dubai real estate market review: third quarter...

Dubai Real Estate MarketREVIEW: THIRD QUARTER 2016

www.valustrat.com

ValuStrat Price Index (VPI)

Residential

Source: ValuStrat

www.valustrat.com | 1

2016 Q3 - Real Estate Indicators

*Residential & commercial trans. Source: DLD, Valustrat

Source: REIDIN, ValuStrat Source: REIDIN, ValuStrat

Source: REIDIN, ValuStrat Source: REIDIN, ValuStrat*Residential & commercial trans. Source: DLD, Valustrat

Source: DTCM, ValuStrat Source: DTCM, ValuStrat

1.2%Average Transacted

Ticket Size*

Q-o-Q

-25%

Transactions Volume*

Q-o-Q

-7%

Apartment Asking Rents

Q-o-Q

-0.6%Q3 Y-o-Y

0%

Office Transacted Prices

Q-o-Q

-9%

Villa Asking Rents

Q-o-Q

-5%

Office Asking Rents

Q-o-Q

-1%

Hotel Occupancy

Jan-Aug Y-o-Y

-10.8%

Hotel ADR

Jan-Aug Y-o-Y

2 | ValuStrat - Real Estate Research Report - Quarter 3, 2016

• This quarter observed fairly mixed results, on one hand we had marginally declining prices in half of the locations monitored, while on the other hand we found that most of the other half has began a soft recovery. In balance, the VPI is now more or less equal to the same period last year

• Dubai’s apartment VPI has shown a quarterly decline of just 0.5% while the villa VPI remained stable QoQ

• The median apartment value in September was AED 13,982 per sq m (AED 1,299 per sq ft) and for villas was AED 14,779 per sq m (AED 1,373 per sq ft)

• Compared to the previous quarter, ten locations saw appreciation in values, International City having the highest quarterly improvement of 4%, while Motor City increased by 3.4%, Dubai Production City (IMPZ) saw an increase of 3%, and Downtown Dubai was up by 2.3%

• Apart from Dubai Sports City that saw a quarterly price fall 5.6%, other declining locations saw dips of less than 2%

• Victory Heights villa prices were up by 0.8% on a quarterly basis, which was the highest increase for freehold villas monitored by the VPI

ValuStrat Price Index - Residential

The latest in-depth residential ValuStrat Price Index (VPI) report has been released to subscribers, analysing 26 freehold locations in Dubai on a monthly basis, it has shown that mostly mid-affordable locations initiated the price recovery process, with quarterly increases ranging from 2.3% to 4%. The exception being high-end Downtown Dubai, which also witnessed a clear trend of positive correction over the last six months. The third quarter 2016 VPI displayed an overall 0.6% annual decline in values. However, the monthly growth rate of residential values has been broadly stable for the past 15 months, but declined slightly this quarter, which was expected during the softer summer months. The July residential VPI registered 97.7 index points, while August and September both dipped by 0.1% to 97.6 and 97.5 points respectively.

VALUSTRAT PRICE INDEX 16 APARTMENT AND 10 VILLA LOCATIONS IN DUBAI

[BASE: JAN 2014=100]Source: ValuStrat

Jan

100

103

107109

111 111110

108106

103104

103101

100 100 99 98 98 98 98 9898 9898 9898 9898 9898 9898

JanFeb FebMar MarApr AprMay MayJun JunJul JulAug AugSep Sep JanOctO ct FebNov Nov MarDec Dec

2014 2015 2016

113

Apr May Jun Jul Aug SeptO


• The Dubai Consumer Price Index has been updated to reflect the new base year of 2014, main expenditure group weights have also been readjusted to reflect the change. Housing and utility expenses now carry a slightly less weight of 43.62, down from 43.7 previously, whilst the education group has more than doubled in weight from 4.09 to 8.48

• As of August, Dubai’s YoY inflation rate was 2.5%, and the monthly rate was 0.38%

• Housing and utility expenses index increased by 4.7% annually

Source: Dubai Statistics Centre

DUBAI POPULATION

2011

2,00

3,00

0

2012

2,10

5,00

0

2013

2,21

0,30

0

20152,

450,

0002016 - Q3

2,56

4,00

0

2014

2,32

0,80

0

MACRO-ECONOMIC SNAPSHOT

• Dubai Customs released trade figures for H1 2016 indicating a 17% increase in volume of traded goods, 41 million tonnes were dealt in the first half of last year, compared to 49 million tonnes the same period this year

• Dubai International Airports’ passenger numbers increased by 6.1% to reach more than 7.7 million in August

• Dubai Metro celebrated its seventh anniversary, reporting more than 830 million passengers so far

• Dubai’s population as of September 2016 is estimated at 2.56 million• Annual population growth rate was 5.6% in 2015, with an average household size of 4.2

individuals

CONSUMER PRICE INDEX VS HOUSING INDEX

114

Jan

Feb

Mar

Apr

May

Jun

Jul

Aug

Sep

Oct

Nov

Dec

Jan

Feb

Mar

Apr

May

Jun

Jul

Aug

2015 2016

112

110

116

108

106

104

102

100

98

118

General Index (2014=100)Housing, Water, Electricity, Gas and other fuels

Source: Dubai Statistics Centre

JANUARY 2015 - AUGUST 2016


ResidentialRESIDENTIAL SUPPLY

• For 2016, the latest estimated total supply of residential apartments and villas to be completed is estimated at 15,000 units. Around 1,100 units were delayed from this quarter to next year

• An estimated 5,500 residential units were completed YTD

• Ten off-plan residential projects were launched in Q3, to add more than 2,000 units to the residential pipeline by 2020

• This year’s Cityscape exhibition saw major projects announced. Such as Emaar South, with 15,000 homes located in Dubai South, Dubai Holding’s Jumeirah Central, and Palm 360 by Nakheel

• Off plan projects offering affordable properties were also on show, Sunbeam by Sun & Sand Developers offered 1 bedroom apartments for AED 385,000, and The Pulse by Dubai South announced Studios for AED 280,000

RESIDENTIAL PRICES

• The median residential transaction price increased by 6.6% YoY

• When compared to the previous quarter, the median residential transacted price was up by 5.2%

• There was a noticeable quarterly increase in sales of apartments priced between 2 and 3 million Dirhams, and villas priced between 5 and 6 million Dirhams

• Median transacted apartment price stands at AED 11,645 per sq m (AED 1,082 per sq ft), up by 7.3% YoY 6.5% QoQ

• The median transacted villa price stands at AED 11,765 per sq m (AED 1,093 per sq ft). Increasing by 2% YoY but down by 2.3% QoQ

• Citywide residential sales transaction volumes witnessed an estimated quarterly decline of 25% for apartments and 14% for villas. This drop may be attributed to the traditionally quieter summer months

* May be subject to significant downward adjustmentSource: Dubai Statistics Centre, REIDIN, MEED Projects, ValuStrat

DUBAI RESIDENTIAL SUPPLY 2013-2017(‘000 UNITS)

Existing New Apartments* New Villas*

2014

2016E

2017E

485

500

11

30

3.85

3.20

485

467

4502013

Source: REIDIN, ValuStrat

RESIDENTIAL MEDIAN TRANSACTED PRICES

Last 2 Years

-9.8%

Last Year

6.6%

Last 6 Months

5.2%

Last Quarter

-5.6%5.3%

2015

OfficeOFFICE SUPPLY

• 2016 began with an estimated 8.39 million sq m (90.3 million sq ft) of office Gross Leasable Area (GLA)

• 230,000 sq m (2.48 million sq ft) GLA is expected to be delivered in 2016, and 542,000 sq m (5.8 million sq ft) during 2017

• Available data on office supply leading up to 2019 points to an estimated additional pipeline GLA of 855,000 sq m (9.2 million sq ft)

• 29 mixed-use or dedicated office buildings are at planning stage or under construction and expected to complete during the next three years, 12 of which are located in Business Bay


RESIDENTIAL RENTS

• Overall residential asking rents declined by 8% YoY

• Median asking rents this quarter were 4.5% lower than Q1 and 7.1% lower than Q2

• Median apartment asking rents declined by 8% YoY and 6.9% QoQ

• Median villa asking rents dropped 11% YoY, and 8.7% QoQ

• Exception to above trend was seen in average asking prices for studio apartments, which rose 6.9% YoY and 1.6% QoQ Source: REIDIN, ValuStrat

RESIDENTIAL MEDIAN ASKING RENTS

Last 2 Years Last Year

-8.o%-14.8%

Last 6 Months

-4.5%

Last Quarter

-7.1%

Source: REIDIN, MEED Projects, ValuStrat

DUBAI OFFICE SUPPLY 2013-2017(MILLION SQ M GLA)

Existing Stock Expected Supply

2014

2016E

2017E

8.39

8.62 0.54

8.39

7.88

7.532013

2015

0.23

OFFICE PRICES

• Overall transacted office prices fell by 8.3% YoY• Office prices were broadly flat since the

beginning of the year• Median transacted prices for office space this

quarter stood at AED 10,796 per sq m (AED 1,003 per sq ft)

• Business Bay saw 46% of total office sales, followed by Jumeirah Lake Towers with 34%. While only a handful of transactions were documented for Downtown Dubai, Barsha Heights and other locations

• Office sizes ranging between 93 sq m and 139 sq m (1,000 sq ft – 1,500 sq ft) represented 44% of all sales. For Business Bay and Jumeirah Lake Towers, the share rises to 47%

OFFICE RENTS

• Median asking rents for office space fell 9.3% YoY and 4.9% QoQ

• Overall asking office rents this quarter were 1.6% lower than the same period two years ago

• The median asking rent for office space was AED 1,076 per sq m (AED 100 per sq ft)

• DIFC saw one of the highest asking rents of AED 3,875 per sq m (AED 401 per sq ft) for an office area of 60 sq m (646 sq ft)



OFFICE MEDIAN TRANSACTED PRICES

Last 2 Years

6.2%

Last Year

-8.3%-13.5%

Last 6 Months Last Quarter


OFFICE MEDIAN ASKING RENT

Last 2 Years Last Year

-9.3%-1.6% -9.5% -4.9%

Last 6 Months Last Quarter

- 0.8% 0.3%

RETAIL SUPPLY

• Located in Jebel Ali, adjacent to Dubai Parks and Resorts, phase one of Outlet Village mall opened its doors this quarter

• Developed by Meraas, the 139,355 sq m (1.5 million sq ft) Italian themed outlet retail space currently features three department stores, food and beverage outlets and 125 brands

• Majid Al Futtaim opened its 20th mall, a new My City Centre Al Barsha. Located in Dubai Science Park and catering to nearby residential communities such as Villa Lantana and an anticipated 40,000 residents that will populate the area by 2017

• Nakheel awarded a contract to build 34,839 sq m (375,000 sq ft) showroom complex in Dragon City, the 18 showroom 10,963 sq m (118,000 sq ft) leasing space had already been booked

• Nakheel announced plans to build a 111,483 sq m (1.2 million sq ft) mall in Nad Al Sheba, adding 200 shops, F&B outlets, cinema, and health services

RETAIL PERFORMANCE

• Prime mall retail rents remained flat since the beginning of the year, line shops continue to command an average rental of AED 6,000 per sq m (AED 557 per sq ft)

• According to one of the UAE’s largest retail groups, high-end fashion retail stores have reported single digit lower sales figures for some of the older brands but growing sales for newer concepts

• Apart from lower spending by Russian, Chinese and UK tourists, Dubai’s resident consumers faced reduced purchasing power due to rising inflation

• Some online retail outlets, who have improved their logistics and shortened delivery times, have reported double digit increases in sales this year


38

1,878

852

416174

Convenience(<3k sq m)

Community(<10k-30k sq m)

Regional(<30k-90k sq m)

Super Regional(>90k sq m)

Neighbourhood(<3k-10k sq m)

Retail



RETAIL MALLS & SHOPPING CENTRES (‘000 SQ M GLA)

NUMBER OF RETAIL MALLS & SHOPPING CENTRES IN DUBAI

23

30

20

15

12

Convenience(<3k sq m)

Community(<10k-30k sq m)

Regional(<30k-90k sq m)

Super Regional(>90k sq m)

Neighbourhood(<3k-10k sq m)

HOTEL PERFORMANCE

• July’s hotel occupancy rates increased by 17.6% YoY mainly due to the falling date of the Eid al-Fitr holiday as demand was up 24.6% YoY

• Average occupancy during period January to August was 76%, compared to 77% the same time last year

• With hotel room stock up 5% since last year, Average Daily Rate (ADR) for the same period dropped by 10.8% YoY and Hotel Revenue Per Available Room (RevPAR) fell 11.3% YoY

• The first eight months of 2016 saw annual visitor increases of 18% from Oman, 18% from Philippines, 14% from Pakistan, 10% from India and 13% more visitors from China. Less visitors from Jordan -20%, Australia -12%, Egypt -7% and Iran -5%

HOTEL SUPPLY

• The total number of hotel rooms and hotel apartments as of August 2016 in Dubai crossed the 100,000 mark, with 100,211 units within 676 establishments

• One hotel had a soft opening this quarter, the 1,004 room Westin Habtoor City, near Business Bay

• Four new hotels were announced to add 1,303 keys to the pipeline over the next three years

• Notable hotel announcements included Aloft Deira City Centre, DoubleTree by Hilton in Jumeirah Village Triangle which will connect to Al Khail Avenue mall, and Rosemont Hotel and Residences Dubai which will be located near to Dubai Internet City and is the world’s first hotel to feature a tropical rain forest


Hospitality

SOURCE OF DUBAI VISITORS BY REGION

GCC

South Asia

North Asia & South East Asia

Russia, CIS & Eastern Europe

Australasia

Western Europe

MENA

Americas

Africa


HOTEL ROOM SUPPLY 2013 - 2017(‘000 KEYS)

Hotel and Serviced Apt Rooms New Supply

2014

2016E

2017E

98

109

10.7

14.4

98

92

832013

2015

Source: DTCM, ValuStrat

25%

21%

16%

11%

9%

6%5%

5% 2%


Jebel Ali Industrial Area

INDUSTRIAL INVESTMENT/SUPPLY

• The Dubai industrial sector is looking to increase share of the manufacturing sector in the country’s GDP to nearly 20 per cent by 2021

• 18 billion Dirhams is the forecasted increase in Dubai’s GDP for the industrial sector, out of which revenues from machinery and equipment division constitutes one fourth of the overall industrial sector

• A connecting transport & logistics passage between JAFZA & Dubai South (DWC) will provide the facility for international firms to transfer goods arriving at Jebel Ali Port to DWC airport within just a few hours

• The industrial segment is now showing some signs of slowing growth, post adapting to lowering oil prices ranging around USD 40-50 per barrelINDUSTRIAL PERFORMANCE

• Industrial built property (warehouses/industrial sheds) sales prices have seen slight declines in asking prices depending on factors such as location, plot size, condition and quality. Overall prices ranged between AED 2,625 per sq m to AED 4,400 per sq m (AED 242 per sq ft to AED 410 per sq ft)

• Average annual rental rates have remained unchanged in locations such as DIP/JAFZA and Jebel Ali, rents ranged between AED 322 to AED 591 per sq m (AED 30 to AED 55 per sq ft) for industrial / warehouse units. Slight price reductions were noted in locations such as Ras Al Khor & Al Quasis, with rentals ranging between AED 300 to AED 540 per sq m (AED 28 to AED 50 per sq ft)

Industrial

Al Quoz

Al Qusais

Jebel Ali Free Zone

Dubai South

Dubai Investment Park

INDUSTRIAL RENTAL RATES

(AED / SQ M)

Source: ValuStrat

Source: ValuStrat

(AED / SQ M)

INDUSTRIAL PRICES

Price High Price Low

Rent High Rent Low

Dubai Investment

Park

Jebel Ali Free Zone

Al Quoz4,515

3,430

4,275

2,890

4,050

2,700

580425

480372

600

430

590425

575420

550400

Yields firm up nicely for mid-tier locations: ValuStratThe consultancy ValuStrat suggests gross yields

of 5.5 per cent for villas and 7.5 per cent for

apartments, while the net would be 4.4 per cent

for villas and 5.3 per cent on apartments. Based

on the latest ValuStrat data, gains of 0.8 per cent

to 2.8 per cent were recorded by “mid-range, high-

yielding properties” during August.

ValuStrat in the Media7 September 2016

ValuStrat to bolster its Qatar operationsBusiness advisory firm ValuStrat has formally

made its Doha office a fully owned subsidiary and

appointed key executives to drive its business in

Qatar to new heights.

Since the establishment of ValuStrat’s franchise

office in Doha under the Qatar Financial Centre

(QFC) in 2013, ValuStrat’s business has gone from

strength to strength – with a growth in revenues,

growing client list, new service lines and increased

staff numbers.

11 August 2016

Dubai businessman Al Habtoor says property prices will rise in ‘coming months’ValuStrat said its data indicated an early

recovery was materialising in some areas, with a

possible bottoming-out of property values during

the course of the year. More broadly the firm

said prices had been relatively stable over the

last 12 months and sentiment was “cautiously

optimistic” towards a recovery commencing in

the second half of 2016.

09 August 2016

ValuStrat CEO Shahid Kazi Interview“The real growth for ValuStrat has come over the

last decade or so, during which the firm moved

from a small UAE company offering just a few

services to becoming a multi-service, multi-

sector regional firm”

01 August 2016

How have externalities affected Dubai real estate?A Q2 2016 review by local consulting firm

ValuStrat revealed that after 12 relatively stable

months, its residential price index displayed

further indications of an early recovery in some of

the areas it measures, signalling possible signs

of a bottoming-out in property values across its

coverage locations during the course of 2016

21 August 2016

Dubai realty sales through in stability modeWith a clear 12-month trend of relatively stable sales

prices, the general sentiment has been cautiously

optimistic towards a recovery commencing in the

second-half of this year,” states a new report from

ValuStrat

13 July 2016

ValuStrat Price IndexThe ValuStrat Price Index (VPI) for Dubai’s residential sector is constructed to represent the monthly price change experienced by typical freehold residential units within Dubai. The VPI provides an up-to-date opinion of current pricing. The VPI is a comprehensive weighted sample of all property types across the city. The latest in-depth 100+ page report that includes citywide analysis of 26 freehold districts, including the ValuStrat Price Index, transaction volumes, service charges, Price to Rent Ratios and Net Yields is now available to subscribers.

Research MethodologyEvery 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. 2016This 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.

ABOUT VALUSTRATValuStrat is a leading consulting firm headquartered in Dubai providing Advisory, Valuation, Research, Due Diligence and Divestment services across a diverse range of industry sectors since 1977. Offices in UAE, Saudi Arabia, Qatar and Pakistan serve over 750 corporate clients. Client base includes financial institutions, local corporates, multinationals, governments, SME’s, 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.

Declan King, MRICSDirector & Group Head of Real [email protected]

Haider TuaimaResearch [email protected]

Vismer Mulenga, MRICSAssociate [email protected]

Cheryl McAdam, MRICSHead of Residential [email protected]

Darshan Shah, MRICSManager, Industrial [email protected]

DUBAI +971 4 326 [email protected]

RIYADH+ 966 11 293 [email protected]

JEDDAH+ 966 12 283 [email protected]

DOHA+ 974 4 496 [email protected]

KARACHI+92 213 582 [email protected]

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