QUARTER REVIEW 2018 Dubai Real Estate ket www.valustrat.com
Real Estate Performance VPI ket Intelligence. Simplified. Office -9.0% -11.6% Q3 Y-o-Y Q3 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 -3.8% -34.2% 9.5% -20.4% -5.1% Hotel ADR Hotel Occupancy Office Sales Ticket Size Office Sales Volume Office Rents -5.4% Jan-Jul YoY Jan-Jul YoY -1% -12.8% -10.1% -7.2% Sources: REIDIN, DTCM, ValuStrat 1 Dubai Real Estate ket 3rd Quarter 2018 Review
VPI 16 Apartment and 10 Villa Locations in Dubai [Base: Jan 2014=100] 110 100.1 98.5 98.1 97.9 98.0 97.9 97.5 97.5 97.0 96.7 96.2 95.4 92.7 89.5 90 87.0 2016 2015 70 The third quarter 2018 VPI, displayed an overall 9% annual fall in capital values, with the quarterly decline decelerating to 2.9% when compared to the previous quarter. This downward trend resulted in 22.3% citywide capital value loss since the peaks of mid-2014. All established freehold locations monitored by the VPI witnessed price drops since the last quarter, ranging from 0.2% to 5%. Quarterly declines of more than 4% were registered in Jumeirah Islands, Business Bay, Palm Jumeirah (apartments), and Discovery Gardens. Capital values for villas in Palm Jumeirah and Al Furjan remained mostly flat as compared to Q2. 2018 Source: ValuStrat Office 5 Office Locations in Dubai [Base: Jan 2015=100] 110 100.0 97.9 97.7 97.0 91.8 91.4 88.7 90 90.0 92.0 91.5 91.3 89.3 86.5 82.7 80.7 2015 2016 70 The VPI Office for Q3, which analyses the freehold office market in the most transacted locations in Dubai, stood at 80.7 points. This suggests that average capital values are 11.6% lower than last year. However, declines slowed to 2.3% when compared to previous quarter. Barsha Heights witnessed the highest annual drop of 15% and 4.2% QoQ, Jumeirah Lake Towers was second in line with losses of 13.3% year on year and 1% QoQ. Dubai International Financial Centre (DIFC) fell 2.1% YoY and 1.1% QoQ. Downtown Dubai also saw annual declines but was the only location monitored by the VPI where there was no change on a quarterly basis. 2018 Source: ValuStrat For more details, please visit www.valustrat.com/vpi www.valustrat.com 2
MacroEconomicSnapshot With the aim of boosting the economy, UAE government announced 10-year visa for investors and certain professionals as well as 100% foreign ownership of non-free zone establishments 5-year renewable residency visa announced for expat retirees. Subject to either AED 2m property, AED 1m savings or AED 20,000 income. Initiative may benefit overall economy, particularly the real estate sector Latest Dubai Department of Economic Development (DED) report notes AED 80 billion worth of foreign direct investment and 54,000 jobs in the city s technology sector over last 3 years DED permitted 163 free zone companies to operate in mainland Dubai due to an MOU signed with the Dubai Free Zones Council. Over 34,000 free zone companies are expected to benefit from this agreement 2,105,000 2,210,300 2,320,800 2,450,000 2,695,000 2,978,000 3,126,000 2012 2013 2014 2015 2016 2018-Q3 Dubai International Financial Centre reported 14% YoY increase on the number of active registered companies Dubai International Airport (DXB) recorded a 1.6% increase in passenger traffic, reached almost 52 million as of July 2018 Consumer Price Index vs. Housing Index January 2016 YTD Dubai s population stood at 3.13 million with a five-year average growth rate of 7.2% 114 With the imminent possibility of two more interest rate hikes this year as per the US Federal Reserve, borrowing costs in the UAE are expected to increase 112 110 108 106 104 102 100 As of August, Dubai s annual inflation rate was 2.2% with a marginal monthly change Jan Feb Apr May Jul Aug Oct Nov Jan Feb Apr May Jul Aug Oct Nov Jan Feb Apr May Jul Aug 98 96 94 2016 2018 General Index (2014=100) Housing, Water, Electricity, Gas and Other Fuels Source: Dubai Statistics Centre 3 Dubai Real Estate ket 3rd Quarter 2018 Review Housing and Utilities Expenses retreated 3.6% YoY and 0.6% MoM
Supply 12,332 apartments and villas, 27% of the total supply as expected at the start of 2018, have been completed YTD 650 Dubai Supply 600 2015-2019 20 ( 000 UNITS) 70% of these completions, amounting to 8,614 units, were located mainly in five areas: Dubailand, Jumeirah Village Circle (JVC), Dubai Silicon Oasis, International City phase 2/3, as well as Dubai ina 15 550 500 485 450 400 201 6 497 519 The upcoming supply mix is composed of 18,420 apartments and 2,729 villas, which are expected to finish construction before year end 519 29 4.7 2019 is expected to add just under 70,000 residential units, which includes projects that were previously delayed during the last 18 months 400 8E 201 450 553 56 13.5 Existing New Apartments* New Villas* E 19 20 500 550 600 467 *May be subject to significant downward adjustment Source: Dubai Statistics Centre, REIDIN, MEED Projects, ValuStrat 650 Sales The summer holidays and Eid break seemed to have influenced residential property sales this quarter as transaction volumes saw considerable declines Established areas that witnessed substantial off-plan sale transactions during the last three months included Downtown Dubai at 85% of sales being off-plan, Business Bay at 84% and Remraam 75% As investor focus shifts towards prime ready properties, average ticket prices for ready properties have risen 9.5% QoQ, however, off-plan sales prices fell 3.8% The median transacted price for ready apartments stood at AED 10,021 per sq m (AED 931 per sq ft), down 11% YoY and 7.9% QoQ Ready Sales Volumes 0.8% Last Year -20.4% Last Quarter Off-plan Sales Volumes -50.5% Last Year -34.2% Last Quarter Source: REIDIN, ValuStrat For ready villas, the median transacted price was AED 10,333 per sq m (960 per sq ft), down 8.8% YoY and 3% QoQ www.valustrat.com 4
Rents Overall residential asking rents fell 11% YoY Asking Rents However, on a quarterly basis asking rents declined 5.1% Compared to the same period last year, listed rents were down 11.1% for apartments and 10.2% for villas -11.0% -20.3% Last Year Last 2 Years Average annual rents for 2-bed villas AED 126,000, 3-bed at AED 177,000, and 4-bedroom villas were AED 255,000 Average annual rents for studio apartments were AED 51,000, 1-bed at AED 74,000, 2-bed was AED 105,000, and 3-bedroom apartments were AED 149,000-7.0% -5.1% Last 6 Months Last Quarter Source: REIDIN, ValuStrat OfficeSupply Office space under construction is estimated at 929,000 sq m (10.1 million sq ft) for delivery by 2021 Dubai Office Supply 2015-2019 (Million sq m GLA) 0.50 Most upcoming office space will be concentrated in Jumeirah Lake Towers (32%), TECOM Business Park (20%), Business Bay (15%), DIFC (11%) and Dubai Silicon Oasis (7%) 0.37 9.07 8.70 8.70 8.47 No major completions were reported for this quarter 8.39 2015 2016 2018E Existing Stock 2019E Expected Supply Source: REIDIN, MEED Projects, ValuStrat 5 Dubai Real Estate ket 3rd Quarter 2018 Review
OfficeSales Office transaction volumes during the summer holiday period declined 10.1% when compared to the previous quarter Office Median Transacted Prices Overall transacted office prices were 24.7% lower than last year, however, saw an increase of 2.9% QoQ The median transacted price stood at AED 8,514 per sq m (AED 791 per sq ft) Business Bay was the most popular choice for office sales with a share of 43% followed by Jumeirah Lake Towers (JLT) with 32.5% of overall transactions The median size of offices sold in Business Bay was 110 sq m (1,184 sq ft) and 111 sq m (1,194 sq ft) in JLT 32,468 sq m (349,477 sq ft) of total GLA was sold during Q3 amounting to a total investment value of more than AED 382 million -21.1% Last 2 Years -10.6% Last 6 Months Source: REIDIN, ValuStrat -24.7% Last Year 2.9% Last Quarter OfficeRents Median office asking rents declined by 11.8% YoY, and 7.2% QoQ Office Median Asking Rents Asking rents for this quarter was 11.7% lower than two years ago The citywide median asking rent for a typical office space stood at AED 948 per sq m (AED 88 per sq ft) Median asking rents commanded by Dubai International Financial Centre (DIFC) were at AED 1,862 per sq m (AED 173 per sq ft) for typically sized units between 93 186 sq m (1,000 2,000 sq ft) In Business Bay, median asking rents stood at AED 915 per sq m (AED 85 per sq ft) for the typical office area of 93 sq m (1,000 sq ft) -11.7% Last 2 Years -6.3% Last 6 Months Source: REIDIN, ValuStrat -11.8% Last Year -7.2% Last Quarter www.valustrat.com 6
RetailSupply Nakheel opened Pavilion at Badrah in Jebel Ali with a total retail space of 6,689 sq m (72,000 sq ft), set to have 26 outlets in addition to its own Carrefour supermarket Retail Malls & Shopping Centres ( 000 sq m GLA) 1,933 Dubai Holding and Emaar Properties announced a partnership to develop Dubai Square at Dubai Creek Harbour, a next generation retail hub expected to have a 750,000 sq m (8.07 million sq ft) GLA (about twice the size of Dubai Mall) and featuring the Middle East s largest Chinatown 439 852 Union Coop to build a 5,260 sq m (56,618 sq ft) hypermarket in Dubai Silicon Oasis as part of a 30-year investment contract with Dubai Silicon Oasis Authority 46 187 Convenience < 3k sq m Regional 30k-90k sq m Neighbourhood 3k-10k sq m Super Regional > 90k sq m Community 10k-30k sq m RetailPerformance Source: REIDIN, ValuStrat Majid Al Futtaim s foray into Saudi Arabia, Egypt, Pakistan and East Africa markets with Carrefour is expected to boost revenue by 10% YoY Dubai Duty Free announced 10% YoY increase in sales during the first half of 2018, with average daily sales reaching AED 20 million Number of Malls and Shopping Centres in Dubai 32 24 23 Two of Dubai s premier retail mall operators have proven resilient amidst a challenging retail environment. Emaar Malls announced an 8% YoY growth in net profit while MAF overall revenues up 13% YoY during H1 2018 15 12 Emaar s retail assets maintained a high occupancy of 93% during the first half of 2018 Neighbourhood 3k-10k sq m Community 10k-30k sq m Convenience < 3k sq m Regional 30k-90k sq m Super Regional > 90k sq m Source: REIDIN, ValuStrat 7 Dubai Real Estate ket 3rd Quarter 2018 Review
HotelSupply As of July 2018, Dubai has a total of 86,506 hotel rooms and 24,826 hotel apartments An estimated total of 1,704 rooms were added during Q3 from the opening of six hotels Hotel Room Supply 2015-2019 ( 000 KEYS) 17.3 Notable openings during the quarter were Hamptons by Hilton Dubai Airport (420 rooms), Occidental IMPZ (239 keys), Royal Central Palm Jumeirah (207 rooms) and Al Seef by Jumeriah (200 keys) 13.5 121 Approximately 2,583 rooms are to be added to the city s hotel room stock by 2020 from the most recent hospitality project announcements 98 2015 103 2016 107 107 2018E 2019E This includes a collection of hotels as part of Dubai Creek Harbour (1,500 rooms), Radisson Hotel DAMAC Hills (481 keys) and a Centara operated hotel (601 rooms) in Deira Islands Hotel & Service Apt Rooms Source: DTCM, MEED Projects, ValuStrat E New Supply HotelPerformance Total international guests ending July 2018 grew to 9.25 million Source of Dubai Visitors by Region Jan-Jul 2018 Citywide occupancy rate was 76%, 1% lower when compared to the same period last year For January-July period, Revenue per Available Room (RevPAR) declined 6.7% while Average Daily Rate (ADR) fell 5.4% YoY 11% 7% 2% 5% 18% The top source markets for Dubai visitors which accounted for more than 50% share came from three regions: Western Europe (21%), South Asia (17%) and GCC (18%) Russian tourists count continued to rally upwards with highest growth rate of 70% YoY. Tourists from China ranked within the top 5 source markets 10% 9% GCC Western Europe South Asia MENA North Asia & South East Asia 21% 17% Americas Russia, CIS & Eastern Europe Africa Australia Source: DTCM www.valustrat.com 8
IndustrialInvestment/Supply Dubai Airport Free Zone Industrial Park, the first expansion project by the free zone achieved 82% occupancy during the first half of the year DP World announced 14.4% YoY revenue growth stemming from increases in volume as well as an agreement with Chinese investors to build a 3 million sq m (32.3 million sq ft) BUA, Traders ket in Jebel Ali Port and Free Zone 5,000 4,000 3,000 2,000 1,000 4,306 2,690 4,306 2,153 3,900 1,938 Indian pharmaceutical and bio-technology firm Wockhardt opened a 10,000 sq m (107,639 sq ft) manufacturing, research and development facility in Jebel Ali Free Zone (JAFZA) worth AED 146.8 million Al Quoz Dubai Investment Park Jebel Ali Free Zone 70 pre-built storage and light industrial units with sizes ranging from 465 sq m (5,000 sq ft) to 929 sq m (10,000 sq ft) were launched by Dubai Industrial Park IndustrialPerformance Industrial property prices remained broadly stable during Q3. Prices were generally ranging 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 Falling sales prices in nearby Emirates such as Sharjah (Sajaa and New Emirates Industrial Parks near to E611), and offerings in Al Jurf Ajman, New Emirates Modern Industrial area in Umm Al Quwain and free zones in Ras Al Khaimah, may exert further pressure on prices in Dubai Industrial rents remained mostly flat in all locations, with rates ranging between AED 296 to AED 538 per sq m (AED 27 to AED 50 per sq ft) with the exception of marginal quarterly decline of 1% seen in Al Qusais industrial area Industrial Rental Rates (AED/sq m) 538 484 538 538 484 484 322 296 355 300 300 322 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 3rd Quarter 2018 Review
03.09.18 Holding back the waves: Asia s land grab Alongside hotels, there will be 4,000 residential units available as second homes priced between Dh1.5m ($408,000) and Dh100m. Each of the 10 palaces on Sweden comes with a beach and a roof shaped like the hull of a Viking ship. The highest price achieved per square foot off-plan in the development is Dh4,000, says Kleindienst more than four times the Dh979 median sales 20.11.17 price per sq ft for villas in Dubai in the 12 months to ch, according to ValuStrat. 15.08.18 Developers take a cautious approach to unit launches Haider Tuaima, Head of Real Estate Research at ValuStrat, observes: It is normal to expect some developments to suffer from poor project and cash-flow management as well as promising unachievable completion dates. 16.07.18 Demand to soon outstrip supply for Dubai home We expect a longer term legacy benefit of Expo, part of which would market Dubai s various offerings such as business, trade, hospitality and tourism on a much wider global scale, resulting in a sustained growth in demand for commercial and residential properties, pointed out by Haider Tuaima, Head of Real Estate Research at ValuStrat. 04.09.18 Architecturally diverse homes find buyer favour in Dubai An investor, driven by rental returns and capital growth, may elect to purchase in an architecturally diverse freestanding project by a private developer, with not such a high build specification as opposed to a master-planned gated community as it is not so much the lifestyle factor motivating his decision but the return on investment," adds Cheryl McAdam, Director Valuations at ValuStrat 28.08.18 Understanding UAE Mortgage Redemption Fees and Loan to Value (LTV) Ratios lan King Managing Director and Group Head Real Estate at ValuStrat discusses mortgage redemption fees and loan to value (LTV) ratios in the UAE on the Business Breakfast Show with Malcolm and Brandy on 103.8 31.08.18 Home truths: The long and short of Dubai real estate Average Dubai property prices are 20 percent below their mid-2014 peak values, according to ValuStrat data. And although the IMF estimates that Dubai s GDP will rise over three percent this year, the business environment is tough in many sectors, with more competition from around the region. www.valustrat.com 10
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 1977. 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 www.valustrat.com/vpi 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. Director - Commercial Valuations Copyright ValuStrat Consulting FZCo. 2018 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. www.valustrat.com