PROPERTY WATCH propertywatch.ae
Q3 2016 — Special Edition
TRANSACTIONS & PRICES TRENDS
DUBAI REAL ESTATE OVERVIEW
MENA REAL ESTATE PREDICTIONS
by Roots Land
by JLL
by Deloitte
ABU DHABI RESIDENTIAL MARKET
DUBAI & ABU DHABI PROPERTY PRICES
STILL CHEAPER TO BUY THAN RENT
by CBRE
by Reidin
by Abu Dhabi Finance
Contents 3
Director's Message
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Transactions & Prices Trends
10 DUBAI REAL ESTATE MARKET 16 MENA Real Estate Predictions 25 Abu Dhabi Residential Market 30 Refinance: Here is what you need to consider 48 Dubai & Abu Dhabi Property Price Indices 47 Middle-Income Housing Sector
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DIRECTOR’S Message Cityscape Global returns to Dubai from 6 to 8 September – and Property Watch magazine returns with a new special edition. This issue is packed full of studies, analysis and reports which I hope will offer readers a valuable insight into the health of the real estate market in Dubai at a time when many investors and property experts are stopping to check its pulse. For many investors and potential home buyers, the burning question is whether this is the right time to purchase property in Dubai – or whether it is better to hold off. The Property Watch team has worked hard with partners to pull together the latest data and analysis into one publication – and online at propertywatch.ae – to make sure investors and buyers have the information they need to help make that decision. We are also excited that our business intelligence site will soon be up and running; this will allow users access to data on the most recent transactions and trends. The opening of the world's largest indoor theme park IMG Worlds of Adventure in City of Arabia on the outer Mohammed bin Zayed Road on 31 August and the soon to be launched Dubai Parks & Resorts located near Jebel Ali. The five main components of Dubai Parks include Bollywood Park and Legoland. These are both attractive new projects that will help cement Dubai’s reputation as a leading tourism destination.
UAE
DIRECTOR
FADI BOUSH RESEARCH ANALYST
ELENA BRATU GRAPHIC DESIGNER
REHMAN ASHRAF
POB 215273 Dubai, UAE T +971 4 329 8333 F +971 4 329 8997 E enquiry@propertywatch.ae
As another world first for Dubai, we have no doubt that the projects will attract huge tourist numbers. Indeed, the theme parks expects to attract millions of people in its first year of opening. We here at Property Watch will be keeping a sharp eye on the positive impacts the parks will have on the property market. As always, we would like to thank everyone who participated in the creation of this issue of the magazine, especially those who provided us with their valuable market studies, research and news.
FOR EDITORIAL OPPORTUNITIES E press@propertywatch.ae FOR ADVERTISING OPPORTUNITIES E enquiry@propertywatch.ae
Fadi Boush Director
DISCLAIMER This publication is the sole property of Roots Land Real Estate LLC and Property Watch and must not be copied or reproduced in any form or by any means, either in whole or in part without the prior written approval of Roots Land Real Estate LLC and Property Watch. The data and other information contained in this publication have been obtained from sources generally regarded to be reliable and every effort have been made to ensure maximum accuracy. However we make no guarantee, warranty or representation in respect of the accuracy and completeness of the information contained herein. Roots Land Real Estate LLC and Property Watch does not accept any liability whether in negligence or otherwise to any party for any loss or damage suffered as a result of negligence, errors, omissions, change of price or other on this publication. The material presented in this publication does not necessarily represent Roots Land Real Estate LLC and Property Watch view and opinion. The listings are correct at the time of printing, availability and prices are subject to change without notice. Photos are for illustration purpose only.
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Transactions & Prices Trends Popular Spots for Apartments in Dubai
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oots Land report details the number of transactions and sales prices of apartments in Dubai in the first half of 2016. The report categorizes the properties into studios and one-, two- and three-bedroom homes and provides
a breakdown of the number of apartments sold every month, sales prices and the most expensive apartment sold in any given area – Dubai Marina or Business Bay, for example. Here are some of the highlights and the full report is
Apartments Sales transactions 2016
available on the Property Watch website. Figure 1: Two maps of Dubai showing the number of transactions per location and total value of sales since the start of 2016.
Business Bay Studio 1 Bed 2 Bed 3 Bed
Palm Jumeirah Studio 1 Bed 2 Bed 3 Bed
89 242 147 77
1 7 107 84
Dubai Marina Studio 1 Bed 2 Bed 3 Bed
66 339 292 133
JLT Studio 1 Bed 2 Bed 3 Bed
98 192 115 24
Figure 1 — For full report visit us on www.propertywatch.ae
Total Apartments Selling Prices 2016
Business Bay Studio 1 Bed 2 Bed 3 Bed
Palm Jumeirah Studio 1 Bed 2 Bed 3 Bed
AED 825.000 AED 416.448.189 AED 561.250.520 AED 380.008.133
Dubai Marina Studio 1 Bed 2 Bed 3 Bed
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AED 53.799.917 AED 416.448.189 AED 561.250.520 AED 380.008.133
www.propertywatch.ae
JLT Studio 1 Bed 2 Bed 3 Bed
AED 61.496.831 AED 195.993.223 AED 158.131.536 AED 58.115.018
AED 84.863.584 AED 376.017.347 AED 364.003.771 AED 317.530.359
In the first half of the year, the highest number of transactions (830) was recorded in Dubai Marina followed by Business Bay (555). JLT and Palm Jumeirah also made the top four, with a total of 429 and 199 transactions respectively. The research suggests that the most preferred type of apartment to buy in Dubai is a one-bedroom property. In the past two quarters, owners in Dubai Marina have seen
a greater return on their investment than owners in other areas of Dubai. The apartments sold there had the
highest combined value, followed by Business Bay, Palm Jumeirah and Jumeirah Lake Towers (JLT).
Prices in [AED] by Area and number of Bedrooms
Transactions by Area and number of Bedrooms
For full report visit us on www.propertywatch.ae
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Business Bay Transactions & Price by Area and number of Bedrooms
Transactions & Price by Area and number of Bedrooms
Transactions & Price by Area and number of Bedrooms
Transactions & Pric by Area and number of Bedrooms
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Apartment Transactions by Month and Area
Apartment Prices by Month and Area
At Dubai Marina and Palm Jumeirah, the highest number of monthly sales occurred in June. In Business Bay, March had the highest number
For full report visit us on www.propertywatch.ae
of transactions, but June had the highest value of transactions at AED 213,564,081. Palm Jumeirah had a high of AED 147,044,041 in May,
and Dubai Marina had its best month in June with total sales fetching AED 290,990,141.
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The three most expensive apartments sold in the first half of 2016. The most expensive property sold for AED 15,600,000 in May in Business Bay – this was a threebedroom apartment in Armani Residences, Burj Khalifa.
The second most expensive apartment – a three-bedroom property within the Fairmont Palm Residences on Palm Jumeirah – sold for AED 9,245,000 in February.
The third most expensive apartment sold for AED 6,000,000 in May and was located in Emirates Crown Tower at Dubai Marina.
Transactions & Price by Area and number of Bedrooms
Transactions & Price by Area and number of Bedrooms
Transactions & Pric by Area and number of Bedrooms
Elena Bratu Research Analyst, Roots Land Real Estate www.rootsland.com
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DUBAI REAL ESTATE MARKET Overview Q2 2016 The vote for Britain's exit of the European Union (Brexit) is the compelling story for the quarter. It raises numerous questions regarding its potential impact on the Dubai real estate market.
While some British investors are likely to be negatively impacted by the devaluation of sterling following the Brexit vote, we believe the impact will be muted as a significant percentage of British investors work and reside in the UAE and therefore do not source their income in GBP.
Dubai is the most open real estate market within the region and hence the most likely to be impacted by external factors. Data from the Dubai Land Department (DLD) suggests that British nationals are the third largest investors in terms of nationality in the city’s real estate.
Given that sentiment plays a major part in determining the level of investment in all sectors of the Dubai real estate market, particularly across residential, we believe that many expatriates in Dubai are likely to opt to continue renting their homes rather than
DUBAI MARKET SUMMARY
switching to ownership. We would therefore expect the sales sector to be more negatively impacted by reduced investor sentiment than the rental sector. Both the office and residential segments are positioned close to the bottom of the property cycle, suggesting that rents have bottomed out (office) or are close to the trough (residential). The timing of any subsequent market recovery may be delayed due to increased uncertainty resulting from the Brexit vote.
Dubai Prime Rental Clock
* Hotel clock reflects the movement of RevPAR Note: The property clock is a graphical tool developed by JLL to illustrate where a market sits within its individual rental cycle. These positions are not necessarily representative of investment or development market prospects. It is important to recognise that markets move at different speeds depending on their maturity, size and economic conditions. Markets will not always move in a clockwise direction, they might move backwards or remain at the same point in their cycle for extended periods.
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Office Market Summary OFfice SUPPLY The second quarter of 2016 saw the handover of only one office tower: Westbury Square in Business Bay, which added 30,000 sq m of office GLA, taking the total stock to 8.5 million sq m, broadly in line with the figure recorded during the first quarter.
Our forecasts of future supply levels for 2017 / 2018 have been revised downwards over the quarter owing to a number of factors: (1) A number of projects which were scheduled for completion in 2017 have been delayed to 2018; (2) Al Duja Tower which was previously included as a mixed-use building has now been confirmed as largely residential
CURRENT SUPPLY (2013 to Q2 2016)
OFfice PERFORMANCE In terms of performance, demand for Central Business District (CBD), the area from the World Trade Centre roundabout to Downtown - persists and this is evident given
FUTURE SUPPLY (H2 2016 to 2018)
the relatively high rentals, currently averaging at around AED 1,922 per sq m and the low vacancy levels. Vacancy rates within the commercial office towers in the Central Business District (CBD) are showing a declining
CBD VACANCY RATE
(with only one floor of office space) reducing potential 2017 office supply by 167K sq m; and (3) the handover of ICD Brookfield has been confirmed for Q1 2019. Despite these changes, Dubai remains the largest and most active office market in MENA, and the preferred regional hub for many businesses.
trend, which suggests that there could be a lack of good quality office space and therefore there has been a number of "Built-to-Suit" projects and prelease agreements scheduled to be completed.
GRADE A RENTS / PER SQ M
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DUBAI RESIDENTIAL MARKET SUMMARY RESIDENTIAL SUPPLY Around 1,500 villas for Emirates Group staff were delivered in District
11 of the MBR City project in Q2 by Emirates Group. This marks the first project that has been delivered in this major development. A further
CURRENT SUPPLY (2013 to Q2 2016)
RESIDENTIAL PERFORMANCE The REIDIN general index for rents and sales remained largely unchanged over Q2, suggesting the
1,680 units were added across Dubai including both apartment and villa units, and taking the total stock to 462,000 units.
FUTURE SUPPLY (H2 2016 to 2018)
residential market is currently at a cyclical trough, having softened by about 15 per cent since its peak in mid-2014. While not significant in its own right, the negative perception and uncertainty resulting from the
Brexit vote may contribute to a delay in the market recovery. Providing there are no major external shocks over the rest of the year, we expect the Dubai residential market to recover in early 2017.
PROPERTY RENT AND SALES INDICES
SOURCE: REIDIN
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DUBAI RETAIL MARKET SUMMARY Retail SUPPLY Three new shopping malls were added over the quarter: a community centre in International City; Ibn Battuta Mall Phase II and The
Ribbon in Motor City. Collectively, they added almost 30,000 sq m of GLA. The remainder of 2016 is expected to witness the delivery of a further 150,000 sq m of GLA. Our supply pipeline for 2017 has been
CURRENT SUPPLY (2013 to Q2 2016)
Retail PERFORMANCE Commercial investors and occupiers are impacted by sentiment and confidence, but their attitude towards real estate in the MENA region is more likely to be driven by their own business and financial situation. Those companies whose business could be negatively
VACANCY RATE
increased with construction having resumed on two projects, the Dubai Art Centre in Barsha and Sustainable City Mall, which increases the 2017 supply to 159,000 sq m.
FUTURE SUPPLY (H2 2016 to 2018)
impacted by Brexit could delay real estate commitments. Furthermore, the performance of retailers is largely correlated with the spending patterns of tourists coming into Dubai. With the devaluation of the British pound, Dubai and the MENA region as a whole has become a more expensive
destination. Therefore, a further decline in European visitors is expected in the foreseeable future. The retail market is currently situated at the top of the real estate cycle, suggesting that we expect rents to continue dropping for the remainder of 2016.
CHANGE IN AVERAGE RENTS
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DUBAI HOTEL MARKET SUMMARY HOTEL SUPPLY The second quarter of the year saw the opening of the landmark W Al Habtoor on the banks of the Dubai Canal, following its sister property St Regis in November 2015.
Combined with other additions to the supply such as the Rove Hotel Downtown and Wyndham Dubai Marina, this brought the Dubai supply to around 72,500 rooms. Several properties announced for 2016 can be expected to see their
CURRENT SUPPLY (2013 Q2 to 2016)
HOTEL PERFORMANCE While occupancy rates remained flat compared to YT May 2015
OCCUPANCY RATE
opening postponed to 2017 which is reflected in our adjusted pipeline shown below. Among the causes are delays in construction and funding, and the overly ambitious timelines initially set by some developers.
FUTURE SUPPLY (H2 2016 to 2018)
data, average daily rates declined 13% to USD 217 which can be attributed partially to the increased competition in the market as well
as the continuing strength of the US dollar.
AVERAGE DAILY RATE
Š 2016 Jones Lang LaSalle IP, Inc. All rights reserved. The information contained in this document is proprietary to Jones Lang LaSalle and shall be used solely for the purposes of evaluating this proposal. All such documentation and information remains the property of Jones Lang LaSalle and shall be kept confidential. Reproduction of any part of this document is authorised only to the extent necessary for its evaluation. It is not to be shown to any third party without the prior written authorisation of Jones Lang LaSalle. All information contained herein is from sources deemed reliable; however, no representation or warranty is made as to the accuracy thereof.
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• Dubai’s residential and office segments are positioned close to the bottom of the property cycle, suggesting that rents have bottomed out (offices) or are close to the trough (residential) • Looking into H2 2016, we expect relatively stable market conditions, with the residential market to start showing signs of improvement from the beginning of 2017
Britain opting to leave the European Union (Brexit) could postpone investors’ decisions to buy property in Dubai’s market • Historically speaking, the Palm Jumeirah, Dubai Marina and Downtown were the booming residential areas in Dubai
• However, the recovery in the market is dependent on no major external factors or negative global events influencing its recovery
• At present, the booming areas in terms of announced projects include Mohammed bin Rashed city and areas South of Dubai – However, “boom” in terms of prices is still concentrated in the prime residential areas such as Downtown, DIFC Umm Suqeim
• Investors are driven by sentiment, and generally speaking, investment decisions are made during stable market conditions – events such as
• In terms of villa project handovers, the market continued to see more completions in Q2 2016. Of that, 1,500 villas were
delivered in District 11 of the MBR City project • In terms of the type of villas, the market is seeing more “affordable” completions to meet the Demand-Supply gap in this segment. A recent example was the 418 unit Glamz residential project located in the Al Furjan area of Jebel Ali
Asma Dakkak Research Manager, JLL MENA www.jll-mena.com
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MENA Real Estate Predictions H1 2016 update Introduction Deloitte’s real estate advisory team issued a Real Estate Predictions Report in January 2016, which looked at trends and prospects for Dubai’s real estate market. Now that we have moved into the second half of 2016, we have compared the predictions we made for Dubai’s residential and hospitality markets with actual performance in the first half of 2016. Our Real Estate predictions for Dubai’s residential and hospitality market prospects in 2016 were based on an assessment of macroeconomic factors, data on supply, demand and performance metrics, in addition to consultations with key industry players.
Residential Predictions One of the key macroeconomic factors shaping Dubai’s residential market identified in January 2016 was low oil prices, which we forecast would dampen demand from regional investors. We predicted that this would be compounded by the declining purchasing power of international investors in Dubai’s residential market, given the ongoing strength of the US Dollar (to which the UAE Dirham is pegged) relative to the currencies of key external markets such as India, the UK and Russia. Overall, we predicted that average residential sales prices in Dubai would continue to fall in 2016, reflecting a transition to a more mature market as well as an increase in more affordable stock and discounting in emerging locations. Assessing data for the 16
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first six months of 2016 shows that residential sales prices have continued to decline in Dubai. The largest price declines have been in Palm Jumeirah (apartments) and Downtown, where prices declined by approximately 10% between Q1 2015 and Q1 2016. On average, residential sales prices in Dubai declined by 4.4% between Q1 2015 and Q1 2016. Another key prediction made by Deloitte in January 2016 was that construction delays and a squeeze on liquidity, as banks re-assess their exposure to residential real estate development, would result in fewer than the 40,000 units of new residential inventory forecast by key market stakeholders would be delivered.
At the beginning of the year, we predicted that supply growth would be slightly ahead of demand growth in Dubai’s hospitality market in 2016 and that as such, occupancy levels at around 70% to 75% were likely to represent the “new normal” in Dubai. Average hotel occupancy in Dubai in the first six months of 2016 was 77%, slightly ahead of our forecasts. Looking at the data in more detail, it is clear that hotel operators in Dubai continued to discount Average Daily Rates in an effort to maintain occupancy, with a decline in Average Daily Rates noted in the first six months 2016. We anticipate that this trend is set to continue in the second half of 2016.
In the first six months of 2016, fewer than 5,000 residential units were delivered in Dubai, which is in line with our prediction that approximately 10,000 units will be delivered throughout 2016.
Conclusions
Hospitality Predictions
We predict that residential sales prices will decline further in Dubai for the balance of 2016 but that this rate of decline will slow, as value and affordability returns to the market. We predict that Average Daily Rates at Dubai’s hotels will decline further in 2016 before stabilising mid-tolate 2017.
One of the key macroeconomic factors shaping Dubai’s hospitality market in January 2016 was ongoing growth in key source markets (particularly KSA), longer average lengths of stay in this segment and increasing demand for better value accommodation. We forecast that these macroeconomic factors would drive strong levels of demand for serviced apartments in Dubai. In the first half of 2016, data from the Dubai Department of Tourism and Commerce Marketing (“DTCM”) shows that serviced apartments experienced the highest occupancy of any category, at 83%.
Overall, Dubai’s residential and hospitality markets have rebalanced towards a “new normal” in the first six months of 2016.
Rather than being a negative, this can be viewed as a positive, as this will help Dubai to become a more affordable destination. As Average Daily Rates decline slightly this should encourage the growth in tourism volumes which will be required to support the investment in tourism infrastructure being developed over the coming years.
Dubai economic overview
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he Economist Intelligence Unit ("EIU") forecasts real GDP growth in the UAE to average 3.6% per annum between 2015 and 2019, marking a decline from the 4.6% growth experienced in 2014. This forecast decline is largely due to a significant fall in global oil prices, along with wider global economic factors, such as a slowing Chinese economy and sluggish growth in the Eurozone economies. It is likely that GDP growth specifically for Dubai will outperform the wider UAE in 2016, largely due to the fact that Dubai’s economy is considerably less dependent on oil revenue compared to other Emirates. Nevertheless, lower oil revenues are likely to drive lower bank deposit levels and greater withdrawals to support potential funding gaps, which may result in tighter liquidity and an increase in the cost of borrowing.
The downturn in global oil prices is forecast to prompt fiscal reform.2 In 2015, fuel subsidies were removed across the UAE which, together with inflation forecast at 3.4% in 2016 and generally stagnant salaries, is likely to lead to lower disposable incomes for some households. Despite the UAE’s forecast budget balance of -0.9% of GDP in 2016, any significant scaling back of key infrastructure projects should be eased by Federal reserves and the new Law No. 22 regarding Public Private Partnerships (“PPP”), passed in November 2015, which aims to boost private infrastructure investment and drive development. In H1 2015, strong economic growth was experienced in Dubai’s restaurant and hotels sector, at 9.2%, whilst Dubai's transport, storage and communications sector achieved 5.7% growth. With significant infrastructure projects underway in these sectors, including the expansion of Dubai’s airports 2
EIU
Global oil price and UAE budget balance forecast, 2015 to 2019
Source: EIU (Dec 2015 forecast), World Bank (Oct 2015 forecast)
GDP growth UAE and World 2014 to 2019
Source: EIU (Dec 2015 forecast)
and the construction of Etihad Rail, we predict that these sectors will further strengthen in 2016. Any lifting of sanctions on Iran also presents potential opportunities for Dubai in 2016. The release of capital
currently in Iran is likely to prompt an influx of investment to safe haven markets from which Dubai may benefit. Dubai may also be able to position itself as a gateway for business into Iran.
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Dubai residential market 2015 Performance & 2016 Outlook
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racket, an increase of 9% compared to 2014. Average residential sales prices across Dubai declined by approximately 10 per cent for villas and 9 per cent for apartments in 2015. The change in average residential sales prices during 2015 was not, however, uniform across all areas of Dubai. Key submarkets where sales prices fell most – i.e. in excess of 10 per cent – were Jumeirah Beach Residence (JBR), Downtown Super Prime and Jumeirah Lakes Towers (JLT). Lower price declines were noted in some more affordable submarkets such as Dubailand (villas) and International City (5.5 per cent to 6.5 per cent). Following a period of belowtrend monthly residential sales transaction volumes in Dubai in H2 2014, activity picked up in 2015 and transaction levels bounced back to average monthly volumes experienced between 2012 to 2015. Monthly residential transactions in Dubai exceeded 1,300 in both January and February 2015; this was partly attributable to a number of project completions and unit handovers in Business Bay, Dubailand and Jumeirah Village. The average value per transaction (calculated monthly) in Dubai in 2015 was lower than 2014, at AED 1.7 million and AED 2 million respectively. This reflects a shift towards more affordable residential units, as we predicated last year. In 2015, 77% of residential sales transactions in Dubai were within the AED 1 million to AED 2 million price. Residential sales price declines in Dubai in 2015 can be attributed to a number of factors, including the exceptional growth experienced in 2013 and 2014, which at 24% and 14% respectively, was significantly in excess of inflation (1.3% in 2013
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Residential monthly sales transactions Dubai — 2014 and 2015
Source: EIU (Dec 2015 forecast)
Average residential sales transaction values Dubai — 2014 vs. 2015
Source: REIDIN (Jan 2014 to Nov 2015)
Average residential sales transaction values Dubai — 2014 vs. 2015
Source: REIDIN, Deloitte
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EIU
and 3.4% in 2014).4 Another factor is a significant fall in global oil prices, which has negatively influenced sentiment and demand from the Middle East North Africa (MENA) region. The strength of the US Dollar (to which the UAE Dirham is pegged) against currencies from key international source markets, such as India, the UK and Russia, has also led to declining purchasing power.
Average residential sales prices Dubai 2015
Furthermore, a factor often overlooked is the impact of increasing stock in more mid-market sectors and discounting in emerging locations, putting downward pressure on average sales prices city wide. Despite the decline in average residential sales prices in Dubai during 2015, price growth over the past four years reflects a Compound Annual Growth Rate (CAGR) of approximately 11.6%, which outperforms most other leading global cities including London and Sydney (both with a residential sales price CAGR of approximately 10.5%).
Source: REIDIN (Jan to Nov 2015)
Residential Sales Price Index and Rent Price Index percentage change — Dubai 2015
Paris and Singapore have experienced a negative residential sales price CAGR over the same period.5 Whilst sales prices have declined during 2015 overall, Dubai's residential Rental Price Index has shown relatively more robust performance, despite some submarket variations. This has spurred the launch of a number of developments offered on a leasehold basis to end users/ occupiers. Developers such as Nakheel, Meraas and Al Wasl have been growing their residential leasehold portfolio, focusing on a rental income strategy.
Source: REIDIN (Jan to Nov 2015)
Despite the decline in average residential sales prices in Dubai during 2015, price growth over the last 4 years reflects a CAGR of approximately 11.6%, which outperforms most other leading global cities
Halifax, Australian Bureau of Statistics (ABS), Le conseil général de l’Environnement et du Développement durable (CGEDD), Urban Redevelopment Authority of Singapore (URA)
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Dubai hospitality market 2015 Performance & 2016 Outlook
H
ospitality market fundamentals in Dubai and the UAE were strong in 2015. Dubai International Airport retained its position as the world's busiest airport for international passenger traffic, up 12% year-on-year. The UAE was ranked 24th overall in the Travel and Tourism Competitiveness Index 2015, scoring number one globally for government prioritization of the travel and tourism industry, and effectiveness of marketing and branding.
Percentage change in hospitality source markets Dubai — 2014 vs. 2015
The tourism industry is fundamental to Dubai’s economy, with the Emirate having the highest overnight visitor arrival expenditure globally, at approximately AED 17,146 per city resident.6 The direct contribution of travel and tourism to the UAE’s GDP was AED 61.6 billion (4.1%) in 2014 and is forecast to rise by 4.9% in 2015. Notably, the travel and tourism industry in the UAE supported 307,000 direct jobs in 2014 (5.4% of total employment) are the figures for 2015 not yet available?7
Source: Tourism Economics
The total number of visitors to Dubai in 2015 was 14.2 million, equivalent to 7.8% year-on-year growth. KSA drove the largest number of visits to Dubai in 2015 with 1.6 million visits, followed by India with this should be 950,000 visits and the UK with 0.9 million. Iran and China drove the greatest increase in visitor numbers, whilst visitors from Russia declined by more than 15% due to economic and political turbulence and a weakened ruble.8
2015 saw average occupancy and ADR in Dubai decline by approximately -1.4% and -7.4% to annual occupancy of 77.5% and AED 797 respectively. This was primarily due to new supply growth (6.8%) outpacing demand growth (4.4%) in 2015.
Hotel performance percentage changes Dubai — 2014 vs. 2015 November YTD
These relatively moderate falls should not be viewed negatively, as Dubai still remains one of the bestperforming hospitality markets globally with regard to occupancy levels, positioned together with New York at 84%, London at 82%, Paris at 78% and Berlin at 77%. 20
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Source: STR Global
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Mastercard Global Destination Cities Index 2015 —
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WTTC —
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Tourism Economics
Global hotel occupancy and ADR benchmarks, selected cities — 2015 (November YTD)
In 2015, 11 new hotels opened, adding approximately 2,800 new keys to Dubai’s inventory, with the greatest supply growth in the upscale and upper upscale sectors. It is estimated that there are 31 new hotels in the pipeline (including Independent hotels), due for completion in 2016, which will increase Dubai’s hotel room inventory by approximately 14% (9,300 keys) to a total of 76,500. In the short term (2016 to 2017), the gap between hospitality supply and demand will widen leading to a ‘new normal’ in hotel performance in Dubai. In the medium term, we predict that demand growth in Dubai's hospitably market will catch up with supply growth, as the market gains traction in the run-up to Expo 2020. We consider that planned tourism infrastructure investment (including a number of major theme parks), Expo 2020 and the prospect of a GCC Schengen-style visa will all have a positive impact on demand in Dubai, driving up visitor numbers and average length of stay. Looking at the longer term, we estimate that there are some 23,000 hotel rooms in Dubai's pipeline
Source: STR Global (US$)
2015 saw average occupancy and ADR in Dubai decline by approximately -1.4% and -7.4% to annual occupancy of 77.5% and AED 797 respectively. This was primarily due to new supply growth (6.8%) outpacing demand growth (4.4%) in 2015. between 2016 and 2020 and while market fundamentals are strong, investors, developers and lenders
should also look beyond Expo 2020 and devise strategies for sustaining demand levels in the years to follow.
Hotel pipeline Dubai — 2016 to 2020
Source: Deloitte
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Dubai Office market 2015 Performance & 2016 Outlook
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olarization in Dubai's office market was noticeable in 2015, as per our predictions at the beginning of the year. A divergence between occupancy and rental values was experienced both inter-d istrict and intra-district. In DIFC for example, a shortage of stock in the most prime build ings has driven rents up to AED 350 per sq ft per annum, whilst less well located and specified build ings are quoting below AED 200 per sq ft per annum.
institutions. As we predicted, dual licensing has become a key differentiator for new schemes, with both D3 Design District and Dubai World Trade Centre District (DWTC) able to accommodate both onshore and offshore companies. In 2015, the first buildings in the D3 Design District were delivered, with office space secured by a
range of high profile brands and businesses for their HQ or regional operations including Chalhoub Group, Hugo Boss, Jumeirah Group and Moncler. The concept and target market for the D3 Design District adds another dimension to Dubai’s office footprint, which has become a diverse amalgamation of clusters attracting a range of global companies and SMEs.
Illustrative office cluster map — Dubai 2015
Across Dubai, the average office size acquired between January to October 2015 was approximately 1,420 sq ft, at an average price of approximately AED 1,185 per sq ft. A total of 1.88 million sq ft of office space was sold over this period, reflecting a year-on-year increase of 12%. Business Bay dominated office sales transactions between January and October 2015, accounting for nearly 50% of total office sales in Dubai.9 The importance of retail and other facilities and amenities for office occupiers was evident this year with landlord’s investing in retail improvements and carefully selecting the right tenant mix. DAFZA Square, inaugurated in 2015, aims to meet the demand of regional and global multinational companies featuring a bank, business centre, gym, food court and shops. For similar reasons, Emirates REIT is currently redesigning the retail space at Index Tower. We estimate that 3.35 million sq ft of prime international Grade A office space was added to the market in 2015. Take up in prime developments was predominantly driven by consolidation & expansion of tenants seeking high quality, single ownership offices, as well as some interest from education 22
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Source: Deloitte
Confirmed major international Grade A office pipeline Dubai — 2016 to 2019
Source: Deloitte
Looking ahead, we forecast a confirmed pipeline of international Grade A space in prime office districts of approximately 3.2 million sq ft, including ICD Brookfield Place, DIFC and DWTC.
Investment in retail and other facilities and amenities for office tenants was a priority for some landlords in 2015 9
REIDIN
Dubai Retail market 2015 Performance & 2016 Outlook Emaar Malls Group (EMG) reported 90 million visitors during the first nine months of 2015, equating to 11 per cent in the year to date, and a 2.9 per cent increase in tenant sales, compared to 2014 (Q1 to Q3). Despite a strong start to the year with 56 million visitors to the Dubai Shopping Festival (DSF) spending around AED 145 billion, some retailers have reported a fall in sales in 2015. This has largely been attributed to a slowdown in the economies of some typically highspending source markets, political instability in certain areas of the MENA region and unfavourable exchange rates for dollar pegged currencies, making Dubai a relatively
more expensive retail destination. In particular, luxury jewellery and designer fashion retailers have stated that sales were down during 2015, notably due to Chinese shoppers not purchasing in the volumes of the recent past. UAEwide, the EIU estimates that retail sales volumes will have decreased by 0.7% in 2015 but will return to growth in 2016, averaging a 1.6% annual growth rate from 2016 to 2019. Food and Beverage (F&B) was a particularly strong retail sector for Dubai in 2015. Indicative of this is a number of restaurant chain acquisitions by investors including Al Safadi Restaurants and Reem
Al Bawadi, together with growth in brand penetration including the debut of American chain Texas de Brazil and various celebrity-backed concepts such as Marina Social (Jason Atherton) and Tom Aikens’ Pots, Pans & Boards. Approximately 2.5 million sq ft of mall retail space in Dubai was added to the market in 2015, including the Mall of the Emirates expansion, City Centre Me’aisem and The Golden Mile Galleria on Palm Jumeirah. High occupancy was achieved on opening at the high-end malls, especially those that benefit from high tourism footfall and delivered by a developer with a strong track record.
Retail sales and consumer price inflation UAE 2014 to 2019
Source: EIU
Key tourist retail mall source markets Dubai — 2015
Source: GRMC
23
Significant amount of speculative retail space has been announced in Dubai, however, we consider it unlikely that all of this will be constructed in the short-to-medium term. We estimate that there is
approximately 12.5 million sq ft of mall retail GLA in the confirmed pipeline, of which 4.3 million sq ft is planned for delivery in 2016, based on current completion dates. Approximately 40% of planned
retail supply in 2016 comprises the expansion of existing malls and 5% community retail projects (on a GLA basis).
Confirmed retail supply pipeline Dubai — 2016 to 2019
Source: Deloitte
The retail pipeline over the next four years shows a focus on development in high density and growing communities such as Palm Jumeirah, Jumeirah Village and International City, which could positively impact residential real
estate prices in these locations. In the context of growing supply, both existing and planned retail schemes in Dubai are competing to differentiate and we predict that this will continue in 2016. We have
seen existing malls re-position their tenant mix, the development of more creative urban retail concepts and the creation of unique attractions to complement retail use, such as BOXPARK and The Dome Box cinematic experience.
Expectation on disposable income levels in 2015 and 2016 comparison to previous year Dubai
Source: GRMC
24
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Abu Dhabi Residential Market Snapshot — Q2 2016 Average rents weaken on lower demand and weaker economic conditions Residential rentals started to show more noticeable declines during Q2 2016. The shift in dynamic has emerged amidst ongoing downsizing across multiple industry sectors, which has resulted in weaker demand, specifically for high-end apartment products. With a growing number of new projects in the long-term pipeline, we expect to see an
increase in annual supply in the coming years, with the majority belonging to properties orientated towards the upper-mid to high-end segments. More affordable units remain in demand, reflecting the demographic of the vast majority of expatriate workers. With limited stock against current requirements, rental rates for affordable units have remained
steady with minimal fluctuation recorded against the general slowdown observed in the upper segments. With economic challenges expected to continue in the short term, we anticipate further deflation of high end / luxury rates as reduced corporate demand creates a more tenant-led market.
Average residential
MARKET DYNAMICS
RENTS
INFOGRAPHICS Q2 2016
Apartment Sales
2% quarter-on-quarter 5% year-on-year
- 1% quarter-on-quarter
Apartment Rents
- 2% quarter-on-quarter
Villa
Average residential
Sales
- 1% quarter-on-quarter
SALES
Villa Rents Future Supply 4% year-on-year *
* Includes properties within the Investment Zones.
- 1% quarter-on-quarter
14,500 Units Q2 2016 - 2018 80% Apartments 20% Villas 25
Abu Dhabi Office Market Snapshot — Q2 2016 Prime office rents remained stable The sluggish performance of the office sector has continued into Q2, with low occupier demand characterising the market. Commercial activities proved to be considerably weaker than in previous quarters, with the subdued business environment reflecting the more muted economic climate. However, average prime rentals
remained flat at AED1,800/m2/ year, although landlords are becoming increasingly flexible with their leasing and payment terms. The secondary market witnessed a further 2% drop quarter-on-quarter, maintaining its downward trend, which has seen a 10% year on year decline in rentals.
office supply emerging in noncore locations, we expect to see a sustained period of deflationary pressure on secondary office rentals, with vacancy rates also expected to increase as some tenants look to downsize their existing locations. Corporate demand is expected to create a more tenant-led market.
With the majority of upcoming
Prime CBD locations
MARKET DYNAMICS
RENTS
INFOGRAPHICS Q2 2016
Existing Stock
0% quarter-on-quarter
1.85
3.85
Million m² | 2008
Million m² | Q2 2016
Secondary office locations RENTS 2% quarter-on-quarter
OCCUPANCY*
50%
90%
OFF-SHORE
ON-SHORE
Future Supply
0.86 Million m² Q2 2016 - 2018
* Off-shore includes Al Maryah Island, whilst on-shore covers all other locations in Abu Dhabi City
Abu Dhabi Hospitality Market Snapshot — Q2 2016 Seasonality in tourism market sees softening of hotel performance Q2 proved to be a more challenging period for Abu Dhabi’s hotel properties, with Ramadan coinciding with the end of the normal visitor season, culminating in weaker than normal tourism performance. According to data from STR Global, the overall average occupancy rate fell from 74 per cent in June 2015 to
72% in June 2016. Both the average daily rate (ADR) and the revenue per available room (RevPAR) dropped by 11% and 13% respectively from the same period last year. ADR’s fell from close to AED532/ room/night in June 2015, to roughly AED472/room/night in June 2016. During the same period, the RevPAR also declined from AED395/room/
Hotel performance
night to AED342 room/night. The downward trend in performance reflected the combined adverse effects of increasing hotel competition, US dollar strength and an overall slowdown in tourism growth. However, overall visitor numbers do continue to increase on year-on-year basis.
RevPAR -13.0% year-to-date ADR -11.0% year-to-date
MARKET DYNAMICS INFOGRAPHICS Q2 2016
Occupancy
Future Supply
72%
4,000
Figures are for the month of June 2016 Source: STR Global
ROOMS Q2 2016 - 2018
* Based on data from STR Global
27
Abu Dhabi Retail Market Snapshot — Q2 2016 Strong demand persists The recently published Abu Dhabi Economic Performance Report from the Department of Economic Development (DED) highlights diminishing consumer confidence during Q1 2016, as depicted by the 17% reduction from the same period last year. Both domestic and external economic challenges and continued uncertainties combined to negatively impact consumer confidence and spending levels.
Despite falling consumer spending, prime retail developments continue to display stability in both rentals and occupancy rates. All major malls in the UAE capital maintained high occupancy, in excess of 95%. However, some retail operators have put their business investment and expansion plans on hold in the short term, as they assess the likely fallout from current weaker economic fundamentals.
Whilst around 175,000 square metres of new retail space are set to be delivered before the end of 2018, in the short term, new retail supply in the capital is actually very limited, which should help to insulate retailers and mall owners from the emergence of more severe negative impacts. However, whilst oil prices remain low, we can expect to see consumer and business confidence also remaining below normal levels.
Existing Stock
1.4
Retail performance
Million m² Prime rental rates
MARKET DYNAMICS INFOGRAPHICS Q2 2016
28
Occupancy Rate
Future Supply
95+ %
175,000
Across major malls
Q2 2016 - 2018
www.propertywatch.ae
Abu Dhabi Market Market Snapshot — Q2 2016 Market Outlook Residential
MARKET DYNAMICS INFOGRAPHICS Q2 2016
Despite ongoing economic uncertainty, the residential sector is expected to remain relatively resilient, aided by the low levels of upcoming supply in the short term. Whilst some high-end apartment products have already started to experience rental declines, the mid-market should see rates maintained as strong demand for affordable residential units prevails.
Office The commercial office sector is expected to see a two-tiered performance prevail in coming quarters; demand for secondary accommodation is expected to remain weak resulting in further rental declines. However, demand for Grade A accommodation will remain stronger and will be better insulated due to the lack of available good-quality supply in the market and in the development pipeline. Overall market vacancy rates will continue to rise, driven by the delivery of new office stock and weaker new employment numbers.
Hospitality Seasonal impacts have been highly evident in the year-to-date performance of the hospitality sector; however, occupancy rates are expected to rebound during the third and forth quarters, driven by higher demand during F1 Abu Dhabi and other key tourists events scheduled for during the cooler winter months. Nevertheless, with tight competition, we expect to see an increasing number of hotels offering packages and room promotions to entice visitors.
Retail Retail demand in Abu Dhabi continues to be driven by the local population, although the rising contribution of the tourism market is also becoming evident. With the economic outlook suggesting reduced growth, we anticipate weaker fundamentals for the retail sector, with the potential for declining rentals in non-prime retail facilities. However, the market will benefit from the low level of supply in the short-term, with no major retail centre expected to be delivered before 2018. 29
Refinance What to consider
T
oday, people with existing mortgage exposure, look at re-mortgage as a great opportunity to reduce the mortgage cost, to unlock the property equity or to consolidate the debts. Well, the question comes, is it a smart move for every homeowner, and how refinance or re-mortgage can contribute to lower debt cost? Indeed, with the reduced interest rates and competitive terms, potential mortgagors and homeowners are considering re-mortgage as a great way to save money and to lower the home financing cost, either by restructuring the prevailing home loan terms or by moving it to other lenders. Perhaps there could be any rationales for homeowners to consider refinance, however, it is prudent to determine whether the reason for refinancing reach out to the required advantages. Expert guidance could be an added value to your experience.
Mortgage Refinancing Refinancing a mortgage is a process that helps unlock the hidden value 30
www.propertywatch.ae
of a property. A new mortgage may offer a lower rate of interest, lower monthly payments, and may release equity for large purchases. Refinancing can help borrowers consolidate or pay off existing debts. It can also provide a new opportunity to either lock in a low fixed rate of interest or choose a variable rate of interest to ease the household's financial burden.
When Refinancing Makes Sense Current market condictions and available mortgage rates favour refinancing, but how does a borrower determine if remortgaging will help save money. There are two types of refinancing loans: rate and term refinancing, and cash-out refinancing.
Rate/Term Refinancing Rate/term refinancing is the simplest and most straightforward form. The borrower trades in the current mortgage loan for better rates and terms, thereby cutting
monthly mortgage repayments. The same property is kept as collateral. Normally, a borrower will consider rate and term refinancing if his or her existing mortgage is an adjustablerate mortgage and he or she wants to lock in lower interest payments. He or she may also consider rate and term refinancing if a fixed rate mortgage is due to expire. Another trigger is if mortgage rates have fallen significantly since the mortgage was initially taken out. Mainly, rate and term refinancing is driven if there is a considerable drop in the mortgage interest rates.
Cash-Out Refinancing Cash-out refinancing is a way for homeowners to use the equity in their property to make an additional purchase or to take out a larger mortgage. This type of mortgage loan is essentially for those who have been in their property for a while and have built up some equity which is available for them to access. primarily depends on the property appraisal value, as cash-out
refinancing is mostly driven by the growing value of the property.
Refinancing Costs Mortgage refinancing comes with a cost. However, over the longer term, it can generate substantial savings that more than offset any initial extra cost. Currently in Dubai, under regulated mortgage guidelines and prevailing mortgage interest rates, the refinancing cost is less than 2 percent of the existing loan principal amount. This consists of Dubai Land Department charges, title deed fee, property evaluation fee, bank charges and insurance costs. At present, banks are being more flexible about cutting exit/ transfer charges. This reduces the transaction costs. They are also offering attractive rates and terms when switching from one bank to another.
How to Keep Refinancing Costs Low First, make sure to do the maths and calculate whether the savings on the mortgage will offset the refinancing costs. A lowering upfront transaction cost means homeowners will benefit from the reduce rate faster. To decide on the best and lowest cost mortgage refinancing deal available in the market, be sure to analyze the various deals on offer, look for promotions and extra rewards, and on top of everything calculate cost or the refinancing fee.
The Refinancing Process The process of refinancing is simple and to start the procedure, banks need homeowner’s personal bank statements, identification documents and liability details, along with the additional income documents.
Banks will review property documents comprise of title-deed copy, floor plan and if the property rented, then tenancy contract copy, rental payment details will also be reviewed and it will be considered as borrowers one of the income sources. The lender will review the current loan size, debt to income ratio, paid amount value and the left tenure of the existing loan together with the current property value to figure out the possible options. If all the documents are as per the bank guidelines, then the bank will be needing two to three weeks’ time to complete the procedure.
percent for UAE nationals, at a very competitive interest rate on the property value. There are many benefits associated with the refinancing condition, but cautiously read the fine print and do proper homework to make an informed financial decision.
Bottom Line Currently, financial institutions are offering up to 75 percent refinance product for expats and up to 80
Mr. Dhiren Gupta Managing Director, 4C Mortgage Consultancy www.4cmortgages.com
31
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OVERVIEW What’s happening on the global and local macro level? In its World Economic Outlook titled ‘Too Slow for Too Long’ (April 2016), the International Monetary Fund (IMF) reduced its global growth forecasts to 3.2% (from 3.4% in January 2016). Despite that, growth forecasts remain higher than 2015 levels (3.1%) and are projected to increase to 3.5% in 2017. While growth is forecast to strengthen, the slowdown in China, further declines in commodity prices, and the slowdown in investment and trade continue to represent downside risk to global growth. FIGURE 1
Global growth levels (%) 2015
2016 F
2017 F
World output
3.1
3.2
3.5
Advanced economies
1.9
1.9
2.0
Emerging markets & developing economies
4.0
4.1
4.6
Middle East & North Africa
2.3
2.9
3.3
Source: IMF, April 2016
On the local level, the impact of lower oil prices resulted in the revision of government budgets, reprioritisation of spending and removal of energy subsidies. These changes have resulted in sizable shifts in relative prices since 2011, with headline inflation rates increasing from 0.8% in 2011 to 4.0% in 2015. Coupled with the appreciation of the US dollar, household disposable income tightened and purchasing powers reduced.
How has the local real estate market been impacted? Against this backdrop, the real estate sector in the UAE witnessed sluggish growth during the first half of 2016. The slowdown in transactional activity continued to weigh on the performance of the residential market, with sale prices softening further in Dubai and stabilizing in Abu Dhabi. While hotel occupancy rates remained healthy, average daily rates and revenues came under pressure on the back of softening demand. Meanwhile, the retail market saw no noticeable increases in average rents as a strengthening US dollar and high inflation rates impacted tourist and domestic spending respectively. Similarly, growth in the commercial market (office and industrial) was muted as corporates and industries continued to scale back expansion plans amid increasing economic uncertainties.
What are the key factors of influence that will drive the market forward?
Forecast inflation 2.7%
Please refer to the important notice at the end of this report.
UAE’s safe haven status
Government commitment to spending on infrastructure and development projects
Availability of more sophisticated investment grade product (e.g. schools, hospitals)
More transparent processes and procedures
Forecast GDP growth 2.6%
Stronger growth projections in 2017
UAE REAL ESTATE 2016 MID-YEAR MARKET REVIEW
RESEARCH
OFFICE MARKET The office market in Dubai remained relatively subdued during the first half of 2016. The slowdown in the economy and consequent cutbacks in the job market impacted demand for office space. In turn, rents remained flat across the majority of locations in Dubai, particularly for lower quality buildings in less developed locations. Performance in select areas with freezone status continues to be strong (e.g. Dubai Media/Internet City). Likewise, Grade A buildings continue to command strong rental rates as demand for quality space in central locations such as the Dubai International Financial Center (DIFC) remained robust. The established infrastructure, ease of accessibility, availability of parking space and developed amenities (F&B /retail) continue to play a key factor in corporates’ choice of office space. Elsewhere in Dubai we see a pick-up in demand for office space in the Dubai Design District (D3). The availability of quality space, dual licensing system (operating as both free zone and non-free zone), and proximity
to Downtown Dubai has seen global and local designers, artists and creative entrepreneurs commit to the development. As such, D3 registered occupancy rates of 75% and saw an AED 45 per sq ft increase in rents over Q1 2016 (to reach c. AED 180 per sq ft). The occupier market in Abu Dhabi continues to struggle as falling oil prices led to the restructuring of many Oil & Gas companies and Government Related Entities (GRE’s); traditionally the largest occupiers of office space in Abu Dhabi. This has in turn impacted rental rates across the Emirate. Asking rents in Abu Dhabi’s prime commercial district, the Abu Dhabi Global Market (ADGM), maintained their levels at approximately AED 2,500 per sq m. Elsewhere across Grade A buildings in Abu Dhabi, landlords have maintained their asking rents given limited available quality stock and reduced supply completions. Meanwhile Grade B rents have declined on the back of weakened demand.
FIGURE 2
FIGURE 3
Dubai office supply
Abu Dhabi office supply
GLA million sq m
6
4
2
0
Source: Knight Frank Research
2013
2014
2015 Existing supply
2016F
2017F
Under construction stock
Viewpoint The performance of the office market in Dubai and Abu Dhabi is likely to remain muted for the remainder of the year as corporates scale back on expansion plans under the current global economic conditions. In Dubai, we expect to see marginal declines in asking rents across Grade B buildings, while rents in grade A office space maintain their stability. In the medium-to-long term, the delivery of more quality space (e.g. ICD-Brookfield Place tower in the DIFC, Dubai World Trade Center - DWTC) is expected to exert downward pressure on the performance of Grade A space. In Abu Dhabi, the short-term impact of the economic slowdown is likely to be offset by delays in the delivery of office space, which in turn will keep rents stable. In the long run however, rents are expected to soften as landlords strive to attract occupiers, and more space is released to the market (in addition to build to suit developments).
INDUSTRIAL MARKET Performance in the industrial sector remained flat over the first half of the year, as occupiers postponed new purchases and expansion requirements on the back of a slowdown in global trade volumes. The sector also witnessed increased supply as some occupiers, namely those in the Oil and Gas industry, have downsized and consolidated their space. There continues to be a flight to quality from traditional industrial areas such as Al Quoz, to newer locations such as Dubai Investment Park (DIP) and Dubai Industrial City (DIC). These latter locations benefit from more developed infrastructure and services, greater connectivity, and longer leasehold tenures. As a result, rents have remained relatively stable, as occupancy rates are high.
Figure 4 Dubai industrial rents
900 800
50
700
40
AED per sq m
AED per sq ft
Occupier demand in Abu Dhabi is also shifting from older industrial areas such as Musaffah and Mina Zayed, to newer locations offering quality services. We understand that locations providing quality European specified warehousing, such as Abu Dhabi Airport Free Zone, have attracted a lot of interest from logistics providers, with occupancy rates registering approximately 90-95%.
Figure 5 Abu Dhabi industrial rents
60
30 20
600 500 400 300 200
10 0
Bonded free zones such as Dubai South and Jebel Ali Free Zone (JAFZA) remain popular areas, as demand for new and quality stock remains high. Infrastructure improvements to Jebel Ali Port and Al Maktoum International airport have also assisted in attracting more occupiers to the area.
100 Al Quoz (Class A)
Source: Knight Frank Research
Dubai Investment Park (Class A)
JAFZA (Class A)
Dubai Industrial City
0
Mussafah
ICAD 1
Q1 2014
KIZAD
Abu Dhabi Airport Free Zone
Q1 2015
Al Markaz
Q1 2016
Viewpoint According to the World Trade Organization (WTO), growth in the volume of global trade is expected to remain subdued in 2016 (2.8%). Further slowdown in the Chinese economy, financial market volatility and sharp exchange rate movements are expected to impact the performance of the sector in the short-to-medium term (WTO). With the industrial and logistics sectors being a main pillar of Dubai’s non-oil economy, the sluggish performance of the global trade market is likely to reflect on the performance of the sector in the short-to-medium term. Consequently, rents are expected to remain stable as occupier demand softens. In Abu Dhabi, while demand has slowed significantly on the back of the decline in oil prices, the limited supply of quality industrial space is expected to keep the market stable. In the long-term, the UAE’s commitment to diversifying its economy through continued investment in developing the sectors’ supporting infrastructure (e.g. Jebel Ali Port & KIZAD) and enhancing legislation is likely to boost the industry further.
UAE REAL ESTATE 2016 MID-YEAR MARKET REVIEW
RESEARCH
HOSPITALITY MARKET Dubai’s hotel market sustained strong occupancy rates in Q1 2016, registering 85%. While down from the rate recorded over the same period in 2015, this was still the highest in the region by a considerable margin.
FIGURE 6
(average)
Key performance indicators
over the same period. Given its heavy reliance on corporate demand, the hospitality market in Abu Dhabi suffered on the back of the slowdown in economic growth and subdued corporate activity.
DUBAI
ADR
Facing a more cash constrained guest profile however, hotels have had to offer more attractive packages in order to maintain market share. As a result, average daily rates (ADR) in the emirate dropped 12% in Q1 2016 compared to the same period in 2015, resulting in a 13% decline in revenues per available room (RevPar).
Occupancy
RevPAR
Q1 2015
268
86
231
Q1 2016
236
85
200
ABU DHABI
In Abu Dhabi, occupancy rates maintained their stability recording 78% in Q1 2016. Meanwhile ADR’s and RevPar’s dropped 15% to USD 138 and USD 108 respectively
ADR
Occupancy
RevPAR
Q1 2015
162
78
127
Q1 2016
138
78
108
Source: STR Global
FIGURE 7
FIGURE 8
Dubai hotel supply
Abu Dhabi hotel supply
90,000
35,000
80,000
30,000
60,000
Number of Keys
Number of Keys
70,000
50,000 40,000 30,000 20,000
20,000 15,000 10,000 5,000
10,000 0
25,000
0 2013
Source: Knight Frank Research
2014
2015
2016F
2017F
2013
2014
2015
Existing supply
2016F
2017F
Under construction stock
Viewpoint Many of the challenges seen in 2015 such as a strong US dollar, lower visitor numbers from Russia & neighbouring CIS countries (which dropped 23% Y-o-Y in 2015 according to DTCM), and slower economic growth in China and the Eurozone are expected to continue throughout 2016, which will invariably impact demand levels – and in turn profitability - in the short term. However in the medium-to-long run our outlook for the hospitality sector remains positive for both cities, and will be rooted in the delivery of major demand generators that will help drive tourism demand – particularly from the leisure segment. The expected delivery of the theme park complex, Bluewaters Island, the Opera District and major retail destinations in Dubai, along with Abu Dhabi’s commitment to developing entertainment and cultural districts of its own, will stimulate visitation and maintain the competitive positioning of both cities. These demand drivers are underscored by the continued investment in airline infrastructure, which will further increase the accessibility of both emirates. From a supply side, and despite notable recent openings, both markets remain underserved in terms of mid-market and budget hotel offerings. The introduction of more affordable hospitality options will ultimately balance the hotel supply, which is heavily weighted towards the top end of the market in both emirates, and will widen the country’s tourist base.
RETAIL MARKET The retail sector in both Dubai & Abu Dhabi saw no noticeable growth over the first half of 2016, as demand remained subdued on the back of a strong US dollar (impacting the purchasing power of tourists from Russia) and slow economic growth in China and the Eurozone. In particular, the lower consumer spending weighed down on the bottom lines of personal luxury brands and high-end retailers, which grew at a slower rate in H1 2016 compared to the same period last year. Domestically, higher inflation rates saw residents reprioritize and redistribute their spending on necessity goods. A recent report by the Dubai Chamber of Commerce reveals that 41% of the country’s consumer spending went to housing in 2014. The next biggest expense was food and beverage (F&B), which accounted for 14% of total expenditure. FIGURE 10
Dubai retail supply
Abu Dhabi retail supply
4,000
4,000
3,500
3,500
3,000
3,000 GLA ‘000 sq m
GLA ‘000 sq m
FIGURE 9
2,500 2,000 1,500
2,000 1,500 1,000
500
500 2013
Source: Knight Frank Research
2014
2015
2016F
2017F
Occupancy rates in well-established malls such as The Dubai Mall and Mall of the Emirates in Dubai, and Yas Mall in Abu Dhabi remain high, indicating strong demand for retail units in the right location. Elsewhere, landlords are re-positioning their malls to meet the changing consumer habits, in order to remain competitive and ensure healthy occupancy rates.
2,500
1,000
0
In fact, unlike other mall categories, F&B outlets have demonstrated a considerable degree of buoyancy over the past 12 months, as the appetite for out-of-home dining in Dubai has grown. As a result, mall operators have been rigid on lease terms for F&B retailers.
0
2013
2014
2015
Existing supply
2016F
2017F
Under construction stock
Viewpoint The retail market in Dubai & Abu Dhabi is expected to see slower growth levels over the second half of the year, as economic uncertainty and unfavourable currency exchange rates continue to impact both tourist and domestic spending. In Dubai, the delivery of extensions to existing super-regional malls is likely to place downward pressure on rents in the short-tomedium term, while the lack of short-term supply completions will keep Abu Dhabi’s retail market stable. However landlords are expected to become more flexible on lease terms; offering increased rent-free periods and further incentives to attract and retain the right occupiers to meet their tenant mix strategy. In the long-term and as global uncertainties begin to ease and confidence in the market picks-up, we expect to witness another growth cycle for the retail market associated with growth in the hospitality and tourism industry. However, we believe retailers will have to diversify their offerings and introduce new products, technologies and marketing strategies to remain competitive in the market.
UAE REAL ESTATE 2016 MID-YEAR MARKET REVIEW
RESIDENTIAL MARKET
100 80 60
JAN 2016
JAN 2015
JAN 2014
JAN 2013
JAN 2012
JAN 2011
Abu Dhabi vs. Dubai general residential sales index Index = 2009 140
Dubai General Residential Sales Index
120 100 80 60
JAN 2016
JAN 2015
Abu Dhabi General Residential Sales Index
40
Source: REIDIN
FIGURE 14
Dubai residential supply
Abu Dhabi residential supply 270 Number of Units, ‘000
Number of Units, ‘000
JAN 2010
FIGURE 12
FIGURE 13
510 500 490 480 470 460 450 440 430 420 410 400
General Residential Sales Index
40
JAN 2014
In Abu Dhabi, sale prices remained relatively stable on the back of a shortage in quality residential supply. The General REIDIN sale price index points to a 1% increase Y-o-Y in Q1 2016. While demand has declined on the back of corporate restructuring and cutbacks in government spending, this has been balanced by a slowdown in the delivery of projects, thus keeping the market steady.
120
JAN 2013
Strong liquidity. The residential real estate market in Dubai continues to attract capital from strong liquid markets such as Saudi Arabia and India; two of the traditionally top buyers of real estate in Dubai.
Prime Residential Sales Index
140
JAN 2012
Government commitment to infrastructure spending. While it is too soon to estimate the impact of the Expo 2020 on the residential
•
Controlled supply. There is a general consensus among developers of the need to phase out residential projects in line with demand.
Index = 2009
JAN 2011
•
•
Dubai prime vs. general residential sales index
JAN 2010
A number of factors have supported this regulation in prices and are set to support the return of confidence to the market:
sector, continued government spending on infrastructure projects geared towards the event (e.g. Route Metro 2020, Dubai Parks & Resorts) will promote confidence in the market and is expected to draw further inward capital.
JAN 2009
Dubai’s prime market continued to outperform the market average. While the General REIDIN prime price index declined 5% in the YT April 2016 versus YT April 2015, encouragingly prices in the prime segment increased 2% on a quarterly basis between Q4 2015 and Q1 2016. The performance of prime apartments outweighed that of villas, with the index pointing to a 2% quarterly increase over the same period. In turn, prime villas recorded no significant price change.
FIGURE 11
JAN 2009
The residential market in Dubai maintained its stability in the year-to-April 2016. Despite an annual 9% Y-o-Y drop across the mainstream market, the General REIDIN sale price index remained relatively flat on a monthly basis, with no noticeable changes in the performance of both apartments and villas.
RESEARCH
2013
Source: Knight Frank Research
2014
2015
2016F
2017F
260 250 240 230 220 210
2013
2014
2015 Existing supply
2016F
2017F
Under construction stock
Viewpoint Looking ahead, the residential market in the UAE is expected to soften over the second half of the year. While it’s difficult to predict when the next growth cycle will be, we expect the residential market to level out by the end of 2016 before seeing gradual recovery in 2017. On a segment split, we expect prime residential properties will continue to outperform the market average in the short-tomedium term. Given Dubai’s position as one of the top five global cities that matter to private high net worth individuals, based on Knight Frank’s global Wealth Report, we expect the emirate to continue attracting investments both regionally and globally. However the outlook for the emirate in general and the real estate sector in particular depends on a number of fundamentals. Further volatility in oil prices, the EU referendum (June 2016), US presidential elections (November 2016) and on-going geopolitical tensions are likely to impact the behaviour of currencies, investor sentiment, and demand for property.
AbU Dhabi REAL ESTATE MARKET Overview Q2 2016
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n the Abu Dhabi market, apartment yields decreased in Q2 compared to the same period in 2015 due to both sale prices and rental rates declining over the course of the year. In Q2 2015, the average gross rental yield in areas covered within our report recorded approximately 7% compared to the 5.5% in Q2 2016. The rental rates in Abu Dhabi have declined an average of 2% in Q2 2016 compared to an increase of 2% in Q2 2015.
low, especially in the luxury villa segment.
The first six months of the year have been characterised by declining sales prices and we are now seeing rental rates follow a similar trend. This is quite normal as the rental market tends to lag behind the sales market. Going forward, although the market is likely to see marginal declines for the remainder of the year, rental yields will remain healthy and rewarding for investors. Uncertainties, such as, such as the impact of lower government spending due to the slow recovery of oil prices, will continue to place pressure on the residential market.
In terms of villa yields, the average across Dubai was 4.8%, but the stand out performers were The Springs (6.4%), Jumeirah Village Triangle (5.9%) closely followed by Victory Heights (5.8%).
While the demand in Abu Dhabi has largely been for high-end residential villa and apartment communities, there is growing demand in the “affordable� market segment across the UAE in general. The limited pipeline supply of residential real estate in Abu Dhabi has helped keep rates of decline relatively
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From a Dubai perspective, Q2 2016 continued to benefit landlords with solid rental yields, especially those owning apartments in the more affordable developments of Discovery Gardens (10.2%), International City (9.4%) and Dubai Silicon Oasis (7.9%), while apartments returned 7.5% gross yield across the board on average.
Overall, higher average yields on apartments rather than villas and especially those in the more affordable developments - bodes well for developers of any upcoming projects in Dubai fitting this category, as they will surely attract ... investors, and please tenants on modest incomes.
The resilient performance in apartment yields was all the more impressive given that rental rates during Q2 were down on average 0.95% while sales prices were up 0.7% on average, squeezing margins.
Remraam leasing rates declined 3% during Q2 - a one-bedroom apartment now leases for AED 58,000 per annum. At the top end of the market, a one-bed unit in DIFC rents for an average of AED 115,000 per annum, while a similar property in Dubai Marina rents for 80,000 per annum. On the sales side of the apartment market, a one-bedroom apartment in The Greens now commands AED 1,350 per square foot, while a similar apartment in DIFC and Downtown Dubai costs AED 1,960 and AED 2,218 per square foot respectively. It was a similar tale in the villa market. Rental rates in Jumeirah Islands and Jumeirah Golf Estates fell on average by 5% in Q2 compared with the previous quarter. A threebedroom villa in Al Furjan currently rents for AED 175,000 per annum, compared with AED 203,000 per annum in Arabian Ranches and AED 360,000 per annum on Palm Jumeirah. As for the Dubai outlook, in the absence of any major catalyst, the market will remain slow during Q3 and rental demand will continue to be weak. However, mid- to longerterm market fundamentals are strong with numerous tourism related projects driving the economy in the run-up to Expo 2020.
Residential — Sales Prices
Apartments Quarterly Change
Villas Quarterly Change
Market Price Points (Q1 2016)
• Prices: Apartment sales prices moved up by 1.2% in Q2 2016 and the villa prices also increased to 1.6%. Both markets have moved up a notch from a relatively flat quarter.
Market Commentary
• Supply: Approximately 2,370 residential units entered the market with apartments making up the majority of the influx. Jumeirah Golf Estate and Jumeirah Park together contributed around 500-plus units and 120-plus units were contributed by Arabian Ranches. • Outlook: Pace of deceleration will slow by next quarter and markets should bottom out by Q3 2016. 41
Residential — Rental Market
Apartments Quarterly Change
Villas Quarterly Change
Market Price Points (Q1 2016)
Market Commentary
• Prices: Apartment rentals declined almost by 1% and in the villas segment a decline of 0.78% was observed. The rentals market was down on the whole with Jumeirah Islands and Golf Estates diving more than 5% in the villa segment. Remraam also declined more than 3%, the biggest drop in the apartments segment. • Demand: Predictably, the affordable housing segment continues to stay in demand, enabling end-users to protect their savings for future uncertainties. • Outlook: Rental demand will continue to be weak and prices will continue to fluctuate as they seek to find equilibrium with the new spending capacity of residents
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Residential — Yields
Apartment Yields
Villa Yields
Average Residential Yields
• Yields for the quarter remained flat with little or no movement in both the apartment and villa segments. • Apartments provided higher average yield than villas.
Market Commentary
• International City and Discovery Gardens remained the highest yield providers in apartments. • The villa segment overall provided an average yield of 4.8% • The Springs remained the highest yield provider for the quarter performing at 6.4%. 43
Residential — Transactions
June 2016 recorded highest value of transactions at AED 9 Billion
Apartments accounted for majority of transactions at 85%
Emirates Living was top-traded area with transactions worth AED 1.9 Billion Figures in AED Millions
• Total transactions decreased by 6% compared to the previous quarter to on AED25.89 billion.
Market Commentary
• Sales transactions for Q2 2016 rose to AED12.09 billion, an increase of 17.5% since Q1 2016. • Mortgage transactions for Q2 2016 fell to AED13.8 billion, a decrease of 20.3% from Q1 2016.
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Office Market — Summary
Sales Price Figures in AED / Sq.Ft
Rent Price Figures in AED / Sq.Ft
June 2016 recorded highest value of transactions at AED 299 Million
Market Commentary • Total office transactions for Q2 2016 increased 6% to AED823.46 million. • Sales transactions decreased by 0.75% to AED493.5 million in Q2 2016. • Mortgage transactions rose 17.6% to AED329.96 million in Q2 2016.
Declan McNaughton Managing Director, Chestertons MENA www.chestertons-mena.com
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Middle-Income Housing Sector Adds a touch of luxury
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l Mazaya adds a touch of luxury to the middle-income housing sector through its Q series project in Dubai and Ritim project in Istanbul. Sales rates and occupancy of Queue Point and Q-Line residential buildings proving demand for mid-level Dubai property remains high In a region that has long prided itself on producing high-end properties with innovative concepts, it is refreshing to see that the demand for medium-priced housing is finally being recognised by developers. Al Mazaya Holding is taking a leading role in addressing the need for these types of housing developments.
of impressive projects across the region. These include the Ritim project, a sprawling residential and commercial complex, that was developed in Istanbul. Al Mazaya also currently has a portfolio of various other projects under construction in many other countries across the region. Mazaya is engaged in several various real estate fields such as purchasing, ownership, selling of land, and land development both inside and outside of Kuwait. Furthermore, Al Mazaya handles the management of third party properties, as well as the management, operations and investment in the leasing and renting of hotels, health clubs, recreational
Middle Income Project
Al Mazaya, the Kuwait-based real estate property and land developer which has managed investments throughout the GCC and Middle East, has answered the call of middle-income families and young executives – a significant and growing demographic in the Gulf countries, and Dubai in particular. Al Mazaya is considered one of the most distinguished real estate development companies within the Middle Eastern market, having been the driving force behind a number
one-bedroom unit in Queue Point, for example, is currently on the rental market for AED 48,000 per annum (AED 4,000 per month) and is thus well within the price range of middle-income tenants. According to Al Mazaya Holding, since Queue Point came onto the buyer and rental market in 2015, the occupancy rate – in just a few months – has reached 80 per cent. Likewise, since Q-Line was introduced to the market, 75 per cent of the units have been sold. This is further proof that demand for reasonably priced housing units is a sector that is showing no sign of slowing.
Luxury Project
parks, gardens, exhibition grounds, restaurants, residential and commercial complexes, and tourist and health resorts. It is to this end that during Cityscape Global 2016, Al Mazaya will be showcasing a series of its midrange housing and apartment projects - which reflects the strength of the booming UAE real estate market and the demand for property within thriving cities like Dubai - including its Queue Point and Q-Line properties. A standard
Al Mazaya plans to showcase Queue Point and Q-Line in Dubai and Ritim Istanbul in Turkey at Cityscape this year. Both projects have limited availability at present, ranging from 20 per cent to 25 per cent, due to their prime location and affordability. The strong demand and consumer confidence in the property market of Dubai for residential units like these ensure that at the current market prices, Queue Point and Q-Line properties are bound to sell out soon. 47
Dubai Residential Property Price Indices
Dubai Residential Price Change
Dubai Residential Price Index
Dubai Residential Price Index vs. Gold Prices vs. Oil Prices
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Abu Dhabi ResidentiaL Property Price Indices
Abu Dhabi Residential Price Change
Abu Dhabi Residential Price Index vs. Gold Prices vs. Oil Prices
UAE Rental Yields
UAE Price-to-Rent Ratios
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DUBAI: The ‘Bottoming’ Out of The Market
Source: REIDIN & UNITAS
As the fears of a redux of the 2008 crash permeate through the ecosystem, a closer examination of the fundamentals at play suggests that this time is different.
In 2009, GDP had a growth rate of -4%, whereas in 2015 Dubai continued to grow at +4%. This is reflective of the government's expansive fiscal policy this time around and an increase in budget spending of 11 per cent. Other factors such as housing start and company formation growth have been diametrically opposed in both scenarios as well. A min to max analysis of the Dubai Financial Markets during both downturns reveals that the 2008 crash had a steeper rate of decline compared to 2014. The index fell by 77% during the World Financial Crisis, compared to 46% fall in 2014/15 driven by the slump in oil prices. In the dissection of transactional value, we can see that in the first cycle the lows touched 1.0B per month, compared to 2015 where the minimum was 2.84 B Comparing the peaks and troughs of the real estate market, we can witness that the decline in 2008 was much steeper compared to 2014. The city-wide index crashed 50
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by 31 per cent in the 22 months from MONTH 2008. In 2014/15 it fell by 13% in the same time period. Similarly, in rentals, prices corrected by 50%, whereas today the declines remain in single digits. A closer look into the transactional activity and price action over the past 6 months signals that base effect could already be established. A 6-month analysis of price changes reveals that the rate of decline has dramatically decreased with certain months also showing a price uptick in the past few months. Transactional
activity, although subdued when compared to last year, shows signs of a recovery as city-wide residential sales have climbed higher since the beginning of the year. Looking at the factors in play during both crash scenarios, we can see that Dubai's economy and markets are in much better health today compared to 2008. The current fall in rental rates is the last leg of the real estate price cycle, implying that we could soon be entering into a third bull cycle, barring any exogenous events in the global markets.
Source: REIDIN & UNITAS
Your Dubai Assets Safeguard with DIFC Wills & Probate
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n the past Dubai has predominantly been a tenants’ market. Times, however, are changing. As Dubai increasingly becomes a location to lay down roots, start a business or invest in from overseas, the number of people buying a permanent home or investing in property has risen over the past few years. With this change in investment behaviour and the acquisition of property acting as a trigger, people are increasingly recognising the need to safeguard their assets. This is where the DIFC Wills and Probate Registry (W&PR) comes in. The DIFC W&PR, a public entity of the Dubai government established under the jurisdiction of the DIFC Courts, offers residents and nonresidents with assets in Dubai a first-of-its kind opportunity to register English language wills and set out the terms of their inheritance according to their wishes. Based on a legal foundation that reflects the spirit of existing UAE inheritance laws and international practices, W&PR is staffed by an expert professional team that focuses on ensuring a smooth registration process and impeccable customer service. A will includes specific directions on how you wish your estate to be distributed, including provisions for any tangible personal property – furniture, jewellery, etc. – and naming guardians for any minor children. In order to be eligible for will registration with W&PR you must be: • Non-Muslim • At least 21 years of age • A holder of assets in Dubai and/ or • Living with minors in Dubai (if guardianship provision is included in the will).
The Registration Process The Registry has a set of simple and standardised rules that makes the process as convenient and efficient as possible, and reduces the potential of future will disputes in the case of the testator passing away. The Registry recommends writing a will with the advice of the professional draftsmen registered with W&PR. After booking a will registration appointment online at www.difcprobate.ae/appointments, you should gather the necessary documents in preparation for the appointment. The Registry will provide a list by email. You will need to bring one witness, who is not named as a beneficiary or guardian in the will, to your appointment. If you have determined guardianship for any minors in your will, the guardian may be present. Alternatively, a signed witness statement will be required. At the appointment, the Registration Officer reads the will to the testator. Amendments can be made by yourself or the lawyer, and the registered will is then stored electronically at the W&PR. You can sign off on the all-important document in just one hour! W&PR also gives you the freedom to modify your will. To do this, you are required to come to the DIFC Wills & Probate Registry with a printed version of the updated will. It is recommended that you seek professional legal advice before your modification appointment.
members under 21, the fees are Dhs 5,000 and Dhs 7,500 for single and mirror wills respectively. To ease the will registration further, DIFC W&PR has partnered with leading national and international banks – including Emirates NBD, NBAD, Citibank, and RAKBANK – to offer easy zero per cent payment plans to customers over a period of up to 12 months. The offers have been specifically designed to offer peace of mind to people who are looking to spread the costs of registering a will, whether they are living, investing or conducting business in Dubai.
The importance of registering now The DIFC Wills & Probate Registry understands that the process of drafting and registering a will can involve making some hard decisions. With that in mind, W&PR remains dedicated to making will registration a pleasant experience. Registering a will with W&PR enables people to have immediate peace of mind knowing their hardearned assets are secure and their succession will be in line with their personal wishes. Everything about preparing and registering a will is becoming increasingly easy – you just need to take the first step forward.
Financial Planning The registration cost of a single will is Dhs 10,000 and that of two mirror wills is DHs 15,000. If you only wish to determine guardianship for family
Sean Hird Director, DIFC Wills & Probate Registry www.difcprobate.ae
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still cheaper to buy than rent Property in the UAE
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ortgage lender Abu Dhabi Finance lays out some of the key considerations potential property buyers should keep in mind when acquiring a mortgage.
It is prudent for potential home buyers in the UAE to undertake careful financial planning before making the decision to purchase a home.
Budget and Affordability The most important consideration in deciding whether or not to buy a property is your budget and affordability. Many people are tempted by the idea of purchasing a property even if they cannot afford to do so. If you are buying a property with cash, the decision to purchase is fairly easy in comparison to taking out a mortgage, since you know exactly what your budget is. However, if you are taking out a mortgage, there are a couple of key factors that need to be taken into account. TIP: On average, you should look at apportioning a third of your monthly income to housing costs.
Down payment Central to this decision is the availability of your deposit/down payment. The Central Bank (CB) of the UAE requires that all mortgage providers lend only a maximum of 75 per cent of the value of the property. (This rises to 80 per cent for UAE nationals.) This means that as an expat, you must have a minimum of 25 per cent of the value of the property available as a down payment. The CB also stipulates that these funds cannot be borrowed, so ideally, they need to come from your savings. The table gives details of the loan52
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to-value (LTV) ratio as per the CB’s guidelines for different categories of individuals.
Credit Report A credit report is a written account of all creditor accounts which belong, or have belonged, to a person in their lifetime. Al Etihad Credit Bureau, first proposed in the wake of the 2008 global financial crash, now provides borrowers’ credit histories to a wide range of clients. The bureau’s establishment has been eagerly awaited by risk-averse lenders who hope that it will help curb bad credit. A credit report from the bureau will include any history of defaulting on payments or refusals to pay. Any judicial decisions issued against the borrower will also be included. The bureau’s credit report on a particular borrower is considered by the lender when assessing the credit worthiness of the borrower. Therefore, it becomes imperative to maintain a good record when applying for a loan. TIP: Make sure to remove all your old credit cards and loans which are closed from the bureau’s report. This will enable the lender to assess your credit worthiness more accurately. When taking out a mortgage from a bank or a financial institution, you must ensure that your monthly repayments are well within your
budget. Keep in mind that your monthly instalment will consist of repaying a portion of capital as well as interest payments. (This applies to conventional loans, not Islamic loans.) When applying for a loan or discussing options with your loan officer, be sure to calculate what your total monthly payment will be including all costs and charges – for instance, most banks also require customers to take out life insurance policies, and the monthly premium will often be added to the monthly mortgage repayment. Moreover, some banks also require you to have property insurance which, although this is usually paid annually, must be factored into your monthly budget TIP: Always remember that interest rates are volatile and may cause an increase or decrease in your monthly payments. Therefore, it is important to build a buffer into your monthly budget to cover yourself in case of interest rate rises.
Rent vs Buy For many people who take out mortgage loans, one of the main incentives is to make payments towards a property that they will ultimately own (thus building their equity) versus making payments to a landlord. By paying rent, they are effectively building someone else’s wealth – why not do it for themselves? The financial incentive to build one’s own wealth is often the driving force behind the decision to buy a property. Furthermore, a monthly mortgage
payment will almost always be lower when compared to monthly rent, thus improving your cash flow. For example, the annual rent on a property worth AED 1 million is AED 100,000 which is equivalent to a monthly rent of AED 8,300. This is much higher than the current equated monthly installment, or EMI, of AED 5,500. Check the rent versus buy monthly figure on your property by accessing our calculators at www.adf.ae All mortgage providers offer flexibility in terms of the total loan repayment period, so you can select a monthly payment plan that suits you best. Most lenders also provide the flexibility of allowing customers to make bulk payments free of charge every year.
Property Location Depending on budget, the decision to buy a property can be heavily influenced by where a person wants to live and what kind of lifestyle they want to lead. For instance, communities such as Raha Beach – with its proximity to the shore and vast number of restaurants and retail outlets – are popular among young, single people. The villas at Saadiyat are more suited to familyoriented living, with a community that offers recreational centers, parks, golf courses etc.
Real Estate Agent Regardless of whether you purchase a property with cash or take out a mortgage loan, the best starting point is to enlist the help of a professional agent who will help you find something suitable. There are hundreds of brokers and agents in the UAE, so it is important to find one who is experienced, with a good reputation in the market, and
who has a successful track record. The new Abu Dhabi real estate law governing the registration of real estate agencies should lead to improvements in the quality of service in this area.
Choosing your lender Deciding on a mortgage provider can be overwhelming. There are dozens of banks and mortgage lenders in the market that provide the same service and that are ready to help you, how do you decide which one? For a lot of customers, the decision is driven by interest rates. Whilst it makes perfect sense to want to get the lowest rate possible, it always pays to read between the lines. Almost every mortgage lender will usually offer you an initial introductory rate – say a reduced rate for one, two or three years – which eventually switches to a higher rate. The key factor in this is to ask the company what the follow-on rate will be, and to ultimately base your financial/ cash flow planning on this rate. Remember that no mortgage lender can offer you a lower introductory rate indefinitely! Another factor that could potentially influence your decision in choosing between lenders are the fees and charges associated with a loan – for instance, loan processing fees, application fees, etc. Although most mortgage lenders are fairly competitive, to ensure that there are no hidden surprises, it is always a good idea to demand that a lender be fully transparent with you in declaring all of its costs. TIP: Abu Dhabi Finance is aware of the additional costs associated with buying a property and has launched a property fee finance product to help purchasers spread out these additional costs.
Owning a property also comes associated with its own costs, with owners typically having to pay annual service and maintenance charges to ensure the upkeep of the property and surrounding community. In addition, there may also be repair and wear and tear costs that arise occasionally. All of these costs have to be kept in mind and ultimately budgeted for. Becoming a homeowner is a financial milestone that everyone at some point in their lives will strive to achieve. If you are armed with the right knowledge and information, the various decisions that need to be taken to own a property can be hassle free and seamless, so make sure you commit yourself to thorough research beforehand. Abu Dhabi Finance provides unparalled service with bespoke products suiting your financial needs. Feel free to give us a call on 800 ADF (233) to speak to a member of our expert mortgage advisory team or visit our website at www.adf.ae We aim to set the standard in the real estate financial services industry by providing our clients with expertise in the local real estate industry, based on our breadth and depth of experience; and transparent products and services, built on leading international standards and trusted advisors throughout the real estate investment journey. With offices in Abu Dhabi and Dubai, our product range includes mortgages for both residential and commercial properties. Sound financial solutions coupled with outstanding client service that sits at the heart of everything we do has delivered numerous client service and innovation awards since our launch.
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Mudon Dubai
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ubai Properties (DP) continues to diversify and expand its destinations, and the Mudon project – a masterplanned residential community in DUBAILAND – is one of the latest additions to its extensive portfolio. With the project currently undergoing a Phase 2 staged homeowner handover scheduled for completion by October, the master developers have maintained progress following their -schedule. The handover, of close to 400 units, comes as the perfect response to growing consumer demand for a unique and family-friendly residential environment.
As Dubai continues to flourish as one of the world’s most dynamic cities, it lures in a blend of ethnicities, making for a unique cultural environment. The prospects for professionals are growing more attractive, and thus, hundreds of nationalities are now able to call the emirate their home. According to a recent Dubai Pulse 2015 report, over 90 per cent of Dubai residents consider the emirate to be a suitable place for raising a family because of its state-of-theart infrastructure and services. The high quality of Dubai’s residential 54
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communities now evidently plays a decisive role in property decisions, with a community like Mudon continuing to stand out as a key investment category for property buyers, particularly end-users. With over 10 years of experience benefiting the premier master developer, the exciting community concept has set the benchmark for residential destinations across the emirate. “We are excited to see Mudon flourish into a community that matches the cosmopolitan lifestyle, growing economy and progressive culture that make Dubai one of the most attractive prospects for buyers coming from around the world,” says Abdulla Abushabib, Senior Executive Director for Customer Care and Government Relations at DP. “Our Phase 1 received fantastic feedback from residents. Since the complete handover of Phase 1 in 2015, homeowners have enjoyed their spacious Arab-themed villas and the numerous facilities that make Mudon one of the most preferred residential neighborhoods in Dubai.” The popularity of the Mudon community comes as no surprise
with real estate portal Bayut. com reporting that DUBAILAND registered as the most popular neighbourhood among users looking for rental villas in the first quarter of the year. Each community within DUBAILAND has been designed as a self-contained district – equipped with schools, shopping centres, nurseries and clinics - to meet all the needs of residents. This variety of residential areas stands as testament to DP’s vision of creating a sprawling haven in which growing families can pursue their choice of lifestyle. “A peaceful living environment with family-friendly community amenities, along with the overall quality of the design and build of villas, were key criteria when deciding where to invest in a home for our family,” saysSerge Raould Tanga, who took over his villa in the Mudon neighbourhood in 2015. “Mudon ticked all the boxes as we instantly fell in love with the aesthetics of our villa and the community is perfectly situated – close enough to town to easily commute into work while at the same time offering a lifestyle that meets the varied needs of all of our family members.”
Investors like Tanga have been drawn by the real estate developers’ commitment to providing dynamic communities that offer a strong sense of togetherness and belonging. DP remains steadfast in its vision to reinforce Dubai’s international position as the location of choice in the region for business, residence and tourism. With Downtown Dubai being just fifteen minutes away and options such as Global Village and Dubai Autodrome Mall close by, Mudon centres itself amongst all the best attractions the city has to offer. With this convenient location, the residential space retains the city’s vibrant environment whilst offering the peace of lush green surroundings. According to Abdalla Alkhajil, a homeowner who lives in Phase 2 of the community with his family, the planned recreation and sporting facilities, and retail and F&B offerings at the Al Salam Town Centre, were some of the main attractions behind their decision to set up home in the community. “As working parents, having a comprehensive community centre, along with sports and leisure amenities, at our fingertips, was important to us. Being able to take
care of all of our shopping, childcare, recreation and healthcare needs a few minutes away from our home allows us to spend more quality time together as a family.” The success of the Mudon development attests to DP’s role as a leading organization in the resurgence of Dubai’s real estate market. Through the creation of mixed-use destinations that meet the changing and growing needs of Dubai’s culturally diversified population, the developers intend to secure a plan for Dubai today, tomorrow and into the future. Their plans, anchored in the long term, are able to fully support the new Minister of Happiness’ Vision of Dubai: to design communities that provide a balanced lifestyle and contribute to the happiness of residents and visitors. Dubai Properties has a number of projects in the pipeline ready to be launched in the lead up to Expo 2020 and beyond. Having spent years planning and developing a diversified portfolio that strategically responds to Dubai’s diverse needs and to the requirements of its residents, business and visitors, DP provides
a range of luxury and affordable investment prospects that continue to fuel the emirate’s strong economic growth. The residential area in Mudon is complemented by a sprawling 64,000 sq. ft. community centre that hosts a supermarket, swimming pool and gym, tennis court, a medical clinic, children’s nursery and playground, and a variety of retail outlets and restaurants. Residents will also soon be able to enjoy the 41-acre Mudon Central Park with cycle and jogging paths, as well as the educational offerings at the GEMS school, which is currently under development. The Mudon project joins other communities in Dubai Properties’ DUBAILAND, as an evolving leisure, shopping and sports destination. As one of the leading master-planned residential and leisure destinations in Dubai, DUBAILAND is home to a number of Dubai’s leading attractions, including Global Village, Dubai Outlet Mall in Outlet City, the Autodrome in Motor City and the Cricket Stadium at Dubai Sports City, as well as 100,000 residents.
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54,000 NEW HOTEL ROOMS In UAE Pipeline
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here are 183 hotel projects and 54,000 hotel rooms in the UAE pipeline, according to a new report. The hotel construction report by TOPHOTELPROJECTS prepared exclusively for The Hotel Show Dubai 2016 reveals that the majority of the new hotels are expected to open before 2020. The busiest years are forecast to be 2017 (56 project openings) and 2018 (58 project openings). Hotels opening in this time include: Paramount Hotel Dubai (2017); Hard Rock Hotel Abu Dhabi (2017); Citymax Hotel Ras Al Khaimah (2017); and Marriott Dubai Jumeirah (2018). Thomas van Vliet, CEO of Paramount Hotels & Resorts commented: “Paramount Hotel Dubai, expected to open by the end of 2017, will be the first ever Paramount Hotels & Resorts property as well as the operator’s UAE flagship hotel. The hotel, part of a mixed use complex also housing 1197 serviced residences, offers a luxurious experience with a Californian edge and Hollywood vibe, housing 823 guest rooms and suites, some of which are themed after Paramount Pictures movies. We have three more projects underway in Dubai, with a total of 1383 keys.” W Hotels & Resorts opened its first hotel in the UAE in June of this year. Peter Katusak-Huzsvar, General Manager of W Dubai – Al Habtoor City, said: “It has been a long-time coming, but the first W Hotel in the UAE has opened its doors. As a leading lifestyle hotel, it is fitting that W Dubai opens within a unique and first of its kind urban resort like Al Habtoor City – Starwood’s largest
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hospitality project in the Middle East. As a city, Dubai represents everything that W Hotels are passionate about – Fashion, Music, Design, and Fuel. Following the launch of W Dubai – Al Habtoor City, the brand is set to rapidly grow its portfolio in the Middle East with four new openings in Abu Dhabi and Dubai, UAE; Amman, Jordan; and Muscat, Oman.” Dubai and Abu Dhabi continue to lead in hotel construction across
the UAE with a combined 155 hotel projects and 47,619 rooms in the pipeline. Other Emirates with hotel construction underway include: Sharjah with 6 projects (959 rooms) and Ras Al-Khaimah with 5 projects (1,847 rooms). TOPHOTELPROJECTS will discuss the latest hotel construction trends across the UAE and the wider Middle East and Africa at the Vision Conference 2016, part of the 17th edition of The Hotel Show Dubai.
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Sparkle Towers Space Marveled by Swarovski A crystal clear choice for luxury living; Expected handover in 4 months
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t’s no secret that Dubai offers its residents a dazzling lifestyle: it’s one of the fastest-growing and most opulent cities in the world and now prospective real estate investors and home buyers have a chance to up the wattage by owning a luxury waterside property at Sparkle Towers at Dubai Marina. In a luxury market where out-ofthe-ordinary is the norm, Sparkle Towers offers sophistication and elegance in one of the most sought- after residential areas in the UAE. Dubai real estate developer Tebyan worked in collaboration with Swarovski, the world leader in crystal and fashion jewellery as well as lighting, interiors and architecture, to turn the space into a crystal wonderland that sparkles at every turn. The dazzling lobbies, with their breath-taking chandeliers, offer a tantalizing introduction to the three interconnecting towers of 29, four and 14 floors. Within the towers, there are studios, and apartments of one, two and three bedrooms available as well as two penthouses.
however, also places a firm focus on health, wellbeing and family. There is a high-tech gym with separate spaces for men and women hall as well as jacuzzis and saunas. There are also two temperature-controlled swimming pools. The landscaped gardens are ideal for families with a kids' splash playing area as well as indoor and outdoor play areas. A variety of retail outlets, including a women’s spa, cater to residents’ daily needs. At Tebyan our bywords are glamour, safety and comfort. Dubai Marina is one of the most desirable addresses in the city and the apartments offer views of the stunning skyline featuring the tallest residential towers in the world, and the Palm Jumeirah. The towers are also situated close to some of the world’s grandest hotels, best fine dining establishments and shopping and entertainment options. Marina Mall, Mall of the Emirates, Ibn Battuta Mall and Madinat Jumeirah are all less than a 10-minutes’ drive away. And for those enjoying outdoor pursuits, a golf club and
yacht club are nearby. There is easy access to the sandy beaches at Jumeirah Beach Residence (JBR), and The Walk, Marina Walk and The Beach are just across the road. The neighborhood truly has something for everyone. Construction started in November 2015 and as per the latest RERA report, 80 per cent construction was achieved in August 2016. Handover is expected in December 2016. All the details making this an attractive investment have been worked out, making this an easy, stress-free purchase. Prices are attractive and an easy-to-handle mortgage is offered by Sharjah Islamic Bank. A post completion payment plan is also available. Availability is limited. Because Sparkle Towers has approval by the Land Department to sell the project, an escrow account ensures that your down payment will be spent solely on building the project, leaving prospective buyers worry free.
Every unit has a marble entrance and ceramic tiles. The deluxe kitchens are lavish yet homely with built- in appliances. The stylish bathrooms have state-of-the-art European sanitary wear. All bedrooms have en-suite bathrooms and built-in wardrobes. Other amenities and facilities include valet parking, optional housekeeping packages, concierge services and a crystal VIP lounge. Sparkle Towers offers nothing short of a five star lifestyle. As well as delivering a luxury environment, the development, 59
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HARTLAND ESTATES Mohammed bin Rashid City
Luxurious Villas for Sale 4 and 5 bedroom from 6,851 to 9,678 sqft
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