QUARTER REVIEW. Dubai Real Estate Market.

Transcription

1 th QUARTER REVIEW 2017 Dubai Real Estate ket

2 2017Q4 Real Estate Performance VPI ValuStrat Price Index ket Intelligence. Simplified. Residential Office -1.9% Q4 Y-o-Y Source: ValuStrat -0.8% Q4 Y-o-Y Source: ValuStrat Key Indicators Transaction Volumes* Average Transacted Ticket Size* Apartment Asking Rents Villa Asking Rents 9% Q-o-Q 5% Q-o-Q -4.0% Q-o-Q 0.2% Q-o-Q *Residential & commercial trans. Source: DLD, ValuStrat *Residential & commercial trans. Source: DLD, ValuStrat Office Asking Rents Office Transacted Prices Hotel ADR Hotel Occupancy -1.1% Q-o-Q -8.1% Q-o-Q -4% Jan-Nov Y-o-Y -1% Jan-Nov Y-o-Y. Source: DTCM, ValuStrat Source: DTCM, ValuStrat 1 Dubai Real Estate ket 4th Quarter 2017 Review

3 VPI ValuStrat Price Index Residential The fourth quarter 2017 VPI - Residential displayed an overall 1.9% annual decline in capital values, equivalent to 15.3% below 2014 peak. As we predicted, overwhelming off-plan sales activity caused a further delay in near term recovery of the wider property market. Most locations monitored by the VPI saw quarterly capital declines, by as much as 4.4% for Jumeirah Lake Towers and 2.6% for Arabian Ranches. Other locations saw the pace of their quarterly declines slow to less than 0.5% down, which was the case for Dubai ina. However, established prime locations such as Downtown Dubai, Palm Jumeirah, Emirates Hills and Jumeirah Islands proved to be immune from the negative trends. ValuStrat Price Index 16 Apartment and 10 Villa Locations in Dubai [Base: Jan 2014=100] Office Source: ValuStrat The VPI-Office represents the quarterly price change experienced by typical freehold office space in Dubai. The Q4 VPI stood at 89.3 points, suggesting that average capital values are 8% lower than the same period during the base year 2015, 0.8% lower than the same period last year and 2.3% lower than the previous quarter. While Downtown Dubai and DIFC have not seen change in their capital values since Q3, TECOM, Business Bay and JLT saw quarterly capital value declines that ranged between 2.5% and 4.8%. ValuStrat Price Index 5 Office Locations in Dubai [Base: Jan 2015=100] Source: ValuStrat 2

4 MacroEconomicSnapshot Dubai s AED 56.6 billion spending budget for fiscal 2018 has been approved, representing a record 19.5% YoY increase in total expenditure The 2018 budget follows the Dubai 2021 strategic plan targets, which will have an increase in infrastructure spending of 43% YoY led by Expo 2020 projects and social development initiatives that are expected to create 3,100 jobs The government expects 12% growth in public revenues at AED 50.4 billion. Government fees represent 71% whereas tax revenues contribute 21%, oil revenues at 6% and 2% from government investments Dubai's free zone trade grew 21% and direct trade increased 9% in Q3 '17 as compared with the previous year Dubai s population reached an estimated 2.98 million, with an average 5-year growth rate of 7% 2,105,000 2,210,300 2,320,800 2,450,000 2,695, ,978, Dubai Population Source: Dubai Statistics Centre Consumer Price Index vs. Housing Index January 2015 YTD Jan Feb Apr May Jul Aug Oct Nov Jan Feb Apr May Jul Aug General Index (2014=100) Housing, Water, Electricity, Gas and Other Fuels Oct Nov Jan Feb Apr May Jul Aug Oct Nov Borrowing costs likely to go up as the US Federal Funds policy rate increased for the third time in 2017 by 25 basis points and the UAE Central Bank followed suit The first wave of tax imposition was felt in the UAE as selective tax took effect last October 1, with 100% on energy drinks and tobacco as well as 50% on carbonated beverages In a move to become a regional fintech hub, the government of Dubai launched the world s first state-owned cryptocurrency, emcash November data from Dubai Statistics Centre saw inflation at record low 0.96% YoY and dipped 0.4% MoM Driven by lowering rents, housing expenses declined 0.55% YoY and 0.3% MoM Source: Dubai Statistics Centre 3 Dubai Real Estate ket 4th Quarter 2017 Review

5 ResidentialSupply Approximately 72% of the projected 25,000 units for 2017 were completed 50% of total 18,000 completions were concentrated in four areas: Al Furjan, Dubailand, International City and Dubai Silicon Oasis Several off-plan projects were launched in Q4, to add more than 30,000 units to the residential pipeline by 2023 Notable announced projects were Azizi Victoria in Meydan, Damac s Vera Residences in Business Bay, Emaar s Beachfront in Dubai Harbour, Island Park in Dubai Creek Harbour, and Vida Zabeel Developers have increasingly moved into home financing, offering innovative self-funded payment plans directly to their purchaser. This may represent some downside risk for future payment defaults Dubai Residential Supply ( 000 UNITS) Existing New Apartments* New Villas* 467 *May be subject to significant downward adjustment E 2018E Source: Dubai Statistics Centre, REIDIN, MEED Projects, ValuStrat ResidentialPrices The median residential transacted price for ready homes declined 7.3% YoY and 4.8% QoQ The median transacted price for ready apartments stood at AED 10,753 per sq m (AED 999 per sq ft), down 6.5% YoY and 4.4% QoQ For ready villas, the median transacted price was AED 10,538 per sq m (979 per sq ft), declining 12% YoY and 7% QoQ There were relatively less off-plan sales and more ready property sales this quarter as the share of ready property sales increased from 27% last quarter to 34% this quarter Most off-plan sales were in Business Bay, Jumeirah Village, Dubai South, Dubai Creek Harbour, and Downtown Dubai, while ready property sales were mostly concentrated in International City, Dubai ina, and Jumeirah Lake Towers 2017 total sales transaction volume for apartments and villas rose by 26% as compared to the previous year Residential Median Transacted Prices -5.6% Last 2 Years -8.8% Last 6 Months * Ready Properties Only -7.3% Last Year -4.8% Last Quarter 4

6 ResidentialRents Overall residential asking rents were 13.1% lower YoY and 3.1% QoQ Compared to the same period last year, rents were down 13.2% for apartments and 12.3% for villas. Additionally, landlords have become more accommodating in reducing rents for existing tenants approaching lease renewal The RERA rental increase calculator was updated in November to reflect rental ranges for 2018 The updated rental index echoed the downward trend, particularly in most non-freehold areas. However, a clear majority of freehold areas saw no change The migration from high rise to low rise continues, as a budget of AED 170, ,000 for a three-bedroom apartment in Dubai ina, may also rent the same number of bedrooms in a villa located in The Springs, Arabian Ranches, Jumeirah Park or Victory Heights Residential Asking Rents -15.2% Last 2 Years -5.8% Last 6 Months -13.1% Last Year -3.1% Last Quarter OfficeSupply Estimated 178,000 sq m (1.9 million sq ft) BUA (Built-Up Area) was completed, namely The Offices 2 and 3 buildings in One Central DWTC (Dubai World Trade Centre) Available data for office space under construction is estimated at 483,000 sq m (5.2 million sq ft) for delivery in the next two years Most upcoming office space will be concentrated in Jumeirah Lake Towers (52%), Business Bay (33%) and Dubai Silicon Oasis (13.6%) Dubai Office Supply (Million sq m GLA) E 2018E Existing Stock Expected Supply Source: REIDIN, MEED Projects, ValuStrat 5 Dubai Real Estate ket 4th Quarter 2017 Review

7 OfficePrices There was a 68% quarterly jump in sales transaction volume for office space, 80% of which were sized less than 140 sq m (1,500 sq ft) Median transacted office prices were 5.9% lower than last year and 8.1% lower than last quarter The median transacted price stood at AED 10,378 per sq m (AED 965 per sq ft) Business Bay remained as the most popular choice for office set-ups, as it took 54% majority of citywide sales transactions, followed by Jumeirah Lakes Towers (JLT) at 26.7% The median size of offices sold in Business Bay were 61 sq m (661 sq ft) and 105 sq m (1,131 sq ft) in JLT 44,222 sq m (476,000 sq ft) of total GLA was sold during Q4 amounting to a total investment of AED 483 million Office Median Transacted Prices -7.6% Last 2 Years -1.2% Last 6 Months -5.9% Last Year -8.1% Last Quarter OfficeRents Office median asking rents dipped 1.1% YoY and QoQ Asking rents for this quarter were 9.7% lower than two years ago The citywide median asking rent for a typical office space now stands at AED 1,064 per sq m (AED 98.8 per sq ft) In Dubai International Financial Centre, the median asking rent was AED 1,722 per sq m (AED 160 per sq ft) for the typical unit size of 93 sq m (1,000 sq ft) In Barsha Heights, asking rents were AED 1,000 per sq m (AED 93 per sq ft) for the typical area of 116 sq m (1,250 sq ft) Office Median Asking Rents -9.7% Last 2 Years -5.3% Last 6 Months -1.1% Last Year -1.1% Last Quarter 6

8 RetailSupply La Mer, a new beachfront retail destination in Jumeirah 1 was opened by Meraas Holding adding a mix of more than 130 cafes, shops and restaurants Lulu Hypermarket signed as the anchor tenant for Juma Al Majid s 22,297 sq m (240,000 sq ft) Burj Nahar Mall in Al Muteena, Deira expected to open in 2018 Construction work for Dubai Mall s Mohammed bin Rashid Boulevard and Fountain Views expansion has begun Due to increased footfall, City Centre Mirdif completed the addition of 500 parking spaces, as part of phase one of the mall's enhancement project. Phase 2 expected to complete Q would add 10 new cinema screens and an additional 500 parking spaces Retail Malls & Shopping Centres ( 000 sq m GLA) Convenience < 3k sq m Regional 30k-90k sq m 852 Neighbourhood 3k-10k sq m Super Regional > 90k sq m 1,878 Community 10k-30k sq m RetailPerformance Royal Institution of Chartered Surveyors (RICS) annual capital value expectations for prime retail to see less than 0.1% decline, while prime retail rents could wane by 3% during a twelve-month period Secondary retail is expected to see sharper declines in the next 12 months at 3% for capital values and 7% for lease rates Emaar Malls achieved AED 1.5 billion net profit during the first nine months of 2017, up 6% from the same period last year The Dubai Mall welcomed 58 million visitors from January to tember A recent report stated more than half of total online transactions in the UAE were from foreign retailers with an average receipt size of AED 1,500 per purchase The UAE topped the list among seven countries in terms of total value of online dealings amounting to more than AED 45.5 billion in Posting a 21% YoY growth as per Payfort, an Amazon-owned company Number of Malls and Shopping Centres in Dubai Super Regional Regional 30k-90k sq m > 90k sq m Convenience < 3k sq m Community 10k-30k sq m 32 Neighbourhood 3k-10k sq m 7 Dubai Real Estate ket 4th Quarter 2017 Review

9 HotelSupply As of November 2017, Dubai had 82,322 hotel rooms and 24,515 hotel apartments In terms of completed projects during Q4, an estimated 3,780 rooms were added to the total stock Notable openings during the quarter were Bulgari Hotel (101 rooms), Renaissance Downtown (298 keys), Retreat Palm Dubai MGallery (255 keys) and Rose Park Hotel Al Barsha (168 rooms) Six new hotel projects were announced to add at least 1,277 keys to the pipeline New hotel announcements included Raffles Palm360 (125 rooms), Holiday Inn and Suites Business Bay (350 keys), Vida Harbour Point Dubai Creek Harbour (275 rooms), ME Dubai Downtown (93 rooms) and 25hours Hotel One Central (434 keys) Hotel Room Supply ( 000 KEYS) E Hotel & Service Apt Rooms Source: DTCM, MEED Projects, ValuStrat New Supply E 118 HotelPerformance Source of Dubai Visitors by Region Jan - Nov 2017 Total international guests as of November rose 6.7% YoY to million The 11-month average citywide occupancy rate declined by 1% to 77% as compared to the same period in 2016 Average Daily Rate (ADR) and Revenue per Available Room (RevPAR) both declined 4% YoY The top source markets for Dubai visitors came from the GCC countries (20%), Western Europe (20%), South Asia (18%), MENA (11%), North & South-East Asia (11%), Russia with rest of Eastern Europe (7%), USA (6%), Africa (5%) and Australasia (2%) Russian tourists were back in the top 10 list of hotel guest nationalities registering the fastest 10-month growth rate of 111% followed by Chinese tourists who were ranked at number 5 with 46% growth 11% 6% 11% 7% GCC Western Europe South Asia MENA North Asia & South East Asia 5% 2% 18% 20% 20% Americas Russia, CIS & Eastern Europe Africa Australia Source: DTCM 8

10 IndustrialSupply Jebel Ali Free Zone Authority (JAFZA) attracted an additional 26 steel and construction companies during the first eight months of 2017 having allocated 1.1 million sq m (11.8 million sq ft) of land As of tember, Dubai Investment Park saw a 36% YoY increase in sub-leasing contracts 32 warehouses owned by Dubai Airport Free Zone Authority were completed, spread across a total area of 16,140 sq m (173,729 sq ft) Available data on industrial spaces under execution stage expected for completion before year end stood at 171,360 sq m (1.84 million sq ft) BUA Dubai Airport Free Zone Authority (DAFZA) and wasl Asset Management Group announced to build the region s first e-commerce free zone in Umm Ramool area. The facility will have a total GLA of 176,000 sq m (1.89 million sq ft) intended for logistics and office units Industrial Prices (AED/sq m) Al Quoz Price - Upper range Source: ValuStrat 4,198 2,800 4,198 Dubai Investment Park 2,315 Price - Lower range 3,900 Jebel Ali Free Zone 2,153 IndustrialPerformance Industrial property prices continued to soften during Q4, as evidenced by drops in both listing and transaction rates for warehouse properties. Price ranges were generally between AED 2,153 per sq m to AED 4,198 per sq m (AED 200 per sq ft to AED 390 per sq ft) Anecdotal evidence suggest that some very large warehouse/logistic properties were trading at prices slightly under AED 2,153 per sq m (AED 200 per sq ft) Average rental rates across all industrial locations have also stabilised during Q4 with rentals ranging between AED 322 to AED 538 per sq m (AED 30 to AED 50 per sq ft) for industrial / warehouse units. Asking rents in older locations such as Ras Al Khor & Al Quasis, have also remained in ranges between AED 322 to AED 431 per sq m (AED 30 to AED 40 per sq ft) Industrial Rental Rates (AED/sq m) Al Quoz Al Quasis Dubai Investment Park Jebel Ali Free Zone Jebel Ali Industrial Area Dubai South Rent - Upper Range Rent - Lower Range Source: ValuStrat 9 Dubai Real Estate ket 4th Quarter 2017 Review

11 ValuStratInMedia Dubai Silicon Oasis, the Technological Park with which the Jewel of the Middle East Seeks to Become a Centre of Global Innovation For the leaders of the United Arab Emirates, the arrival of taxi-drones was a way of drawing attention from other parts of the world towards their intention to create an economy based on modern technologies. Fujitsu, AMD, Euromonitor International, Western Digital and ValuStrat are some of the companies that operate in the technological oasis of Dubai Do Valuation Experts Value Technology? Many surveyors now enjoy being assisted by technology, using a single instrument out on site to take geo-tagged field notes and photographs and arriving back at the office after inspections to find much of the procedural work already in motion allowing them to focus more on their core skill of valuing, says lan King MRICS, Managing Director and Group Head for Real Estate at ValuStrat Locations that Offer Cheapest Rents in Dubai There is a clear trend for more affordable two and three-bedroom apartments in the north and north-eastern side of Dubai, primarily on the border with Sharjah. This has made northern Dubai more attractive for Sharjah residents who work in Dubai, willing to shorten their daily commute times, observes Cheryl McAdam MRICS, Valuation Manager at ValuStrat, a strategic advisory firm Dubai Rents Drop by as Much as 25% in Some Areas According to Haider Tuaima, the Head of Real Estate Research at ValuStrat, a comparison of the updated figures with the previous databases shows that a majority of non-freehold areas have seen declines averaged 10 percent Dubai Property Deals Cross $55.5bln in Nine Months As per our calculations, Dh72 billion worth of real estate transactions were made during Q Given the exponential growth of off-plan transactions as compared to ready properties, it would be highly likely that the total transaction value for this year will surpass Dh259 billion which was the figure for 2016, said Haider Tuaima, Head of Real Estate Research at ValuStrat Dubai Off-Plan Sales Start to Dwarf Ready Units Buyers have been attracted away from older second-hand properties with modern specification, lower price points, attractive payment plans and hoped-for appreciation during the pre-handover build period, said lan King MRICS, Managing Director and Group Head for Real Estate at ValuStrat. This trend is now evident in transaction statistics and is impacting some parts of the secondary market. 10

12 About 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. VPI ValuStrat Price Index Dubai Dubai@valustrat.com Doha Doha@valustrat.com Riyadh Riyadh@valustrat.com Jeddah Jeddah@valustrat.com Karachi London Karachi@valustrat.com London@valustrat.com VPI online The ValuStrat Price Index for Dubai s freehold office sector is constructed to represent the quarterly price change experienced by typical office space within Dubai. The ValuStrat Price Index 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. lan King, MRICS Managing Director & Group Head of Real Estate declan.king@valustrat.com Haider Tuaima Head of Real Estate Research haider.tuaima@valustrat.com Vismer Mulenga, MRICS Associate Director Commercial Valuations vismer.mulenga@valustrat.com Cheryl McAdam, MRICS Head of Residential Valuations cheryl.mcadam@valustrat.com Darshan Shah, MRICS Associate Director & Head of Industrial Consulting darshan.shah@valustrat.com