Exceptional. Individual. Volume 14 October Economic Overview United Arab Emirates has continued to benefit its safe-heaven status. The economic recovery has been strong which is well supported by tourism, hospitality and with the rebounce of the real estate sector, the economic activity is expected to remain strong. The macroeconomic indicators also look positive. The economic growth is well supported by various mega projects announced, all which are aimed at improving the current infrastructure. The growth is expected to bring in inflation in the short term, primarily caused by the increase in housing prices. For the month of August, the overall Consumer Price Index (CPI) has reached 121.20, (indexed at 2007 = 100), overall CPI has increased by 0.43 as compared to the previous month. The average increase in prices recorded were at 2.42 as compared to the same time last year i.e., August. (Source: National Bureau of Statistics) The Global Infrastructure Investment Index has ranked UAE among the top 3 countries, a list of 41 most dynamic countries with a good potential for growth and infrastructural investment. The study conducted had also looked at various other aspects such as the ease of doing business, GDP per capita, ongoing tax rates, government policies, quality of the current infrastructure and availability of debt. Infrastructural Investments and spendings continue to rise in the UAE. The first phase of the Dubai Tram is scheduled for a launch on 11 th of Nov 14. The 11 Trams will cover 11 stations. The Tram network will circle Dubai Marina and JBR and will stretch along the Al Sofouh road. The Tram will also touch bases of stations on Dubai Metro and one on Monorail. Once operational the traffic is expected to ease out and offer convenience to commutters. The Tram network is also expected to boost the real estate prices of properties strategically located in and around the stations. 01
The banking sector is expected to benefit the strong economic growth and ample liquidity in the cash market. However the growth in the retail segment will be nicely balanced by the launch of Al Etihad Credit Bureau. The Sector is expected to do well with earnings more than the market expectations. The profitability will be primarily driven by growth in fee income and decline in provisioning. The compression in margins is expected to continue which will be over shadowed by strong growth in lending book size. With the outstanding success of the Initial Public Offering of the Emaar Malls Group, the IPO Market has shown traction. More number of companies are expected to take this route to listing. Such listings will add further depth and liquidity to the bourses. Amanat holding, Al Habtoor Group, Ithmar Capital and Damac are a few companies who have lined up their IPOs. Listings will ease out cash liquidity issues, however the challenge will be to make good use of funds raised and to meet working capital requirements for short and long term. UAE continues to benefit with influx of private capital on account of political unrest in addition to influx of wealth emerging markets like India, Russia and China. The Institute of International Finance (IIF) confirms that Foreign Direct Investments (FDI) have doubled to USD 12 billion which now accounts to 3 of the GDP. The fiscal balance is at a surplus of 10.2 of GDP of. All indicators have led to an improvement in credit conditions for the economy. Real Estate Sector Highlights The Dubai Real Estate market is showing signs of stabilisation owing to the much needed regulations imposed by Central Bank on mortgage lending and increase of property registration fee 2 to 4 imposed by Dubai Land Department. CBRE reported that the transactional numbers for all the three quarters of have dipped down by 22 as compared to subsequent quarters for previous year. Majority of the transactional activity has been in prime residential areas like Dubai Marina, Downtown Dubai, Emirate Living and the Palm. The residential rents have also dipped by 1 marginally though during Q3. The highest fall in rentals have been in the freehold sector, while rental rates across leasehold area remained stable. The dip in rentals can be attributed to an increase in new residential supply combined by weaker demand. The sales market maintaines momentum though at a slower rate. Positive market sentiments and strong economic fundamentals has encouraged developers moving ahead with stalled projects as well as launch of new projects.various new launches by master and private developers alike has resulted in a rapidly growing pipeline of residential supply. The consistent supply of real estate will keep a check on the rental rates. The Cityscape Global Exhibition that concluded was a success, attracting 40K visitors which is an increase of 27 as compared to previous year. 280 exhibitors 28 countries had participated in this event showcasing high quality real estate projects. Various new projects worth billion dirhams were launched and quite a few were successfully sold. 02
Pricing Index At we have been tracking the property prices by indexing them community wise on a scale of 100. Basis of the Price Indexing, the percentage over a period of time has been indicated both for Apartments and Villas for major communities. Price Index as of end June Nov- 3 Months Change Sept- 13 Arabian Ranches 80 81 82 83 85 86 84 84 85 85.3 85.1 84.8 84.2 82.7 82.1 81.5-0.7-3.3-2.0-3 1333 Burj Khalifa Tower 49 50 53 56 56 56 53 53 53 52.8 53.4 53.3 53.3 53.1 52.8 52.6-0.5-1.5-6.1-1 3750 Change 14 Burj Dubai Downtown 89 90 92 96 97 100 102 103 104 104.4 104.4 104.6 105.2 105.2 105.2 104.7-0.5-0.5 8.9 2 2868 Business Bay 54 58 59 62 65 67 70 72 73 73.6 74.3 74.9 74.5 74.7 75.1 74.3-1.0-0.3 20.0 4 1389 DIFC 44 44 46 48 48 48 51 51 54 54.9 55.2 55.2 55.8 55.8 55.8 55.7-0.2-0.2 16.6 8 1869 Dubai Land 66 67 69 70 72 73 74 75 76 76.8 76.6 77.4 77.5 76.4 76.7 76.0-1.0-1.9 8.5 1 981 Dubai Marina 67 70 72 75 76 77 79 82 82 83.5 83.4 83.4 82.9 82.9 83.2 83.0-0.2 0.1 10.4 2 1748 Greens 61 62 64 66 69 71 70 71 72 73.4 73.4 74.0 74.2 72.4 71.7 70.7-1.4-4.7 6.4 0 1363 International City 54 54 59 60 61 64 67 70 73 75.0 75.7 75.7 76.4 75.7 76.0 74.7-1.8-2.3 25.0 6 684 Beach Residences 67 68 71 73 74 75 77 77 78 79.1 79.4 79.1 82.0 82.0 81.6 81.3-0.4-0.8 11.7 5 1613 Lake Towers 51 51 53 55 56 56 57 58 59 61.2 61.9 61.9 62.3 62.1 61.4 62.1 1.2-0.3 13.3 7 1028 Islands 88 91 93 95 97 98 97 98 98 98.5 98.5 98.6 98.6 98.1 98.1 97.9-0.2-0.7 3.2 0 1816 Park 70 71 78 82 85 85 82 82 82 82.0 81.2 80.7 79.4 78.9 77.9 76.4-1.9-3.9-7.2-7 1236 Village 83 87 91 97 98 101 112 111 113 114.1 113.8 114.1 114.0 113.0 111.2 110.1-1.0-3.4 13.8-1 1001 Old Town Burj Dubai 67 68 69 71 72 76 74 75 75 76.8 76.8 76.8 76.8 76.8 76.8 76.6-0.1-0.1 7.9 2 2188 Palm 105 108 113 116 119 120 119 120 121 125.7 126.3 126.3 127.4 125.6 126.3 126.4 0.1-0.8 8.7 5 2810 Springs/ Meadows 74 76 76 79 80 82 81 83 84 84.8 84.5 84.0 83.5 81.8 81.1 79.2-2.3-5.1 0.8-5 1419 03
Pricing Index Contd. Apartments & Villas: The property prices for the month of September 14 as compared to the previous months have dipped across all locations except for Lake Towers and Palm which is very marginal. The percentage in property prices over the last three months indicate a declining trend across all major locations where the prices are marginally holding up. Over a period of last 12 months (since Sep 13) prominent Villa Community such as Village have witnessed an increase of 13.8 in property prices followed by Meadows & Springs which has witnessed an increase of 0.8. Over a period of last 12 months (since Sep 13) Apartments such as International City have witnessed a increase of 25 in property prices followed by Business Bay which has witnessed a increase of 20. Price Watch Villa Price Trend Price Index as of end June 3 Months Arabian Ranches Nov Change Change Sept-13 14 83 85 86 84 84 85 85.3 85.1 84.8 84.2 82.7 82.1 81.5-0.7-3.3-2.0-3 1333 Islands 95 97 98 97 98 98 98.5 98.5 98.6 98.6 98.1 98.1 97.9-0.2-0.7 3.2 0 1816 Park 82 85 85 82 82 82 82.0 81.2 80.7 79.4 78.9 77.9 76.4-1.9-3.9-7.2-7 1236 Village 97 98 101 112 111 113 114.1 113.8 114.1 114.0 113.0 111.2 110.1-1.0-3.4 13.8-1 1001 Springs/ Meadows 79 80 82 81 83 84 84.8 84.5 84.0 83.5 81.8 81.1 79.2-2.3-5.1 0.8-5 1419 04
Apartment Price Trend Price Index as of end June Nov- 3 Months Change Change Sept- 13 14 Burj Khalifa Tower 56 56 56 53 53 53 52.8 53.4 53.3 53.3 53.1 52.8 52.6-0.5-1.5-6.1-1 3750 Burj Dubai Downtown 96 97 100 102 103 104 104.4 104.4 104.6 105.2 105.2 105.2 104.7-0.5-0.5 8.9 2 2868 Dubai Marina 75 76 77 79 82 82 83.5 83.4 83.4 82.9 82.9 83.2 83.0-0.2 0.1 10.4 2 1748 Beach Residences Lake Towers 73 74 75 77 77 78 79.1 79.4 79.1 82.0 82.0 81.6 81.3-0.4-0.8 11.7 5 1613 55 56 56 57 58 59 61.2 61.9 61.9 62.3 62.1 61.4 62.1 1.2-0.3 13.3 7 1028 Outlook The demand for mid to low end residential units is expected to remain strong in the short term. The Economic outlook is positive which will drive the demand for good quality residential and commercial space. The price across all locations have stabilised. With dip in number of transactions, we expect this trend to continue for Q4 as well. Lower interest rate regimes will prevail in the lending market. Scope for lowering the rate of interest further looks unlikely. Disclaimer: Please note that this communication constitutes information on general market and is based on studies and research, it should not be solely relied on without an opinion your investment advisor. bank psc shall not be liable for an liability arising out of any financial advice provided in connection with this communication. 05