiries has gone up in our opinion. We believe that the new mortgage regulations will prevent real estate activities at the wrong end. Speculative investors in Dubai mainly make their purchases in cash. However, in order to cool down the market, pure speculative investments have to be slowed down and end-user investments should be fostered. We also believe that further regulation of real estate professionals and the education of the market is essential to improve and stabilize the market in the long run. At the moment, we see that clients with a long-term focus on real estate investments and personal use of properties understand that now is the right time to invest. Their returned confidence, the strong fundamentals, and the additional government spending in order to strengthen Dubai’s position as an international hub for trade, commerce and tourism will make Dubai even more attractive as a residence of choice.

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Market Report Summer 2014

Residential It is obvious to anyone living in or travelling to Dubai: This thriving city is among the world´s most dynamic. Therefore it comes as no surprise that Dubai´s residential property market witnessed a strong and relatively broad based growth over the past couple of months and years. We want to give you two examples of just how well the residential market performed. Case study 1: 2 bedroom apartment in DEC Tower in Dubai Marina According to our inhouse statistics and research, the price for a two bedroom apartment in DEC Tower started off with an average cost of 719 AED/ sq.ft. in January 2010. In spring 2011, prices started declining and reached a low by mid 2012. In May, the apartment sold for 647 AED/ sq.ft. Ever since that time, prices continued to grow at a steady pace. In May 2014, the price for the two bedroom apartment in DEC Tower nearly doubled reaching 1210 AED/sq.ft. Since the beginning of 2014, when the two bedroom apartment sold for 1034 AED/sq.ft., this property saw an increase of 17% in only five months. see figure: DEC Tower 2 BR apartment 2010-2014 Case study 2: 4 bedroom villa in Meadows (Emirates Living) A four bedroom villa in Meadows in January 2010 started off with an average cost of 1042 AED/sq.ft. By April 2011, its price had fallen to a low of 849 AED/sq.ft. Since then up until May 2014, prices have nearly doubled with the four bedroom villa in Meadows selling for 1632 AED/sq.ft. Since the beginning of 2014, when the four bedroom villa sold for 1406 AED/sq.ft. in January, this property saw an increase of 16% in the first five months of this year. see figure: Meadows 4 BR villa 2010-2014 Page 3 of 5 © 2014 Kensington Finest Properties International

Market Report Summer 2014

Commercial Looking at Dubai´s office market, there has been an increase in activity in the segment, particularly for properties in Business Bay. But also areas such as Jumeirah Lake Towers saw impressive price increases, due to once low sales during the economic downturn. Case study 3: Office in Aspect Tower in Business Bay An office in Aspect Tower on average sold for 1200 AED/sq.ft. in January 2010. In December that same year, prices reached a low, when offices sold for only 850 AED/sq.ft. Prices remained at this level until March 2012. Since then however, prices saw a steady growth and in May 2014 offices in Aspect Tower reached an average sale price of 1335 AED/sq.ft. – 11.3% more than in January 2010, but only 2.3% higher compared to the beginning of this year. see figure: Aspect Tower 2010-2014 Case study 4: Office in Jumeirah Business Center in JLT In October 2010, an office in Jumeirah Business Center in JLT on average sold for 750 AED/sq.ft.. By March 2011, prices reached a low at 550 AED/sq.ft., only to climb to 1400 AED/sq.ft. in February this year. That´s a 254% gain in two years! Since the beginning of this year, the sale price of the office in Jumeirah Business Center is up only 2%. see figure: Jumeirah Business Center 2010-2014