QUARTER REVIEW Dubai Real Estate Market.

Transcription

1 QUARTER REVIEW 2018 Dubai Real Estate ket

2 Real Estate Performance VPI ket Intelligence. Simplified. Office -11.1% -13.0% Q4 Y-o-Y Q4 Y-o-Y Source: ValuStrat Source: ValuStrat Key Indicators Off-Plan Sales Ticket Size Off-Plan Sales Volume Ready Sales Ticket Size Ready Sales Volume Rents -2.4% 47.9% -16.1% 24.8% -1.2% Hotel ADR Hotel Occupancy Office Sales Ticket Size Office Sales Volume Office Rents -5.6% Jan-Nov YoY -1.0% Jan-Nov YoY -11.0% -11.9% 3.1% Sources: REIDIN, DTCM, ValuStrat 1 Dubai Real Estate ket 4th Quarter 2018 Review

3 VPI 16 Apartment and 10 Villa Locations in Dubai [Base: Jan 2014=100] Dubai s fourth quarter 2018 VPI, displayed an overall 11.1% annual fall in capital values, with quarterly declines of 3.1%. This downward trend resulted in 24.7% citywide capital value loss since the peaks of mid All established freehold locations monitored by the VPI witnessed price drops since the last quarter, ranging from 2.3% to 5.5%. On an annual basis, 5 out of 26 locations saw single-digit declines, villas in Palm Jumeirah, Emirates Hills and Al Furjan, as well as apartments in Dubai ina and Jumeirah Village Circle. Capital values dropped more than 15% annually in The Meadows, Jumeirah Islands, International City, Discovery Gardens, Business Bay, and The Greens Source: ValuStrat Office 5 Office Locations in Dubai [Base: Jan 2015=100] Source: ValuStrat For more details, please visit The VPI-Office is a valuation-based weighted price index that represents the quarterly price change experienced by typical freehold office space in Dubai. The Q4 VPI stood at 77.7 points, suggesting that average capital values are 22.3% lower than the same period during the base year 2015, 13% lower than the same period last year and 3.8% lower than the previous quarter. Jumeirah Lake Towers witnessed the highest annual drop of 13.9% and 3.3% QoQ, Business Bay was second in line with losses of 13.7% year on year and 3.5% QoQ. Dubai International Financial Centre (DIFC) was the best performing office location as office space there saw a quarterly increase of 2.1% and with no annual change in capital values.

4 MacroEconomicSnapshot Dubai government announced the 2019 budget of AED 56.8 billion, up 0.35% YoY. Majority allocated to infrastructure, social development and state security 25% of government revenues will come from tax, 64% as non-tax related, 8% through oil activities while remaining 3% will be from investments Dubai Customs saw non-oil trade value at AED 965 billion during the first nine months of 2018, down 2% from Dubai Free Zone Council announced trade volume grew 22% YoY in YTD tember ,105,000 2,210,300 2,320,800 2,450,000 2,695,000 2,978,000 3,183, Dubai International Airport (DXB) have successfully crossed the billionth passenger mark since its opening in 1960 Dubai s population stood at 3.18 million with a five-year average growth rate of 7.6% Consumer Price Index vs. Housing Index January 2016 YTD For the fourth time, US Fed Reserve increased interest rates by a quarter point with UAE Central Bank following suit. As a result, borrowing costs increased As of November, Dubai s inflation rate remained relatively stable at 0.5% YoY and dipped 0.3% MoM Jan Feb Apr May Jul Aug Oct Nov Jan Feb Apr May Jul Aug Oct Nov Jan Feb Apr May Jul Aug Oct Nov General Index (2014=100) Housing, Water, Electricity, Gas and Other Fuels Source: Dubai Statistics Centre 3 Dubai Real Estate ket 4th Quarter 2018 Review 2018 Housing and Utilities Expenses retreated 4.7% YoY and 0.6% MoM

5 Supply 19,367 apartments and villas, 43% of the total supply as expected at the start of 2018, have been completed YTD 650 Dubai Supply ( 000 UNITS) 49% of these completions, amounting to 9,454 units, were located mainly in two areas: Dubailand and Jumeirah Village Circle (JVC) Damac Hills apartments and villas, Town Square townhouses and Mudon villas saw much of the 6,515 completions in Dubailand, while 96% of project completions in JVC came from 18 apartment buildings having 2,827 units E Expected supply for 2019 have been adjusted upwards to 78,566 units as result of carry over delays from the last few years. However, due to unforeseen construction delays this figure may be subject to significant downward adjustment Existing New Apartments* New Villas* E *May be subject to significant downward adjustment Source: Dubai Statistics Centre, REIDIN, MEED Projects, ValuStrat 650 Sales A more affordable buyers market resulted Ready Sales Volumes in a substantial jump in residential sales transactions when compared to the previous quarter as off-plan sales volumes were up 47.9% QoQ and ready sales were up 24.8% QoQ 24.8% 0.6% Last Quarter Last Year A record 59% of ready apartment sales were less than AED 1 million, while a record 52% of ready villa sales were between AED 1 Off-plan Sales Volumes million - 3 million Established areas that witnessed substantial off-plan sale transactions during the last three months included Downtown Dubai at 47.9% -17.8% 78% of sales being off-plan, Business Bay at Last Quarter Last Year 83% and International City 76% An increasing number of affordable Source: REIDIN, ValuStrat purchases resulted in average ticket prices for ready properties to decline 16.1% QoQ, and off-plan sales prices to dip 2.4% QoQ The median transacted price for ready apartments stood at AED 9,494 per sq m (AED 882 per sq ft), down 11.7% YoY and 5.3% QoQ For ready villas, the median transacted price was AED 9,698 per sq m (901 per sq ft), down 8% YoY and 6.1% QoQ 4

6 Rents Overall residential asking rents fell 8.6% YoY Asking Rents However, on a quarterly basis asking rents dipped 1.2% Compared to the same period last year, listed rents were down 8.9% for apartments and 6.9% for villas -8.6% -20.5% Last Year Last 2 Years Average annual rents for 2-bed villas stood at AED 140,000, 3-bed at AED 175,000, and 4-bedroom villas were AED 217,000 Average annual rents for studio apartments were AED 50,000, 1-bed at AED 73,000, 2-bed was AED 104,000, and 3-bedroom apartments were AED 145, % -1.2% Last 6 Months Last Quarter Source: REIDIN, ValuStrat OfficeSupply Office space under construction is estimated at 919,000 sq m (9.9 million sq ft) for delivery by 2021 Dubai Office Supply (Million sq m GLA) 0.60 Most upcoming office space will be concentrated in Jumeirah Lake Towers (32%), TECOM Business Park (21%), Business Bay (15%), DIFC (11%), Trade Centre (8%) and Dubai Silicon Oasis (7%) Key office completions during Q4 included Mastercard office building in Media City with a Gross Leasable Area (GLA) of 12,855 sq m (138,368 sq ft), and ADCI office building located in Al Barsha South with a GLA of 5,364 sq m (57,736 sq ft) E Existing Stock 2019E Expected Supply Source: REIDIN, MEED Projects, ValuStrat 5 Dubai Real Estate ket 4th Quarter 2018 Review

7 OfficeSales Office transaction volumes during the fourth quarter declined 11.9% when compared to the previous quarter Office Median Transacted Prices Overall transacted office prices were 9% lower than last year, however, saw a notable increase of 11% QoQ The median transacted price stood at AED 9,451 per sq m (AED 878 per sq ft) Business Bay was the most popular choice for office sales with a share of 53.8% followed by Jumeirah Lake Towers (JLT) with 23.7% of overall transactions this quarter The median size of offices sold in Business Bay was 103 sq m (1,114 sq ft) and 119 sq m (1,282 sq ft) in JLT 26,014 sq m (280,012 sq ft) of total GLA was sold during Q4 amounting to a total investment value of more than AED 301 million -14.3% Last 2 Years 14.2% Last 6 Months Source: REIDIN, ValuStrat -9.0% Last Year 11.0% Last Quarter OfficeRents Median office asking rents declined by 8.1% YoY, however, saw an increase of 3.1% QoQ Office Median Asking Rents Asking rents for this quarter were 9.1% lower than two years ago The citywide median asking rent for a typical office size stood at AED 948 per sq m (AED 88 per sq ft) Citywide median asking rents commanded by Dubai International Financial Centre (DIFC) were AED 1,970 per sq m (AED 183 per sq ft) for typically sized units between sq m (1,000 2,000 sq ft) In Business Bay, median asking rents stood at AED 926 per sq m (AED 86 per sq ft) for the typical office area of 93 sq m (1,000 sq ft) -9.1% Last 2 Years -4.4% Last 6 Months Source: REIDIN, ValuStrat -8.1% Last Year 3.1% Last Quarter 6

8 RetailSupply The Pointe at Palm Jumeirah was completed, featuring more than 100 shops within its estimated GLA of 90,258 sq m (971,451 sq ft) Wharf Retail at Bluewaters Island had a soft opening, has capacity of more than 160 retail shops and restaurants within an estimated 33,630 sq m (362,000 sq ft) GLA Construction of Gate Avenue DIFC with 42,920 sq m (462,000 sq ft) GLA was completed, when opened it will offer a mix of 150 outlets and cafes Dubai Mall now houses Nike s largest store in the Middle East, boasting a GLA of 2,790 sq m (30,000 sq ft) Union Properties unveiled plans to build One Avenue Mall as part of The Avenue District in Motor City, to boast an estimated 65,000 sq m (699,700 sq ft) GLA, opening in 2022 Ithra Dubai announced expansion work for Deira Gold Souq, will add 176 units to the current store count in Q Construction work begun for the largest sports themed mall equivalent to 12 football pitches, Sport Society Mall by Viva City Developments, soon to rise near City Centre Deira in 2020 Retail Malls & Shopping Centres ( 000 sq m GLA) 46 Convenience < 3k sq m Regional 30k-90k sq m Source: REIDIN, ValuStrat Neighbourhood 3k-10k sq m Super Regional > 90k sq m 929 2,024 Community 10k-30k sq m RetailPerformance Emaar s retail assets sustained 93% overall occupancy and welcomed a total of 99 million visitors, with The Dubai Mall alone seeing 4% YoY growth in footfall during the first nine months of 2018 Dubai Duty Free annual sales crossed USD 2 billion mark (AED 7.3 billion) before year-end, up 3.5% YoY Dubai Chamber expects to see the city s retail sector to grow 5.6% from 2018 and reach AED billion in the next three years United Nations Conference on Trade and Development (UNCTAD) 2019 B2C E-commerce Index released in ember 2018, ranked the UAE as fourth most prepared developing economy for online trade. Projected e-commerce spending to reach almost AED 100 billion in 2022 Number of Malls and Shopping Centres in Dubai 32 Neighbourhood 3k-10k sq m 24 Community 10k-30k sq m Source: REIDIN, ValuStrat 23 Convenience < 3k sq m 17 Regional 30k-90k sq m 13 Super Regional > 90k sq m 7 Dubai Real Estate ket 4th Quarter 2018 Review

9 HotelSupply As of November 2018, Dubai had a total of 89,862 hotel rooms and 24,516 hotel apartments An estimated 2,713 rooms were added during Q4 from the opening of ten hotels Notable openings during the quarter were Emerald Kempinski Palm Jumeirah (391 keys), Caesars Palace Bluewaters Resort (301 rooms), W Hotel Palm Jumeirah (350 keys) and Stella Di e Dubai ina (369 rooms) More than 3,500 rooms are to be added to the city s hotel stock by 2023 as per the hospitality project announcements this quarter These include Andaz Hotel La Mer (150 keys), Oakwwod Hotels Falconcity (1,790 rooms), Aykon Hotel Roberto Cavalli (220 keys) and Taj Hotel Dubai Creek (200 rooms) Hotel Room Supply ( 000 KEYS) Hotel & Service Apt Rooms E E New Supply E Source: DTCM, MEED Projects, ValuStrat HotelPerformance Total international guests ending November 2018 reached 14.3 million, up 0.42% YoY Source of Dubai Visitors by Region Jan-Nov 2018 Citywide occupancy rate during Jan-Nov period was 76%, a percent lower when compared to the same period last year Revenue per Available Room (RevPAR) declined 8% YoY while Average Daily Rate (ADR) fell 5.6% YoY 11% 6% 2% 5% 18% 21% The top source markets for Dubai visitors which accounted for more than 50% share came from three regions: Western Europe (21%), South Asia (18%) and GCC (18%) 10% 9% 18% Tourists from China ranked 4th among the top source markets with an annual growth rate of 12%. Visitors from Russia (ranked 7th) had the highest annual growth rate of 37%, followed by Nigeria (ranked 17th) at 35% GCC Western Europe South Asia MENA North Asia & South East Asia Americas Russia, CIS & Eastern Europe Africa Australia Source: DTCM 8

10 IndustrialInvestment/Supply Gulf Agency Company (GAC) inaugurated a 26,890 sq m (289,440 sq ft) BUA logistics facility designed to handle fast moving consumer goods (FMCG) in Dubai South Kuehne + Nagel opened a 10,000 sq m (107,639 sq ft) BUA warehouse extension project in Dubai South Logistic District Hormann opened a 4,800 sq m (51,667 sq ft) production facility in Jebel Ali 5,000 4,000 3,000 2,000 1,000 4,306 2,690 4,306 2,153 3,900 1,938 Available data on under construction warehouses, logistic facilities, storage and light industrial units (LIUs) stood at 279,225 sq m (3.01 million sq ft) BUA, expected for delivery by 2020 Al Quoz Dubai Investment Park Jebel Ali Free Zone Emirates Global Aluminum (EGA), Mubadala Investment Co and Dubai Holidng announced a co-operation to invest a total of AED 1 billion for the development of a power generation and water desalination plant at EGA's aluminium smelting facility in Jebel Ali IndustrialPerformance Industrial property prices remained generally stable during second half of 2018 Prices generally ranged between AED 1,938 per sq m to AED 4,306 per sq m (AED 180 per sq ft to AED 400 per sq ft) with high specification / quality built and modern cold storage facilities priced at the upper end Industrial rental movement also remained relatively flat during the second half of the year for all locations Asking rentals ranged between AED 296 to AED 538 per sq m (AED 27 to AED 50 per sq ft) depending on location Industrial Rental Rates (AED/sq m) Rent - Upper Range Source: ValuStrat Al Quoz Rent - Lower Range Al Qusais Dubai Investment Park Jebel Ali Free Zone Jebel Ali Industrial Area Dubai South 9 Dubai Real Estate ket 4th Quarter 2018 Review

11 UAE developers change strategy to adapt to softening market Prime residential areas, which saw relative resilience in 2018, may continue to see some improvements, leading local consultancy ValuStrat said in its 2019 outlook this month Review 18 / Outlook 19 Dubai Sector By the end of 2019, the population of Dubai is expected to reach 3.4 million, and assuming all projects are delivered on time, the number of residential units would reach 600,000, office supply 9.5 million sq m (102 million sq ft) and Dubai could have 138,000 hotel rooms and hotel apartments, as per the recently released ValuStrat report Dubai land prices are 50% cheaper than in 2008 Land values generally track the performance of the asset that would be built on it. Many Dubai land values have fallen in recent years, reflecting the downward trend of most real estate classes in the city, observes lan King, Managing Director and Group Head Real Estate at ValuStrat Cityscape Global Curtain-Raiser: Off-plan launches take a back seat in Dubai Haider Tuaima, Head of Real Estate Research at ValuStrat Consulting Group, said Several reputed developers were able to hand over their projects either on time or slightly beyond. This led off-plan investors to trust those developers and pick well-located projects. Additionally, payment plans have recently become far more attractive as many developers waived various fees and opted for easy post-handover payments Visa reforms to help UAE retain appeal as an investment hub properties priced more than Dh5 million represent approximately 3.5 per cent of overall Dubai home sales, according to consultancy in Dubai ValuStrat. Most transactions, 75 per cent, were for homes priced less than Dh2 million. Therefore, the new visa could increase the share of high-end home sales, reckons Haider Tuaima, head of real estate research at ValuStrat Remodelling an investment villa for a higher rate of return Energy-saving upgrades, solar panels and energy-efficient heating or cooling devices make your home more efficient and generate savings on utility costs. They also make the property more marketable by delivering long-term benefits to the occupants, according to Cheryl McAdam MRICS, Director Valuation at ValuStrat. 10

12 ValuStrat is a firm regulated by RICS ValuStrat is a leading consulting firm headquartered in Dubai providing Advisory, Valuations, Research, Due Diligence and Divestment services across a diverse range of industry sectors since Offices in the UAE, UK, Saudi Arabia, Pakistan and Qatar serve over 800 corporate clients in the Middle East. Client base includes financial institutions, local corporates, multinationals, governments, SMEs, family businesses and start-ups. Some of the key sectors serviced by ValuStrat s consulting team include real estate, hospitality, healthcare, education, manufacturing, retail, entertainment, transport and FMCG. ValuStrat is a Royal Institution of Chartered Surveyors (RICS) Regulated Firm and the first company head quartered in all of MENA and Asia to be accepted into the prestigious RICS Tech Affiliate program. Strategic Partners of VPI Financial Institutions VPI Online The for Dubai s freehold office sector is constructed to represent the quarterly price change experienced by typical office space within Dubai. The for Dubai s freehold residential sector is constructed to represent the monthly price change experienced by typical residential units within Dubai. The VPI is a valuation-based weighted price index that uses a comprehensive sample representing more than 90% of all property types across the city and is built by our expert RICS Registered Valuers. Research Methodology Every effort has been made to ensure the accuracy of this document. New supply data covers 38 defined areas in Dubai including non-freehold areas. Only completed and under construction projects are included. The new supply data does not include announced projects, and projects in design phase. The new supply database does not take into account most private building projects. Prices are calculated from actual transactions that have been carefully cleansed to exclude duplicates, bulk sales and outdated transactions. Rental data is derived from a carefully cleansed database of listings that don t include duplicates, potential errors and outliers. Copyright ValuStrat Consulting FZCo This document is the property of ValuStrat Consulting FZCo and must not be reproduced or transmitted in any form or by any means, without the prior written consent of ValuStrat Consulting FZCo. We welcome your constructive feedback and any corrections that may need to be made to this document. ValuStrat Consulting FZCo does not accept any liability in negligence or otherwise for any damage suffered by any party resulting from reliance on this document. Director - Commercial Valuations