observer dubai market report q2 / 2019 - shamalcomms › sites › default › files ›...

OBSERVERDubai Market ReportQ2 / 2019

Price Movements

Apartments

Apartments

Volumes

Volumes

Villas

Villas

Values

Values

Rental Movements

Completed Unit Transactions

Off-Plan Unit Transactions

Report HighlightsServices

Sales prices

Further price declines were witnessed in Q2 2019 with average apartment and villa sales prices down 4% from Q1 2019; a result of continued oversupply in the Emirate’s residential real estate market. Despite price declines across the board, there is some positive sentiment in Dubai’s property market as a result of increased transaction volumes in the completed unit and off-plan sectors.

Rental rates

As in previous quarters, there was continued downward pressure on rents in Q2 2019. This was a consequence of additional supply being added to the market, thus offering more choice to potential tenants. However, Q2 saw a more marked decrease in rents than in Q1. Average rents saw a further 5% decrease in the apartment market and 8% in the villa market when compared with Q1 2019.

Transactions

Volumes. The market for completed units witnessed an increase in transactional volumes in Q2 2019 with a 2% uplift compared with Q1 2019, from 3,230 to 3,280 units. The volume of off-plan transactions was up 4% on Q1 2019.

Values. Transactions involving completed properties reflected an increase in values of 31% from AED 5.64 billion in Q1 2019 to AED 7.37 billion in Q2 2019. Conversely, there was a decrease in value for off-plan properties of 8% from AED 7.85 billion in Q1 2019 to AED 7.19 billion in Q2.

Market outlook

The Dubai Government is working hard to ensure its real estate sector shows positive growth in the medium to long term. This has involved the recent introduction of a number of Government initiatives such as the 10 year residency visa and economic stimulus package. One positive result of such initiatives has been a significant increase in the number of new business licenses issued during the first half of 2019, which increased 35 percent compared with the same period in 2018. Furthermore, a framework for a Foreign Direct Investment Committee is being developed, which aims to increase foreign ownership to 100% (in specific sectors) and attract inward FDI.

In the short term, however, oversupply will continue to hamper the Dubai real estate market. Over 20,000 new residential units were delivered in 2018 and the projections for the remainder of 2019 are significantly higher. This will ensure Dubai’s residential market remains highly occupier and buyer friendly, due to the wide variety of options available at competitive prices/rates.

ValuationsMortgage and Secured LendingPortfolio Valuations

Advisory and ResearchFinancial FeasibilitiesHighest and Best Use StudiesMarket ResearchConceptual Advisory and Project Positioning Studies Project Redevelopment/Repositioning Advisory Investment Strategies – Acquisition and Disposal

Sales and LeasingCommercialIndustrialResidentialRetail

Property/Facilities Management CommercialMixed-UseResidential

International Properties London Off-Plan ResidentialInternational Homes and Investments International Relocations

Dubai Residential Market Q2 2019 Snapshot

QoQ −4%

QoQ −5%

QoQ +2%

QoQ +4%

QoQ −4%

QoQ −8%

QoQ +31%

QoQ -8%

The Observer - Dubai Residential Q2 2019 1

Transaction volumes up in Q2,despite oversupply

Further price declines were witnessed in Q2 2019 with average apartment and villa sales prices down 4% from Q1 2019; a result of continued oversupply in the Emirate’s residential real estate market. A total of 47,502 apartments, villas and townhouses* are set to be completed this year which is almost twice what was delivered in 2018. Increased supply, especially as developers work to complete projects before Expo 2020, is likely to result in further price declines across the remainder of the year.

Despite price declines across the board, the Emirate’s property market is displaying some positive sentiment as a result of increased transaction volumes in the completed unit and off-plan sectors. In terms of the latter, there was a 4% increase between Q2 and Q1 2019, which indicates that demand is

continuing to be generated through incentives such as 5-year post-handover payment plans, the rebate of registration fees, freezing property service charges and guaranteed rental returns.

The completed units market saw a 31% increase in transaction values which suggests that end-users are still active and purchasing homes in Dubai. Prices in the secondary market have been increasingly affordable as sellers have been highly motivated due to competition with off-plan, completed stock.

*Based on figures from Dubai Pulse, the data platform initiative from the Smart Dubai office

HOT TOPIC Evidence of developers becoming increasingly innovative to stay relevant in a competitive market, has come from industry-leader Emaar. In partnership with the Dubai Multi Commodities Centre, Emaar will offer buyers of its Executive Residences in Dubai Hills Estate, a free three-year renewable business license, a free three-year renewable family residency visa as well as 100% business ownership. This unprecedented move will allow entrepreneurs to legally start a home-based business and will assist with absorption rates of a particular segment of properties. The product is targeted at SMEs who currently contribute 80 per cent to the Emirate’s economy.


Apartments: Quarter-on-Quarter movement: (–4%)

Modest price declines were seen in the apartment segment in The Greens, Dubailand and Dubai Motor City with a 2% decrease from the previous quarter. Average apartment prices decreased from AED 925 per sqft to AED 907 per sqft, AED 722 per sqft to AED 706 per sqft and AED 713 per sqft to AED 700 per sqft respectively.

The highest price declines were witnessed in The Views and Downtown Dubai with a 9% decrease, from AED 1,197 per sqft to AED 1,090 per sqft and a 7% decrease from AED 1,511 per sqft to AED 1,401 per sqft respectively.

In contrast to the previous quarter, the most resilient apartment location in Q2 was International City, which saw no price movement when compared with Q1. 7% declines were witnessed in Q1 2019 down from Q4 2018.

Apartments: Quarter-on-Quarter movement: (–4%)

Market sentiment in the villa community of Palm Jumeriah remained the most positive, witnessed by a small movement in prices from Q1 2019, with a 1% decline from AED 1,984 per sqft to AED 1,967 per sqft.

In contrast to the previous quarter, The Lakes witnessed the highest price decline of 6% since Q1 2019, followed by The Meadows and Springs with a 5% decline from the previous quarter.

Apartments and Villas − Residential Sales Prices and Quarterly Change

SharjahAbu Dhabi

The Palm Deira

DubaiMaritime

City

Bur Dubai

Deira

Hamriya

WuheidaMamzar

Hor Al Anz

Al Nahda

AirportFree Zone

Karama

Garhoud

Twar Qusais

Muhaisnah

Mirdif

Mizar

Khwaneej

Ghoroob

Shorooq

Warqaa

ZabeelOud

Metha

CultureVillage

UmmRamool

NaddShamma

DubaiFestival City

MeydanCity

Ras Al Khor

Bu Kadra

NaddAl Hammar

InternationalCity

AcademicCity

DubaiSilicon Oasis

Al WahaCommunity

MotorCity

SportsCity

Layan

Nad Al Sheba

Al BarariLiving Legends

ArabianRanches

Dubiotech

Awir

UmmHurairTrade

CentreDIFC

Dubai Mall

Mirdif CityCentre

Dragon Mart

Deira CityCentre

Al KhailGate

MediaCity

JumeirahIslands

JumeirahGolf

Estates

GreenCommunity

DowntownJebel Ali

Technology Park

DubaiInvestment

Park

DubaiWorld

Central

InternationalMedia

ProductionZone(IMPZ)

JumeirahHeights

TheGardens

DiscoveryGardens

Ibn BattutaMall

Jebel AliVillage

Jebel Ali Freezone EmiratesHills

InternetCity

Greens

Meadows/Springs

The Lakes

Al FurjanThe SpringsJumeirah

Park

JumeirahVillage Circle

TECOM

The Views

JLT

Al Quoz

Barsha

Mall of the Emirates

Dubai Pearl

Palm Jumeirah

Dubai MarinaBurjuman

Centre

Satwa

Badaa

Jumeirah

Al WaslSafa

Umm Suqeim

ManaraSufouh

The World

Arabian Gulf

Jumeirah BeachResidence

BluewaterIslands

The PalmJebel AliDubai

Waterfront

Barsha

MOTOR CITY

AED713MOTOR CITYAED700

DISCOVERYGARDENS

AED627

-2%Q-o-Q

Movement

DISCOVERYGARDENS

AED592

-6%Q-o-Q

Movement DOWNTOWNAED1,511

DOWNTOWNAED1,401

-7%Q-o-Q

Movement

BUSINESS BAYAED1,038

BUSINESS BAYAED1,011-3%

Q-o-QMovement

DUBAILANDAED722

DUBAILANDAED706

-2%Q-o-Q

Movement

DUBAIMARINA

AED1,153

DUBAIMARINA

AED1,090

-5%Q-o-Q

Movement

DUBAI SILICONOASIS

AED703DUBAI SILICON

OASIS

AED697-1%

Q-o-QMovement

SPORTS CITYAED737

SPORTS CITYAED713

-3%Q-o-Q

Movement

JUMEIRAHLAKE TOWERS

AED921JUMEIRAH

LAKE TOWERS

AED872-5%

Q-o-QMovement

THE VIEWS

AED1,197THE VIEWS

AED1,090

-9%Q-o-Q

Movement

JUMEIRAHVILLAGECIRCLE

AED728JUMEIRAHVILLAGECIRCLE

AED708

-3%Q-o-Q

Movement

THE GREENSAED925 THE GREENS

AED907

-2%Q-o-Q

Movement

INTERNATIONALCITY

AED481INTERNATIONAL

CITY

AED481

0%Q-o-Q

Movement

Apartment Sales Q1 2019 Apartment Sales Q2 2019Villa Sales Q1 2019 Villa Sales Q2 2019 QoQ MovementFigures in AED/Sq FtSource: REIDIN & Chestertons

ARABIANRANCHES

AED860

THE LAKESAED1,107

ARABIANRANCHES

AED833

JUMEIRAHPARK

AED859

-3%Q-o-Q

Movement

JUMEIRAHPARK

AED827

-4%Q-o-Q

Movement

PALMJUMEIRAH

AED1,984PALM

JUMEIRAH

AED1,967

-1%Q-o-Q

Movement

THE MEADOWS/SPRINGS

AED897

THE MEADOWS/SPRINGS

AED854 -5%Q-o-Q

Movement

THE LAKESAED1,038

-6%Q-o-Q

Movement

Dubailand

The Observer - Dubai Residential Q2 2019 4 The Observer - Dubai Q2 2019 5

Softening rental market provides tenant-friendly conditions for the foreseeable future

As in previous quarters, there was continued downward pressure on rents in Q2 2019. This was a consequence of additional supply being added to the market, thus offering more choice to potential tenants. However, Q2 saw a more marked decrease in rents than in the previous quarter with a further 5% decrease in the apartment market and 8% in the villa market when compared with Q1 2019. Whether tenants want to upgrade, downsize, or remain in their current property, the ongoing downward correction in Dubai’s rental market is providing leverage for them to get the best possible deal.

Communities with significant upcoming supply in 2019 are likely to see the largest rent reductions. These include Jumeirah Village Circle and Business Bay as well as locations in Dubailand and Mohammed Bin Rashid City.

Older units in central locations will be under pressure to generate demand with tenant preferences shifting to outlying areas where newer and competitively priced options are increasingly becoming available.

As residential rents continue to soften, landlords are offering lower rental rates and incentives to attract and retain tenants. The number and range of incentives has increased with rent-free periods, some up to three months, being the most popular. Other incentives include multiple rent cheques, waiver of security deposits, multiple cheques to cover utility bills, shorter term leases and the inclusion of maintenance within the rent. The bottom line is that Dubai will continue to be a tenant-friendly market for the foreseeable future.

Apartments: Quarter-on-Quarter movement: (– 5%)

In the apartment market, the biggest average rental decline was witnessed in Dubai Silicon Oasis with a 12% decrease when

compared with Q1 2019. A typical 2 bedroom apartment rented for AED 70,000 per annum in Q1, dropping toAED 60,000 per annum in Q2, representing a 14% decline for that format.

Dubailand and Discovery Gardens were the next most affected locations with an average 8% decline from the previous quarter. Typical three bedroom units in Discovery Gardens rented for AED 100,000 per annum in Q1, dropping to AED 85,000 in Q2, reflecting a 15% decline.

The Views, The Greens, JLT and Dubai Sports City were the most resilient communities in Q2 with declines of 1% and 3% for the latter three locations.

The popular established communities of Dubai Marina and Business Bay, which saw no movement in rental rates in Q1 2019 when compared to Q4 2018, witnessed a 5% decline in Q2.

Villas: Quarter-on-Quarter movement: (– 8%)

In the villa market, the biggest rental declines were witnessed in Jumeirah Islands, The Meadows and Arabian Ranches with an average 11% decline from the previous quarter. Typical four bedroom villas rented for AED 250,000 per annum in Q1 dropping to AED 210,000 per annum in Q2 in Jumeirah Islands. Similarly, in The Meadows, a typical four bedroom villa rented for AED 210,000 per annum in Q1 dropping to AED 180,000 per annum in Q2 and in Arabian Ranches the decrease was from AED 175,000 per annum in Q1 to AED 160,000 per annum in Q2.

The most resilient location in the villa rental market was Palm Jumeirah with a 2% decline from Q1 2019.

The Observer - Dubai Residential Q2 2019 6 The Observer - Dubai Residential Q2 2019 7

HOT TOPIC At the beginning of May 2019, The Dubai Land Department confirmed it was studying a proposal to freeze residential rents for three years after landlords and tenants sign rental contracts. This could have a positive impact on people’s decision to move to the UAE as rentals are the biggest item of expenditure and under this new proposal they would be able to fix their costs for a designated period of time. However, the downside is it could remove some of the incentive for residents to become property buyers, as well as potentially put off buy-to-let investors as their future income could be affected against rising mortgage and maintenance costs.

Apartments − Residential Market Rent and Quarterly Change

-14%

-12%

-10%

-8%

-6%

-4%

-2%

0%

-

40,000

60,000

20,000

80,000

100,000

140,000

160,000

120,000

180,000

200,000

Studio 1BR 2BR 3BR QoQ Change

Business Bay DIFC DiscoveryGardens

DowntownDubai

Dubai Marina DubaiSilicon Oasis

Dubai Sports City

Dubailand InternationalCity

JLT JVC The Greens The Views DubaiMotor City

PERCENTAG

E CHAN

GEAE

D R

ENTA

L RA

TES

Figures in AED/Sq FtSource: Propertyfinder & Chestertons

-12%

-10%

-8%

-4%

-6%

-2%

0%

-

50,000

100,000

150,000

200,000

250,000

300,000

350,000

400,000

ArabianRanches

TheSprings

TheMeadows

The Lakes VictoryHeights

Al Furjan JVT JumeirahIslands

JumeirahGolf Estates

PalmJumeirah

2BR 3BR 4BR 5BR QoQ MovementFigures in AED/Sq FtSource: Propertyfinder & Chestertons

AED

REN

TAL

RATE

S

PERCENTAG

E CHAN

GE

-14%

-12%

-10%

-8%

-6%

-4%

-2%

0%

-

40,000

60,000

20,000

80,000

100,000

140,000

160,000

120,000

180,000

200,000



DowntownDubai


Dubai Sports City



PERCENTAG

E CHAN

GEAE

D R

ENTA

L RA

TES


-12%

-10%

-8%

-4%

-6%

-2%

0%

-

50,000

100,000

150,000

200,000

250,000

300,000

350,000

400,000

ArabianRanches

TheSprings

TheMeadows




PalmJumeirah


AED

REN

TAL

RATE

S

PERCENTAG

E CHAN

GE

The Observer - Dubai Residential Q2 2019 8 The Observer - Dubai Residential Q2 2019 9

Villas − Residential Market Rent and Quarterly Change

-14%

-12%

-10%

-8%

-6%

-4%

-2%

0%

-

40,000

60,000

20,000

80,000

100,000

140,000

160,000

120,000

180,000

200,000



DowntownDubai


Dubai Sports City



PERCENTAG

E CHAN

GEAE

D R

ENTA

L RA

TES


-12%

-10%

-8%

-4%

-6%

-2%

0%

-

50,000

100,000

150,000

200,000

250,000

300,000

350,000

400,000

ArabianRanches

TheSprings

TheMeadows




PalmJumeirah


AED

REN

TAL

RATE

S

PERCENTAG

E CHAN

GE

Value of Residential Transactions Q2 2019 (AED Billions)

Completed units show a 31% increase in transactional values in Q2

Volume of Residential Transactions Q2 2019 (Number of Units)

Transactional activity was on the rise in the second quarter of 2019 (detailed figures below). This could be due to a combination of factors to include the announcement of Government initiatives such as the retirement visa, foreign company ownership and long-term residency visas.

Property developers, such as Emaar, recently revealed the announcement regarding long-term visas has been well-received as enquiries from foreign buyers, especially from China, grew significantly.

The completed unit market continued to exhibit increasing market resilience in Q2 with a 31% increase in transactional values when compared with Q1. This demonstrates that buyers may be more inclined to take the lower risk option of property that is move-in ready so there are no issues with delayed handovers. We expect this trend to continue throughout 2019 as developers offer attractive incentives such as 5% deposits and long-term payment plans on newly completed stock.

Transaction Volumes

Quarter-on-Quarter Movement (Completed Units): +2% Quarter-on-Quarter Movement (Off-Plan Units): +4%

The market for completed units witnessed an increase in transactional volumes in Q2 2019 with a 2% increase compared with Q1 2019, from 3,230 to 3,280 units.

The volume of off-plan transactions was up 4% on Q1 2019. This follows a 10% increase in Q1 2019 and a 33% increase in volumes in Q4 2018 compared with Q3 2018. This could be a result of the attractive incentives offered to entice buyers, coupled with the fact that inventories are mostly focused on mid-market, affordable properties.

Dubailand continued to be the most popular community in terms of completed unit transaction volumes as it was in Q1 2019 and Mohammed Bin Rashid City was the most popular off plan location.

Transaction Values

Quarter-on-Quarter Movement (Completed Units): +31% Quarter-on-Quarter Movement (Off-Plan Units): –8%

Transactions involving completed properties increased in value by 31% from AED 5.64 billion in Q1 2019 to AED 7.37 billion in Q2 2019. Conversely, there was a decrease in the value of off-plan properties of 8% from AED 7.85 billion in Q1 2019 to AED 7.19 billion in Q2.

Downtown Dubai was the most popular location in terms of completed unit transaction values at AED 1.13 billion and The Lagoons for off-plan units at AED 820 million.

HOT TOPIC In our last issue of the Dubai Observer, we outlined the Dubai Land Department’s goal to secure AED 1 billion of foreign direct investment into the UAE in 2019. A major boost to this plan will come in the form of American billionaire, Warren Buffet, who recently announced that his company, Berkshire Hathaway, will work with local company Gulf Properties to help connect prospective buyers and sellers across the world to complete real estate transactions throughout the UAE.


1,000

0

2,000

3,000

4,000

5,000

6,000

Q1 2019 Q2 2019

Completed Properties O�-planFigures in AED/Sq FtSource: REIDIN & Chestertons

Completed Properties

O�-plan3,280

5,158

Figures in AED/Sq FtSource: REIDIN & Chestertons

3,230

4,965

7.377.19

1,000

0

2,000

3,000

4,000

5,000

6,000

Q1 2019 Q2 2019



O�-plan3,280

5,158


3,230

4,965

7.377.19

1,000

0

2,000

3,000

4,000

5,000

6,000

Q1 2019 Q2 2019



O�-plan3,280

5,158


3,230

4,965

7.377.19


Q2 2019 Sales TransactionsCompleted Units

Top 10 Areas Based on Transaction Volumes (Number of Units) Top 10 Areas Based on Transaction Volumes (Number of Units)

Q2 2019 Sales TransactionsOff-plan Units

Top 10 Areas Based on Transaction Values (in million AED) Top 10 Areas Based on Transaction Values (in million AED)

100 50 150 200 250 350 400300

Al Furjan

Dubai Sports City

Palm Jumeirah

Business Bay

Downtown Dubai

Emirates Living

International City

Jumeirah Village Circle

Dubai Marina

Dubailand

200 400 600 800 1,000 1,200

Al Furjan


Business Bay

Arabian Ranches

Palm Jumeirah

MBR City

Dubailand

Emirates Living

Dubai Marina

Downtown Dubai

200100 300 500400 700 800600 900 1000

Meydan City

Jumeirah Lake Towers

Dubai Harbour


Business Bay

Dubai South

The Lagoons

Downtown Dubai

Dubailand

MBR City

200100 400300 600 700500 800 900


Dubai Marina


Jumeirah

Palm Jumeirah

Dubai South

Business Bay

Dubai Harbour

Dubailand

The Lagoons

Source: REIDIN & Chestertons Source: REIDIN & Chestertons


100 50 150 200 250 350 400300

Al Furjan

Dubai Sports City

Palm Jumeirah

Business Bay

Downtown Dubai

Emirates Living

International City


Dubai Marina

Dubailand

200 400 600 800 1,000 1,200

Al Furjan


Business Bay

Arabian Ranches

Palm Jumeirah

MBR City

Dubailand

Emirates Living

Dubai Marina

Downtown Dubai

200100 300 500400 700 800600 900 1000

Meydan City


Dubai Harbour


Business Bay

Dubai South

The Lagoons

Downtown Dubai

Dubailand

MBR City

200100 400300 600 700500 800 900


Dubai Marina


Jumeirah

Palm Jumeirah

Dubai South

Business Bay

Dubai Harbour

Dubailand

The Lagoons



100 50 150 200 250 350 400300

Al Furjan

Dubai Sports City

Palm Jumeirah

Business Bay

Downtown Dubai

Emirates Living

International City


Dubai Marina

Dubailand

200 400 600 800 1,000 1,200

Al Furjan


Business Bay

Arabian Ranches

Palm Jumeirah

MBR City

Dubailand

Emirates Living

Dubai Marina

Downtown Dubai

200100 300 500400 700 800600 900 1000

Meydan City


Dubai Harbour


Business Bay

Dubai South

The Lagoons

Downtown Dubai

Dubailand

MBR City

200100 400300 600 700500 800 900


Dubai Marina


Jumeirah

Palm Jumeirah

Dubai South

Business Bay

Dubai Harbour

Dubailand

The Lagoons



100 50 150 200 250 350 400300

Al Furjan

Dubai Sports City

Palm Jumeirah

Business Bay

Downtown Dubai

Emirates Living

International City


Dubai Marina

Dubailand

200 400 600 800 1,000 1,200

Al Furjan


Business Bay

Arabian Ranches

Palm Jumeirah

MBR City

Dubailand

Emirates Living

Dubai Marina

Downtown Dubai

200100 300 500400 700 800600 900 1000

Meydan City


Dubai Harbour


Business Bay

Dubai South

The Lagoons

Downtown Dubai

Dubailand

MBR City

200100 400300 600 700500 800 900


Dubai Marina


Jumeirah

Palm Jumeirah

Dubai South

Business Bay

Dubai Harbour

Dubailand

The Lagoons



The Observer - Dubai Residential Q2 2019 13The Observer - Dubai Residential Q2 2019 12

Contact Us Nick Witty, BSc (Hons) MRICSManaging [email protected]

Adam Wilson, BSc (Hons) MRICS ACIArbDirectorHead of International [email protected]

Vladimir Cvetinovic, MRICSAssociate DirectorValuations & Advisory - Abu [email protected]

Ellen SleutjesHead of Property Management - [email protected]

Slim BoukerAdviser to the [email protected]

Mena Head Office1802, Blvd. Plaza Tower 1Sheikh Mohammed Bin Rashid Blvd. Downtown DubaiPO Box 28336, Dubai United Arab Emirates Office: +9714 381 0200 Fax: +9714 325 3359 Email: [email protected]

Abu Dhabi OfficeOffice M01, Mezzanine FloorAl Ghazal Building (Above Al Hilal Bank) Khalifa Park PO Box 128983, Abu Dhabi United Arab EmiratesOffice: +9712 447 3100 Fax: +9712 441 6200 Email: [email protected]

Bahrain OfficeMaz Business CentreThe LagoonAmwaj IslandOffice: +973 1603 0646Email: [email protected]

Disclaimer:All articles and data presented herein is intended for information purposes and has been compiled from sources deemed reliable including the Valu-ations and Research Department of Chestertons, sales and leasing staff, published data, and secondary sources. Though information is believed to be correct, materials presented is subject to errors, omissions, changes, or withdrawal without notice.

www.chestertons-mena.com

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