Dubai House Price Index First Quarter 2016
Index Points Index Points Executive Summary Overview DUBAI HOUSE PRICE INDEX: QUARTER ON QUARTER The overall quarterly index registered no major change in Q1 2016, standing at 144 index points. The blended average rate for residential property in Q1 2016 was AED 1,276 per sq ft (AED 13,739 sq m) compared to AED 1,283 sq ft (AED 13,809 sq m) in Q4 2015. 170 165 167 152 148 144 144-3% -9% -3% -3% 0% Q1 Q2 Q3 Q4 Q1 2015 2016 DUBAI HOUSE PRICE INDEX: YEAR ON YEAR The Annual Dubai House Price Index registered a 14% Y-O-Y decrease in Q1 2016. The blended average rate for residential property in Q1 2016 was AED 1,276 per sq ft (AED 13,739 sq m) compared to AED 1,482 per sq ft (AED 15,953 sq m) in Q1 2015. 170 165 167 144-14% Q1 2015 Q1 2016 2
TOP 5 DEVELOPMENTS BY VOLUME OF TRANSACTIONS Q1 2016 20.0% 18.0% 16.0% 14.0% 12.0% 10.0% 8.0% 6.0% 4.0% 2.0% 0.0% 17.6% Dubai Marina 6.5% 6.2% 6.2% Jumeirah Lakes Towers The Springs Arabian Ranches - Villas Dubai Marina recorded the highest number of transactions in the HPI, equating to 17.6% of the total transactions. Jumeirah Lakes Towers obtained a 6.5% share of the total transactions followed by The Springs and Arabian Ranches - Villas at 6.2%, both. In fifth place was Downtown Dubai at a 5.5% share. TOP 5 DEVELOPMENTS BY DECLINE IN SALE PRICE YEAR ON YEAR 5.5% Downtown Dubai BREAKDOWN OF TRANSACTIONS BY PROPERTY TYPE Q1 2016 26% 15% Q1 2016 59% Apartments Townhouses Villas 0% -5% -10% The Villa The Meadows Jumeirah Beach Hotel Green Community - Townhouses Jumeirah Islands The Villa development saw the largest year on year decrease, (22%), while The Meadows recorded the second largest decrease (21%) over the period Q1 2015 to Q1 2016. -15% -20% -22% -21% -20% -18% -17% -25% 3% 5% 3
Additional Units Additional Units Forthcoming Supply In 2015 the occupancy level for both owner occupied and rented properties in Dubai was 88%. Colliers projections estimate that by the end of 2016, occupancy levels are expected to stay at 88% as demand and supply are expected to grow side by side. By 2020 the number of household units supplied is estimated to increase by an additional 16% adding approximately 73,300 units to the market. However, demand is also estimated to increase by 28% (approximately 111,100 units), adding further pressure and potentially leading to an undersupplied market. At the end of 2015, there were approximately 212,300 freehold Units. By Q4 2016 the number of freehold units is expected to increase by 7%, reaching an estimated 227,500 units, adding around 15,200 units and this constitutes 47% of the total number of residential units in Dubai. By 2018, the total number of freehold units is expected to increase by another 20% adding around 43,100 units to the market. Demand vs. Supply 2014 / 2020 600,000 100% 500,000 95% 400,000 90% 300,000 85% 200,000 80% 100,000 75% - 2014 2015 2016 2017 2018 2019 2020 Demand Supply Occupancy Levels 70% Additional Freehold Units 60,000 50,000 40,000 39,315 50,685 30,000 15,754 20,000 10,000 8,415 13,975 12,383 9,880 19,118 10,587 14,760 15,211 15,096 12,802-2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 4
Index Points Sample Size Historical Performance Over 2012 to 2013, the Dubai residential real estate market registered a growth of 50% reaching 156 index points in Q4 2013, compared to 104 index points in Q4 2011. In 2014 the index increased by a further 10%, to reach 171 points in the last quarter of 2014. Over Q1 to Q4 2015 the HPI registered 14% decrease from 167 to 144 index points. The total number of transactions decreased 11% over the same period, from 438 to 389 transactions. In the first quarter of 2016 the HPI registered no major change in value. On the other hand, the total number of transactions decreased 21% to 306 transactions, down from 389 transactions in the previous quarter. Index Points vs. Sample Size 175 170 165 550 500 450 400 350 300 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 2013 2014 2015 2016 Index Points Sample Size 250 Compared to Q2 2008 (the peak of Dubai s residential real estate market), the total volume of transactions remains 49% lower and the average price per sq ft 30% lower in Q1 2016, highlighting the successful measures introduced by the government to dampen property speculation. Sample Size & Price Per Sq ft 2,000 1,800 1,833 1,600 1,463 1,482 1,400 1,200 1,000 800 1,038 1,018 915 949 1,226 1,354 1,318 1,283 1,276 600 400 596 515 449 438 412 394 389 200-113 44 159 156 Q2 2008 Q1 2009 Q1 2010 Q1 2011 Q1 2012 Q1 2013 Q1 2014 Q1 Q2 Q3 Q4 Q1 306 2015 2016 Volume Price / Sq ft (AED) 5
Alternative Analysis Real Estate Returns In Q1 2016, Dubai Financial Market registered a 7% increase of its value while the HPI registered no major change, standing at 144 index points. DFM / HPI Comparison Volatility of Returns - Quarter on Quarter The second chart shows that the HPI has, since its inception in Q1 2007, outperformed the DFM index. In this regard, a residential investment purchased in Q1 2007 has to date, over the nine years period, generated returns of circa 44%. A similar investment in the DFM for the same period has generated 10% in losses in Q1 2016, down from 6% losses recorded in Q1 2015. 60% 40% 20% 0% -20% Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016-40% -60% -80% DFM HPI DFM / HPI Comparison Investment Performance 250 225 200 175 125 100 75 50 25 0 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 DFM HPI 6
Price to Rent Ratio To provide further analysis of the residential real estate market, Colliers International introduced the concept of Price-to-Rent Ratio (PRR). This ratio is widely used as an indicator of the fundamental value, generated from rental income, of real estate assets. The ratio simply measures the relationship between the prices (taken from the HPI) of purchasing a residential property and the rental income. A high property price associated with a flat rental market (as in most western markets) increases the value of the ratio, indicating that property values are expensive. However, if rents are falling there would be the expectations of a greater fall in property prices as investors receiving less income would pay less for residential property. For the purpose of this analysis, Q2 2007 is assumed as the base quarter and the ratio is rebased at 1 (Q2 2007 = 1). The ratio in Q1 2016 has seen 2% increase compared to Q4 2015, standing at 1.35. The long term average (excluding the mid-2008 boom) stands at 1.336, meaning that in Q1 2016 the price to rent ratio is 1.24% above the long term average. When comparing the ratio during this quarter (Q1 2016) to the ratio in Q1 2015, there has been a 7.4% decrease. Price to Rent Ratio 1.55 1.45 1.35 1.25 1.15 1.05 0.95 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 Ratio LTA 7
Index Points Index Points Apartment Index APARTMENT INDEX: YEAR ON YEAR Year on Year The Annual Overall Apartment Index decreased 14% in Q1 2016 compared to Q1 2015, decreasing to 133 points from points. The blended average rate per sq ft for apartments in Dubai in Q1 2016 was AED 1,346 (AED 14,488 per sq m) compared to AED 1,563 per sq ft (AED 16,824 per sq m) in Q1 2015. 125 120 133-14% Q1 2015 Q1 2016 Quarterly The Quarterly Overall Apartment index decreased 2% in Q1 2016. The blended average rate per sq ft for apartments in Dubai in Q1 2016 was AED 1,346 (AED 14,488 per sq m) compared to AED 1,376 (AED 14,811 per sq m) in Q4 2015. APARTMENT INDEX: QUARTERLY 143 143 136 133 125 120-1% -8% 0% -5% -2% Q1 Q2 Q3 Q4 Q1 2015 2016 8
Index Points Index Points Townhouse Index Year on Year The Annual Overall Townhouse Index decreased 11% in Q1 2016 compared to Q1 2015, decreasing to 133 points from points. The blended average rate per sq ft for townhouses in Dubai in Q1 2016 was AED 1,055 (AED 11,356 per sq m) compared to AED 1,188 per sq ft (AED 12,788 per sq m) in Q1 2015. Quarterly The Quarterly Overall Townhouse index saw a 1% decrease in Q1 2016. TOWNHOUSE INDEX: YEAR ON YEAR 125 120 133 Q1 2015 Q1 2016 TOWNHOUSE INDEX: QUARTERLY -11% The blended average rate per sq ft for townhouses in Dubai in Q1 2016 was AED 1,055 (AED 11,356 per sq m) compared to AED 1,067 (AED 11,485 per sq m) in Q4 2015. 133 134 133 125 129 120 115 0% -11% -3% 4% 1% Q1 Q2 Q3 Q4 Q1 2015 2016 9
Index Points Index Points Villa Index Year on Year The Annual Overall Villa Index decreased 15% in Q1 2016, compared to Q1 2015, decreasing to 171 points from 200 points. The blended average rate per sq ft for villas in Dubai in Q1 2016 was AED 1,235 (AED 13,295 per sq m) compared to AED 1,447 per sq ft (AED 15,576 per sq m) in Q1 2015. Quarterly The Quarterly Overall Villa index saw a 3% increase in Q1 2016. The blended average rate per sq ft for villas in Dubai in Q1 2016 was AED 1,235 (AED 13,295 per sq m) compared to AED 1,204 (AED 12,960 per sq m) in Q4 2015. VILLA INDEX: YEAR ON YEAR 205 200 195 190 185 180 175 170 165 200 VILLA INDEX: QUARTERLY Q4 2014 / Q4 2015 210 200 190 180 200 171-15% Q1 2015 Q1 2016 181 170 167 167 171-6% -9% -8% 0% 3% Q1 Q2 Q3 Q4 Q1 2015 2016 10
About the Index The Colliers International House Price Index (HPI) was created in 2007 and established in January 2008 by Colliers International and five leading banks and financial institutions in the Emirate of Dubai to provide statistics specifically designed to reflect the average growth - decline rate of house prices across certain foreign ownership areas of Dubai, United Arab Emirates. The data that forms the basis of the indices presented in this HPI has been provided by all the member financial institutions and relates to properties which have been mortgaged through these institutions. The member banks - financial institutions associated with the Colliers International House Price Index are as follows: HSBC Bank Middle East Limited Emirates NBD Standard Chartered Bank Amlak Finance Noor Bank Citi Bank We have used the weighted average method to construct the overall index. Based on our coverage of 21 master developments in Dubai, weighting has been apportioned on the basis of unit type (Apartment, Villa or Townhouse). Apartments, Villas and Townhouses have been weighted at 59%, 26% and 15% respectively in order to provide an accurate representation of market trends. The Recommended minimum sample size for this HPI is 10 property transactions. 11
554 offices in 66 countries on 6 continents Primary Authors: Ian Albert, BSc (Hons) MRICS Regional Director MENA ian.albert@colliers.com Tremaine Ferreira NDPV CIEA Director Residential Valuations tremiane.ferreira@colliers.com $2.5B IN ANNUAL REVENUE 2B SQUARE FEET UNDER MANAGEMENT 16,000 PROFESSIONALS AND STAFF Colliers International Dubai Al Shafar Tower 1 Tecom, Dubai UAE Tel +971 4 453 7400 Fax +971 4 453 7401 About Colliers International Colliers International is a global leader in commercial real estate services, with over 15,800 professionals operating out of more than 485 offices in 63 countries. Colliers International delivers a full range of services to real estate users, owners and investors worldwide, including global corporate solutions, brokerage, property and asset management, hotel investment sales and consulting, valuation, consulting and appraisal services and insightful research. The latest annual survey by the Lipsey Company ranked Colliers International as the second-most recognized commercial real estate firm in the world. In MENA Colliers International has been providing leading advisory services through its regional offices since 1996. Colliers International currently has four corporate offices in Dubai, Abu Dhabi, Riyadh and Jeddah. colliers.com Copyright 2014 Colliers International. The information contained herein has been obtained from sources deemed reliable. While every reasonable effort has been made to ensure its accuracy, we cannot guarantee it. No responsibility is assumed for any inaccuracies. Readers are encouraged to consult their professional advisors prior to acting on any of the material contained in this report.