2018 Dubai Real Estate Market

Transcription

1 st QUARTER REVIEW 2018 Dubai Real Estate ket

2 Real Estate Performance VPI ket Intelligence. Simplified. Office -3.5% -1.4% Q1 Y-o-Y Q1 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 -3.0% -28.8% -4.4% -8.0% -0.7% Office Sales Ticket Size Office Sales Volume Office Rents Hotel ADR Hotel Occupancy -5.0% -36.4% -4.9% -2.5% Jan-Feb YoY Jan-Feb YoY Sources: REIDIN, DTCM, ValuStrat 1 Dubai Real Estate ket 1st Quarter 2018 Review -1%

3 VPI 16 Apartment and 10 Villa Locations in Dubai [Base: Jan 2014=100] The first quarter 2018 VPI - displayed an overall 3.5% annual decline in capital values, equivalent to 16.8% below 2014 peak. Attractive off-plan deals with easy payment plans took a toll on secondary market sales, causing the majority of locations monitored by the VPI to witness quarterly capital falls by as much as 6% for International City, 5% down in Dubai Production City, 4.1% decline for Arabian Ranches and a 3.6% drop in The Meadows. No change, or only marginal declines of less than 1%, were found in prime properties such as Emirates Hills, Palm Jumeirah, Dubai ina and Burj Khalifa Source: ValuStrat Office 5 Office Locations in Dubai [Base: Jan 2015=100] Covering major office locations in Dubai, the VPI Office, has shown that citywide office capital values have declined 6% annually and 3.1% quarterly. Registering the highest citywide quarterly loss since Q1, Barsha Heights witnessed the biggest annual loss of 13.6% and 3.5% QoQ, Business Bay was second in line with an 8.7% annual capital loss, 3.9% QoQ. Dubai International Financial Centre (DIFC) was the only location where there were capital gains of 1%, both annually and quarterly Source: ValuStrat 2

4 MacroEconomicSnapshot Dubai s economy grew 2.6% in with its real GDP reaching AED 389 billion, as per Dubai Statistics Centre Real Estate activities rose 3.5% YoY and amounted to AED 27.6 billion, which made up 7.1% of Dubai's real GDP January 2018 monetary survey conducted by the UAE Central Bank showed that M1, which is currency in circulation outside banks plus monetary deposits, went up 1.1% to AED 498 billion Dubai International Airport had 88.2 million passengers in, equivalent to a 5.5% YoY increase 2,105,000 2,210,300 2,320,800 2,450,000 2,695,000 2,978,000 3,028, Consumer Price Index vs. Housing Index January 2015 YTD Jan Feb Apr May Jul Aug Oct Nov Jan Feb Apr May Jul Aug Oct Nov Jan Feb Apr May Jul Aug Oct Nov Jan Feb General Index (2014=100) Housing, Water, Electricity, Gas and Other Fuels Source: Dubai Statistics Centre 3 Dubai Real Estate ket 1st Quarter 2018 Review Q1 Dubai s population crossed the 3 million mark with a five-year average growth rate of 7% The UAE Central Bank followed suit after the US Federal Funds rate was increased by another 25 basis points, coming after a series of hikes last year. Borrowing cost expected to increase further Dubai Economy Department issued 19,877 new business licenses in, down 25.6% YoY The inflationary effect of 5% Value Added Tax (VAT) implemented at the start of this year has begun to show as YoY inflation rose 2.3%, albeit with the MoM rate stabilising Due to declining rents, Housing and Utilities Expenses retreated 1.03% YoY and 0.34% MoM

5 Supply Last year just over 22,000 units were completed, 88% of the projected total Completion of 35,000 apartments and 10,000 villas is expected this year, 3% were finished as of Q1 Half of all new build apartments this year in mid-market areas of Dubailand (Akoya, Arjan, Town Square), Jumeirah Village Circle, and Dubai Sports City More than 80% of villas to be handed over this year are within Town Square, Mudon and Akoya Oxygen 11 off-plan projects launched in Q1, promising over 2,300 apartments and 900 villas by 2021 Notable projects were Emaar s Sunrise Bay, Damac s Reva Residences, and Dubai Properties Amaranta phase Dubai Supply ( 000 UNITS) E Existing New Apartments* New Villas* E *May be subject to significant downward adjustment Source: Dubai Statistics Centre, REIDIN, MEED Projects, ValuStrat 650 Sales The median residential transacted price declined 7.4% YoY, however stabilised QoQ The median transacted price for ready apartments stood at AED 10,839 per sq m (AED 1,007 per sq ft), down 6.9% YoY and 0.8% QoQ For ready villas, the median transacted price was AED 11,334 per sq m (979 per sq ft), dropping 11% YoY with no change QoQ Transaction volumes declined across the board this quarter, with off-plan sales falling 42.4% YoY and 28.8% QoQ, while ready properties in the secondary market saw fall of 19.4% YoY and 8.7% QoQ Established areas with substantial off-plan sale transactions included Business Bay at 88%, Jumeirah Village at 80% and Al Furjan 65% Average off-plan ticket size this quarter was AED 1.3 million, compared to AED 1.6 million for ready properties Ready Sales Volumes -19.4% Last Year -8.7% Last Quarter Off-plans Sales Volumes -42.4% Last Year -28.8% Last Quarter Source: REIDIN, ValuStrat 4

6 Rents Overall residential asking rents fell 5.8% YoY However, on a quarterly basis asking rents remained broadly flat for both villas and apartments Compared to the same period last year, rents were down 7% for apartments and 3% for villas The RERA rental calculator was updated since November last year, adjusting rental ranges for most of the freehold areas, some seeing downward changes, while the majority saw increased rental values The RERA rental range index for a studio in Downtown Dubai was AED 60,000 80,000 per annum, now updated to AED 69,000 85,000 per annum. A studio apartment in International City was AED 25,000 35,000 per annum now increased to AED 30,000 36,000 per annum. Green Community (DIP, Motor City), Jumeirah Islands, The Meadows and Arabian Ranches saw rental declines between the range of 3%-5% Asking Rents -5.8% -14.4% Last Year Last 2 Years -3.8% -0.7% Last 6 Months Last Quarter Source: REIDIN, ValuStrat OfficeSupply This year began with 8.7 million sq m (93.6 million sq ft) of office Gross Leasable Area (GLA) Two major office building projects were completed this quarter, The Exchange in DIFC with 14,900 sq m (160,000 sq ft) GLA, and The Opus Tower in Business Bay with 84,346 sq m (907,890 sq ft) GLA Available data for office space under construction is estimated at 483,000 sq m (5.2 million sq ft) for delivery by 2020 Most upcoming office space will be concentrated in Jumeirah Lake Towers (61%), Business Bay (22%) and Dubai Silicon Oasis (16%) Dubai Office Supply (Million sq m GLA) E Existing Stock 2019E Expected Supply Source: REIDIN, MEED Projects, ValuStrat 5 Dubai Real Estate ket 1st Quarter 2018 Review

7 OfficeSales Office transaction volumes were 36.4% lower than the previous quarter Overall transacted office prices were 15.7% lower than last year and 8.2% lower than last quarter The median transacted price stood at AED 9,526 per sq m (AED 885 per sq ft) Jumeirah Lake Towers was the most popular choice for office sales with a share of 48%, followed by Business Bay with 39% of all office transactions The median size of offices sold in Jumeirah Lake Towers was 101 sq m (1,089 sq ft) and 82 sq m (888 sq ft) in Business Bay 29,713 sq m (319,824 sq ft) of total GLA was sold during Q1 amounting to a total investment of AED 291 million Office Median Transacted Prices -12.5% Last 2 Years -15.7% Last 6 Months -15.7% Last Year -8.2% Last Quarter Source: REIDIN, ValuStrat OfficeRents Median office asking rents declined by 6.0% YoY and fell 4.9% QoQ Asking rents for this quarter were 14.7% lower than two years ago The citywide median asking rent for a typical office suite stood at AED 937 per sq m (AED 87 per sq ft) Median asking rents for Dubai International Financial Centre were AED 2,239 per sq m (AED 208 per sq ft) for typically sized units sq m (1,000 2,000 sq ft) In Business Bay, median asking rents were AED 1,324 per sq m (AED 123 per sq ft) for the typical area of less than 93 sq m (1,000 sq ft) Office Median Asking Rents -14.7% Last 2 Years -5.9% Last 6 Months -6.0% Last Year -4.9% Last Quarter Source: REIDIN, ValuStrat 6

8 RetailSupply The Dubai Mall Fashion Avenue expansion was opened adding 55,742 sq m (600,00 sq ft) GLA featuring 150 luxury brands Meraas unveiled The Yard, a 32,571 sq m (350,000 sq ft) extension of Last Exit D89 offering its visitors an organic farmer s market, bakery, restaurants, cafes and exclusive shops Art of Living Mall, a shopping centre dedicated to home furnishings is set to open by tember this year, it will feature 100 outlets spread across a 23,226 sq m (250,000 sq ft) GLA Expansion plans for Dubai Outlet Mall were announced, to add an estimated 189,500 sq m (2.04 million sq ft) GLA This year, Dubai is expected to see the completion of three major malls from Nakheel (The Circle Mall, The Pointe and Nakheel Mall) and Meraas (Wharf Retail), estimated to inject 996,000 sq m (10.7 million sq ft) GLA to the total retail stock. This may apply pressure to rents and footfall on old and secondary shopping centres RetailPerformance 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 852 1,933 Community 10k-30k sq m Pre-VAT spending and 23rd edition of Dubai Shopping Festival induced year-end increased in sales and mall footfall Foot traffic went up 10% YoY among Dubai s popular malls while Visa card transactions grew 27% as compared to same period in Dubai Duty Free annual turnover increased 5.6% and reached AED 7.05 billion The minimum cost of renting a retail space in shopping malls currently stands at AED 2,691 per sq m (AED 250 per sq ft) Number of Malls and Shopping Centres in Dubai Super Regional > 90k sq m Regional 30k-90k sq m Community 10k-30k sq m Neighbourhood 3k-10k sq m Convenience < 3k sq m Source: REIDIN, ValuStrat 7 Dubai Real Estate ket 1st Quarter 2018 Review

9 HotelSupply As of February 2018, Dubai has a total of 83,269 hotel rooms and 24,791 hotel apartments A total of 2,645 rooms were added during Q1 from the opening of 11 hotels Notable openings during the quarter were Gevora Hotel (528 rooms), Swissotel Al Ghurair (428 keys), Aloft Palm Jumeriah (206 rooms) and Al Bandar Rotana (190 keys) Seven new hotel projects were announced to add an estimated 1,979 rooms to the city s hotel room stock Two new Jumeirah branded hotels Zabeel House Al Seef (350 rooms) and Zabeel House The Greens (210 keys), as well as the conversion of Queen Elizabeth 2 cruise ship into a 300-room hotel, Sabah Rotana (533 keys) and Millennium Place Hotel and Apartments Mirdif (116 rooms) were included in these announcements Hotel Room Supply ( 000 KEYS) Hotel & Service Apt Rooms E E New Supply E Source: DTCM, MEED Projects, ValuStrat HotelPerformance Total international guests during reached million, increasing by 6.2% YoY, and the first two months of this year saw an increase of 1.3% YoY to 3.05 million The first two months saw citywide occupancy rates dip 1% to 87% as compared to same period last year Revenue per Available Room (RevPAR) declined 2.9% YoY while Average Daily Rate (ADR) declined 2.5% Top source markets for Dubai visitors came from the GCC countries (18%), Western Europe (21%), South Asia (18%), Russia, CIS with Eastern Europe (10%) Russian tourists jumped to number five with a headline growth rate of 137% YoY Mainstream tourism destinations achieved record performance with Dubai Parks visitor count jumping 45% QoQ and the 22nd season of Global Village welcoming over 6 million guests, up 7.1% from its previous season With new tourism drivers coming online such as Dubai Frame and Dubai Safari Park, the city is well positioned in achieving its visitor target with a 3-year average growth of 6.2% Source of Dubai Visitors by Region Jan-Feb 2018 GCC Western Europe South Asia MENA North Asia & South East Asia Source: DTCM 11% 11% 6% 10% 1% 4% 18% 18% 21% Americas Russia, CIS & Eastern Europe Africa Australia 8

10 IndustrialSupply Jebel Ali Free Zone (JAFZA) registered a 9% YoY growth in company set-ups Dubai Wholesale City was commissioned by Lulu Group International to build a 121,000 sq m (1.3 million sq ft) central logistics hub to provide distribution services for the company s portfolio of malls and hypermarkets across the UAE Dubai is expected to absorb an estimated 545,000 sq m (5.8 million sq ft) BUA of industrial space this year National Industries Park saw the completion of a 6,503 sq m (70,000 sq ft) storage and manufacturing facility from Hira Walraven during Q while JAFZA witnessed the opening of a consumer goods production unit from The Momin Group covering an estimated area of 10,000 sq m (108,000 sq ft) 5,000 4,000 3,000 2,000 1,000 Al Quoz Dubai Investment Park Jebel Ali Free Zone IndustrialPerformance Industrial property prices remained relatively stable during Q from Q4. Prices are generally in a range between AED 2,045 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 Asking prices for large and older warehouse properties being offered at prices slightly under AED 2,153 per sq m (AED 200 per sq ft) Despite competition / growing activities in nearby emirates, new industrial logistics and production properties are emerging in Dubai Industrial Park and Dubai Technology Park Competition continues to be observed from other nearby emirates such as Sharjah (industrial parks along or near Emirates Road), and offerings in Al Jurf Industrial Area in Ajman, Emirates Modern Industrial Area in Umm Al Quwain Low rents continue to be observed in older established locations such as Ras Al Khor & Al Quasis, with rentals ranging between AED 300 to AED 484 per sq m (AED 28 to AED 45 per sq ft). Similar rents are also seen in other locations such as DIP, Al Quoz, JAFZA & Jebel Ali, Umm Ramool and DIC Industrial Rental Rates (AED/sq m) Rent - Upper Range Source: ValuStrat Al Quoz Rent - Lower Range Al Quasis Dubai Investment Park Jebel Ali Free Zone Jebel Ali Industrial Area Dubai South 9 Dubai Real Estate ket 1st Quarter 2018 Review

11 Dubai developers reach out to cryptocurrency investors It is our understanding that investors who allegedly purchased properties using cryptocurrencies, as per some media reports, did not make a direct payment using the technology. Rather, it was the equivalent value of the cryptocurrency in UAE dirhams, reckons Haider Tuaima, Head of Real Estate Research at ValuStrat Why some Dubai residents are abandoning the high-rise lifestyle The mid-term overabundance of new supply has led to this healthy competition between apartments and villas, particularly those with two or three bedrooms, giving potential tenants plenty of choice, says Haider Tuaima, Head of Real Estate Research at ValuStrat Dubai growth trends Since the last four years, the Dubai real estate market has witnessed a peak of a cycle during mid-2014, a plateau during, and probable rebirth of a new cycle during, concludes Haider Tuaima, Head of Real Estate Research at ValuStrat When property prices are no more in square feet Quoting a total price rather than price per square foot is a mere marketing strategy targeting first-time home buyers with one figure, giving a clearer picture on affordability without the need to have to calculate the size multiplied by price per square foot. Savvy investors, however, look beyond the total price or price per square foot, informs Haider Tuaima, Head of Real Estate Research at ValuStrat Dubai property correction to continue amid off-plan surge Property firm ValuStrat warned last year that a rise in off-plan property could be delaying a market recovery in the emirate with the segment accounting for 73 per cent of sales in the third quarter Downtown, Palm weather soft market conditions better The main trends of were the rise of off-plan launches and their impact on the wider residential market, said lan King MRICS, Managing Director and Group Head for Real Estate. High profile successes in the new homes sector came at a price for the existing secondary market, with price falls recorded in both sales and leasing rates for many established locations 10

12 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. Dubai Dubai@valustrat.com London London@valustrat.com Riyadh Riyadh@valustrat.com Jeddah Jeddah@valustrat.com ValuStrat is a firm regulated by RICS Karachi Karachi@valustrat.com Doha Doha@valustrat.com VPI 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 uses a comprehensive weighted 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. declan.king@valustrat.com haider.tuaima@valustrat.com Director - Commercial Valuations vismer.mulenga@valustrat.com cheryl.mcadam@valustrat.com darshan.shah@valustrat.com