dubai house price index...apartments townhouses villas source: colliers international dubai marina...

Dubai House Price IndexThird Quarter 2015

Dubai House Price Index | Q3 2015 | Colliers International2

DUBAI HOUSE PRICE INDEX:

YEAR ON YEAR

Q3 2014 / Q3 2015

170171

167

152

148

135

140

145

150

155

160

165

170

175

Q3 Q4 Q1 Q2 Q3

2014 2015

Index

Poin

ts

0% 1% -9% -3%-3%

170

148

135

140

145

150

155

160

165

170

175

Q3 2014 Q3 2015

Index

Poin

ts

-13%

Source: Colliers International


Executive Summary

Overview

The overall quarterly index registered a 3% decrease in Q3 2015, decreasing from 152 index points to 148

index points. The blended average rate for residential property in Q3 2015 was AED 1,318 per ft² (AED

14,187 m²) compared to AED 1,354 ft² (AED 14,575 m²) in Q2 2015.

The Annual Dubai House Price Index registered a 13% Y-O-Y decrease in Q3 2015. The

blended average rate for residential property in Q3 2015 was AED 1,318 per ft² (AED

14,187 m²) compared with AED 1,508 per ft² (AED 16,232 m2) in Q3 2014.

DUBAI HOUSE PRICE INDEX:

QUARTER ON QUARTER

Q3 2014 / Q3 2015

Dubai House Price Index | Q3 2015 | Colliers International


The Villa development saw the largest

year on year decrease, (22%), while

prices of townhouses in the Arabian

Ranches recorded the second largest

decrease (20%) over the period Q3 2014

to Q3 2015.

-22%

-20%-19%

-18%

-16%

-25%

-20%

-15%

-10%

-5%

0%The Villa

Arabian Ranches -Townhouses

Palm Jumeirah(Nakheel) -Apartments

Jumeirah Village -Villas The Springs

TOP 5 DEVELOPMENTS BY DECLINE IN SALES PRICE YEAR ON YEAR

3

BREAKDOWN OF TRANSACTIONS

BY PROPERTY TYPE Q3 2015

Q3

2015

Apartments Townhouses Villas


Dubai Marina recorded the highest number of transactions

in the HPI, equating to 11% of the total transactions.

Jumeirah Lakes Towers obtained a 10% share of the total

transactions followed by Downtown Dubai at 8%. The

Springs and The Greens obtained 7% and 6% share

respectively.

61%

15%

24%11%

10%

8%

7%

6%

0%

2%

4%

6%

8%

10%

12%

Dubai Marina Jumeirah LakesTowers

Downtown Dubai The Springs The Greens

TOP 5 DEVELOPMENTS BY NUMBER OF TRANSACTIONS Q3 2015


3% 5%


Factors Influencing

the Residential

Real Estate Market

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%, from 156 points in Q4

2013 to 171 points in Q4 2014 (5% increase in Q1,

3% in Q2, no change in Q3 and 1% increase in

Q4).

Transactional data from Q1 2015 has revealed a

moderate decline with a 3% decrease registered

when compared with Q4 2014. Conversely, the

total number of transactions in Q1 2015 increased

by 16% reaching 438 transactions from 379

transactions in Q4 2014. In Q2 2015 the index

decreased 9% compared to Q1 2015 with the

volume of transactions moderately declining by 5%.

In Q3 2015 the index recorded a 3% decline with

the volume of transactions again decreasing by

4%. Compared to Q2 2008 (the peak of Dubai’s

residential real estate market), the total volume of

transactions remains 34% lower in Q3 2015,

highlighting the successful measures introduced by

the government to dampen property speculation.

1. Increase in Transfer Fees

In Q3 2014 the Dubai Land Department doubled

the transfer fees for all property sales from 2% to

4%. In the case of a direct sale from a developer to

a buyer the 4% is divided equally between the

developer and buyer, however, in some instances

the full amount is paid by the buyer. Transaction

costs now consist of the transfer fee to the DLD

(4%), commission to the agent (2% or more), NOC

fee to the developer (AED 1,500) and loan

application fee to the bank (between AED 2,000

and AED 15,000). The increase in the transfer fees

was implement to safeguard the market, and when

taken in combination with the mortgage cap rule, it

appears to have been successful.

The following graph is a comparison of the cost of

buying a AED 2 million apartment and a AED 6

million villa in 2013 and 2015. Following the

increase in transfer fees and the implementation of

the mortgage cap, the average cost of buying an

apartment increased by 63% from AED 381,500 in

2013 to AED 621,500 in 2015, while the average

cost of buying a villa increased by 116% from AED

1,141,500 in 2013 to AED 2,461,500 in 2015.

381,500

1,141,500

621,500

2,461,500

-

500,000

1,000,000

1,500,000

2,000,000

2,500,000

3,000,000

Apartment Villa

Cost

(AE

D)

OVERALL COST INCREASE2013 / 2015


0

100

200

300

400

500

600

700

135

140

145

150

155

160

165

170

175

Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3

2013 2014 2015

Sam

ple

Siz

e

Index

Poin

ts

Index Points vs. Sample Size

Index Points Sample Size

63%

116%



Factors Influencing

the Residential

Real Estates market

2. Mortgage Cap

In the last quarter of 2013 a new mortgage cap rule

was confirmed by the UAE government, taking

effect in December. The new rule included a

mortgage limit with a loan to value ratio of 75% and

80% for expatriates and UAE nationals respectively

for properties below AED 5 million. Properties over

AED 5 million in value were limited to 65% of the

value for expatriates and up to 70% for nationals.

The expectation of the mortgage cap, back in the

final two quarters of 2013, put pressure on the

market causing a significant increase in values and

also an opportunistic increase in asking prices

beyond the market values. These significant

increases discouraged buyers causing a drop in

demand, decreasing the total volume of

transactions by 25% in Q4 2014 compared to Q4

2013. The graph below shows the effect of the

announcement and implementation of the

mortgage law on the villa market:

3. Oil Prices

Over the past year oil prices have recorded a

significant decline of 52% approximately, the price

per barrel dropped from around USD 94 per barrel

in Q3 2014 to USD 45 per barrel in Q3 2015. In Q4

2014 oil prices drastically decreased by 43% to

land at USD 54 per barrel compared to USD 94 per

barrel in Q3 2014. On the other hand, the HPI was

stable in the period from Q2 to Q4 2014 standing at

171 index points in Q4 2014, however, in Q1 2015

we noted a 2% decrease followed by another 9%

and 3% in Q2 and Q3 2015 respectively. In Q3

2015 the Dubai House Price Index stood at 148

index points. The following graph shows the impact

of oil prices on Dubai’s residential real estate

market.

278

318

134119

111

0

50

100

150

200

250

300

350

Q2 Q3 Q4 Q1 Q2

2013 2014

Num

ber

of

Tra

nsactions

SAMPLE SIZE: VILLASDUBAI HOUSE PRICE INDEXQ2 2013 / Q2 2014

87% 14% -11% -7%-58%


135

140

145

150

155

160

165

170

175

0

20

40

60

80

100

120

Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3

2013 2014 2015

HP

I (I

ndex

Poin

ts)

Oil (

US

D / B

arr

el)

Oil Prices vs. HPI

Oil Prices HPI



70%

75%

80%

85%

90%

95%

100%

105%

110%

-

100,000

200,000

300,000

400,000

500,000

600,000

2014 2015 2016 2017 2018 2019 2020

Additio

nal

Units

Demand vs. Supply2014 / 2020

Demand Supply Occupancy Levels

6

Forthcoming Supply

In 2014 the occupancy level for both owner

occupied and rented properties in Dubai was 87%.

Colliers’ projections estimate that by the end of

2015, occupancy levels are expected to reach

88% as the increase in demand is greater than the

increase in supply. By 2020 the number of

household units supplied is estimated to increase

by an additional 17% adding approximately

73,500 units to the market.

However, demand is also estimated to increase by

34% (approximately 130,000 units), adding further

pressure and potentially leading to an

undersupplied market.

At the end of 2014, there were approximately

197,500 freehold Units. In Q4 2015, the number of

freehold units is expected to increase by 7%

reaching an estimated 212,300 units to add

14,700 units and this constitutes 46% of the total

number of residential units in Dubai. In 2017, the

total number of freehold units is expected to

increase by 13.6% adding around 26,900 units to

the market.



8,415

39,315

50,685

15,754

13,975 12,383

9,880

19,118

10,587

14,760

7,130 5,060

-

10,000

20,000

30,000

40,000

50,000

60,000

2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017

Additio

nal

Units

Additional Freehold Units


0

25

50

75

100

125

150

175

200

225

250

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

2007 2008 2009 2010 2011 2012 2013 2014 2015

DFM / HPI ComparisonInvestment Performance

DFM HPI

-80%

-60%

-40%

-20%

0%

20%

40%

60%

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

2007 2008 2009 2010 2011 2012 2013 2014 2015

DFM / HPI ComparisonVolatility of Returns - Quarter on Quarter

DFM HPI

7

Alternative Analysis

Real Estate Returns

In Q3 2015, Dubai Financial Market registered a

12% decrease of its value while the HPI has seen

3% decrease, standing at 148 index points.

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 eight

years period, generated returns of circa 48%. A

similar investment in the DFM for the same period

has generated 4% in losses in Q3 2015, down

from a 31% growth recorded in Q3 2014.




0.80

0.90

1.00

1.10

1.20

1.30

1.40

1.50

1.60

1.70

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

2007 2008 2009 2010 2011 2012 2013 2014 2015

Price to Rent Ratio

Ratio LTA

8

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 Q3 2015 has seen 0.75% increase

compared to Q2 2015, standing at 1.35. The long

term average (excluding the mid-2008 boom)

stands at 1.335, meaning that in Q2 2015 the

average is 1.15% above the long term average.

When comparing the ratio during this quarter (Q3

2015) to the ratio in Q3 2014, there has been a

2.6% decrease.



Apartment Index

Year on Year

The Annual Overall Apartment Index decreased

8% in Q3 2015 compared to Q3 2014, decreasing

to 143 points from 155 points.

The blended average rate per ft2 for apartments in

Dubai in Q3 2015 was AED 1,446 (AED 15,565

per m²) compared to AED 1,567 per ft2 (AED

16,867 per m²) in Q3 2014.

Quarterly

The Quarterly Overall Apartment index saw no

major change in Q3 2015 compared to an 8%

decrease in Q2 2015.

The blended average rate per ft2 for apartments in

Dubai in Q3 2015 was AED 1,446 (AED 15,565

per m²) compared to AED 1,442 (AED 15,522 per

m²) in Q2 2015.



155156

155

143 143

135

140

145

150

155

160

Q3 Q4 Q1 Q2 Q3

2014 2015

Index

Poin

ts

APARTMENT INDEX: QUARTERLYQ3 2014 / Q3 2015

-1% 1% -8% 0%-1%

155

143

136

138

140

142

144

146

148

150

152

154

156

Q3 2014 Q3 2015

Index

Poin

ts

APARTMENT INDEX: YEAR ON YEARQ3 2014 / Q3 2015

-8%


Townhouse Index

Year on Year

The Annual Overall Townhouse Index decreased

21% in Q3 2015 compared to Q3 2014,

decreasing to 129 points from 164 points.

The blended average rate per ft2 for townhouses

in Dubai in Q3 2015 was AED 1,025 (AED 11,033

per m²) compared to AED 1,299 per ft2 (AED

13,982 per m²) in Q3 2014.

Quarterly

The Quarterly Overall Townhouse index saw a 3%

decrease in Q3 2015 compared to an 11%

decrease in Q2 2015.

The blended average rate per ft2 for townhouses

in Dubai in Q3 2015 was AED 1,025 (AED 11,033

per m²) compared to AED 1,054 (AED 11,345 per

m²) in Q2 2015.




164

129

0

20

40

60

80

100

120

140

160

180

Q3 2014 Q3 2015

Index

Poin

ts

TOWNHOUSE INDEX: YEAR ON YEARQ3 2014 / Q3 2015

-21%

164

151 150

133129

0

20

40

60

80

100

120

140

160

180

Q3 Q4 Q1 Q2 Q3

2014 2015

Index

Poin

ts

TOWNHOUSE INDEX: QUARTERLYQ3 2014 / Q3 2015

2% -8% -11% -3%0%


Villa Index

Year on Year

The Annual Overall Villa Index decreased 18% in

Q3 2015, compared to Q3 2014, decreasing to

167 points from 205 points.

The blended average rate per ft2 for villas in Dubai

in Q3 2015 was AED 1,206 (AED 12,981 per m²)

compared to AED 1,480 per ft2 (AED 15,931 per

m²) in Q3 2014.

Quarterly

The Quarterly Overall Villa index decreased 8% in

Q3 2015 compared to a 9% decrease in Q2 2015.

The blended average rate per ft2 for villas in Dubai

in Q3 2015 was AED 1,206 (AED 12,981 per m²)

compared to AED 1,310 (AED 14,101 per m²) in

Q2 2015.



205

167

0

50

100

150

200

250

Q3 2014 Q3 2015

Index

Poin

ts

VILLA INDEX: YEAR ON YEARQ3 2014 / Q3 2015

-18%

205213

200

181

167

0

50

100

150

200

250

Q3 Q4 Q1 Q2 Q3

2014 2015

Index

Poin

ts

VILLA INDEX: QUARTERLYQ3 2014 / Q3 2015

0% 4% -9% -8%-6%


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 61%, 24% 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.

Primary Authors:

Ian Albert, BSc (Hons) MRICS

Regional Director | MENA

[email protected]

Tremaine Ferreira NDPV CIEA

Director | Residential Valuations

[email protected]

Tel +971 4 453 7400

Fax +971 4 453 7401

Colliers International | Dubai

Al Shafar Tower 1

Tecom, Dubai | UAE

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.

$2.5B

IN ANNUAL

REVENUE

2B

SQUARE FEET UNDER

MANAGEMENT

16,000PROFESSIONALS

AND STAFF

554 offices in

66 countries on

6 continents

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