q3 2016 dubai real estate report

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Property Review

Q3 2016 DubaiReal Estate Report

Dubai Q3 2016 Residential Highlights• Average residential sales rates for completed properties were broadly stable, recording no change compared with the

previous quarter, despite a significant slowdown in the number of transactions, down by 22% compared with Q2 2016 (Reidin). Rates appeared to have stagnated in the last few months at levels similar to the pre-Expo 2020 announcement.

• However, with many off-plan property launches at competitive rates, Developers could potentially face some pressure in the near future. A significant increase in activity in the area closest to the new airport was recorded in the last few months, such as the launch of Emaar’s Urbana at Emaar South and various projects in Dubai South.

• Most of these recent releases had significantly lower asking prices compared with the current market pricing as Developers are expanding into the affordable segment, by reducing unit sizes and launching projects in secondary locations. These low prices in Dubai South could only be applicable for initial launches to increase take-up and create momentum for the area as it is the closest to the Dubai Expo site and the new airport, which will in time generate a significant amount of employment.

• Apartment rental rates remained stable this quarter, with some variations depending on localities, whereas villa rental rates were down by 1%, on average, over the quarter as a large amount of newly delivered stock was vacant and competing to find Tenants.

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Q3 2016 Report

© Asteco Property Management, 2016

RESIDENTIAL PRICE MOVEMENT, SEP 2008 = BASE 100

Apartment Sales Villa Sales Apartment Rental Villa Rental

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GROWTH RECOVERY AND GROWTH STABILISATIONRECESSION

Dec Mar Mar Mar Mar Mar Mar Mar MarJun Jun Jun Jun Jun Jun Jun Jun JunSep Sep Sep Sep Sep Sep Sep MarDecSep SepDec Dec Dec Dec Dec Dec Dec

20092007 2008 2010 2011 2012 2013 2014 2015 2016

Q3 2016 down by 4% since Q3 2015.-4

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Dubai

Dubai Q3 2016 Office Highlights• Both sales and leasing rates for offices never fully recovered since their peak in 2008; with only a modest growth recorded

in 2013 and minimal movement thereafter. Both average sales and rental rates this quarter remained unchanged.

• According to data provided by Reidin, whilst the number of office transactions reduced by 24% compared to Q2 2016, the number was 12% higher than in Q3 2015.

• Overall, transactions were relatively slow during the third quarter as both Owners and Buyers were unsure about the economic outlook. Whilst Buyers anticipated a further decline there appeared to be little appetite for sellers to reduce their price expectations.

• With more supply announced and due to enter the market over the next few months, there seems to be little potential for both rental and sales growth, except potentially within select developments.

Q3 2016 Report

© Asteco Property Management, 2016 3

OFFICE PRICE MOVEMENT, SEP 2008 = BASE 100

Office Sales Office Rentals

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GROWTH STAGNATIONRECESSION

6% decrease in sales prices since Q3 2015-6

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Dec Mar Mar Mar Mar Mar Mar Mar MarJun Jun Jun Jun Jun Jun Jun Jun JunSep Sep Sep Sep Sep Sep Sep MarDecSep SepDec Dec Dec Dec Dec Dec Dec

20092007 2008 2010 2011 2012 2013 2014 2015 2016

Q3 2016 Report

4 © Asteco Property Management, 2016

Dubai Residential Rental Rates Q3 2016

Apartments

• Average rental rates remained unchanged this quarter, despite some adjustments

in various localities. We also noted a widening of the rental range between

buildings in the same communities.

• Some of the more affordable communities that recorded growth this quarter are

now reaching a critical mass of Residents leading to the completion of supporting

facilities, retail, services, and landscaping. This includes Jumeirah Village Circle

and Dubai Sports City where rates were up by 2% and 3%. The latter also

recorded the highest growth over the year, averaging 13%.

• The mid to high end segment also saw some movement, with Business Bay

recording a 5% decline compared to the previous quarter due to new supply

being handed over.

• In comparison, rates in Downtown Dubai were up by 1% due to the lack of new

supply. However, the next few months could see a reduction in rental rates as

more stock is expected to be handed over, not only within the community, but

also in neighbouring City Walk by Meeras.

• Overall, value for money and budget have been the main drivers for Tenants to

downgrade to smaller units or to relocate to cheaper communities and this trend

is likely to continue in the foreseeable future.

Apartment Rental Rates

(AED 000’s pa)

Studio 1BR 2BR 3BR

Min Max Min Max Min Max Min Max

Affordable Areas

Deira 35 55 45 80 65 120 85 150

Discovery Gardens 45 53 60 72 75 80 - -

International City 35 40 42 55 60 70 - -

Jumeirah Village 40 55 55 70 75 120 125 165

Min/Max Affordable 35 70 40 90 60 130 80 180

Mid to High End Areas

Business Bay 65 85 70 105 110 155 160 190

Greens 60 85 75 125 105 165 140 215

Jumeirah Lakes Towers 55 75 65 95 85 150 120 180

Min/Max Mid to High End 50 85 65 125 80 170 115 220

High to Luxury End Areas

DIFC 75 100 75 135 135 200 170 250

Downtown Dubai 75 105 95 140 140 200 175 300

Dubai Marina 50 95 60 130 85 185 130 260

Jumeirah Beach Residence 70 95 95 120 120 180 145 230

Palm Jumeirah 75 110 100 170 135 230 165 330

Sheikh Zayed Road 65 80 80 125 110 160 125 220

Min/Max High to Luxury End 50 110 60 170 85 230 125 335

APARTMENT RENTAL RATE MOVEMENT BY AREA

% Change (Q2 - Q3 2016) % Change (Q3 2015 - Q3 2016)

-6% -4% -2% 0% 2% 6%4%

Deira

Discovery Gardens

International City

Jumeirah Village

Business Bay

Greens

Jumeirah Lakes Towers

DIFC

Downtown Dubai

Dubai Marina

Jumeirah Beach Residence

Palm Jumeirah

Sheikh Zayed Road

2%0%

-5%0%

3%-1%

1%2%

0%-5%

1%2%

-5%2%

-1%0%

5%1%

-4%-1%

0%0%

-5%-1%

-2%0%

Q3 2016 Report

5© Asteco Property Management, 2016

Villas

VILLA RENTAL RATE MOVEMENT BY AREA


-20% -10%-15% -5% 0% 5% 10%

Al Barsha

Arabian Ranches

Arabian Ranches - Phase II

Victory Heights

Jumeirah

Jumeirah Park

Jumeirah Village

Meadows

Mudon

Palm Jumeirah

Springs

Umm Suqeim

-2%

1%

-8%

0%

-6%

1%

0%

1%

1%

0%

3%

0%

-3%

0%

6%

-6%

-19%

-6%

-2%

3%

9%

-6%

2%

-12%

• Whilst overall villa rental rates were stable this quarter, we noted a significant year-on-year decline in

Jumeirah and Umm Suqeim by 19% and 12% respectively. This was due to a combination of factors, including

a substantial amount of new supply being handed over and also generally an increasing number of budget-

conscious Tenants. Given that Tenants now have a wide range of options to choose from, they are also more

likely to negotiate with their existing Landlord; and if their requirements are not met, they will vacate. Whilst

this was noticeable in Jumeirah and Umm Suqeim, this trend has spread throughout the wider market.

• Other areas affected by declines were Arabian Ranches Phase II (-8%) and Al Barsha (-2%) as the amount of

available supply has led Landlords to reduce their rates to improve take-up.

• Mudon and the Springs are two areas that recorded a quarterly increase of 1% and 3% respectively. Mudon’s

popularity increased as the community has a completed feel to it and only a few units remain available,

whereas the Springs continues to attract good levels of demand given its popular location.

• With more handovers expected in the next few months, we anticipate villa rental rates could come under

further pressure.

Villa Rental Rates

(AED 000’s pa)

2BR 3BR 4BR 5BR

Min Max Min Max Min Max Min Max

Al Barsha - - 165 210 180 280 200 350

Arabian Ranches 130 185 155 250 190 295 265 340

Arabian Ranches - Phase 2 - - 185 215 210 240 230 275

Victory Heights - - 175 180 170 260 230 370

Jumeirah - - 170 225 190 250 200 350

Jumeirah Park - - 190 235 210 290 230 330

Jumeirah Village 125 160 135 200 140 215 165 215

Meadows - - 220 240 210 300 250 350

Mudon - - 185 230 195 220 - -

Palm Jumeirah - - 285 370 275 525 360 1,000

Springs 130 145 165 220 - - - -

Umm Suqeim - - 170 225 180 330 200 360

Q3 2016 Report


Dubai Residential Sales Prices Q3 2016

Apartments

Apartments

(AED per sq ft)

Average Sales Prices

Min Max

Affordable Areas

Discovery Gardens 660 1,050

Dubai Sports City 600 1,380

IMPZ 570 1,050

International City 500 900

Jumeirah Village 600 1,200

Min/Max Affordable 500 1,380

Mid to High End Areas

Business Bay 850 1,750

Greens 1,000 1,600

Jumeirah Lakes Towers 760 1,700

Min/Max Mid to High End 750 2,100

High to Luxury End Areas

DIFC 1,450 1,950

Downtown Dubai 1,320 3,000

Dubai Marina 850 2,400

Jumeirah Beach Residence 860 1,730

Palm Jumeirah 1,100 2,700

Min/Max High to Luxury End 850 3,000

• Apartment prices remained broadly stable over the quarter; with Buyer’s

preference continuing to be for smaller units in more affordable communities.

We expect transaction levels to increase over the next few months as the general

perception indicates the market is bottoming out.

• After dropping nearly 20% year-on-year, rates in Dubai Marina remained stable

and similarly DIFC, Greens, and JBR were stable this quarter.

• With ample options available in the market, at various prices and attractive

payment plans, Buyers have significant choice. They also appeared to be better

informed compared to previous years, as they researched their options, pricing,

payment plans, and Developer’s track record.

• Off-plan products launched by the Master Developers achieved a strong take-up

due to attractive sales prices and payment plans.


-20% -15% -10% -5% 0% 5% 10%

2%

10%

-19%

-6%

2%

-1%

3%

-3%

-3%

0%

2%

0%

-5%

0%

1%

0%

APARTMENT SALES PRICE MOVEMENT BY AREA

Discovery Gardens

Dubai Sports City

IMPZ

International City

Jumeirah Village

Business Bay

Greens

Jumeirah Lakes Towers

DIFC

Downtown DubaI

Dubai Marina

Jumeirah Beach Residence

Palm Jumeirah

-1%

6%

-2%

-2%

0%

-5%

2%

-11%

-14%

-10%

1%

Q3 2016 Report


Dubai

Villas

(AED per sq ft)

Average Sales Price

Min Max

Al Furjan 705 1,060

Arabian Ranches 890 1,600

Dubai Sports City (Victory Heights) 950 1,450

Jumeirah Golf Estates 850 1,400

Jumeirah Park 750 1,500

Jumeirah Village 650 1,100

Meadows 960 1,380

Palm Jumeirah 1,440 3,500

Springs 920 1,430

Villas

VILLA SALES PRICE MOVEMENT BY AREA


-20% -15% -10% -5% 0% 5% 10% 15%

Al Furjan

Arabian Ranches

Dubai Sports City (Victory Heights)

Jumeirah Golf Estates

Jumeirah Park

Jumeirah Village

Meadows

Palm Jumeirah

Springs

-5%

13%

-10%

-17%

-2%

-8%

2%

-3%

-2%

-1%

-1%

-2%

-6%

2%

-3%

2%

1%

5%

• Levels of activity picked up in September after two quiet summer months. In line with the rest of the year,

interest was predominantly for more affordable and mid-priced units, typically priced between AED 2 to

AED 5 million. As a result, established communities such as the Springs and Mudon recorded 5% and 1%

increases respectively over the quarter.

• Mira townhouses by Emaar were also delivered during Q3 2016 leading to price increases for the three-

bedroom townhouses, which were selling at AED 1.8 million pre-completion and increasing to over AED 2

million post-handover. Whilst activity in the newly handed over communities increased, we noted much

quieter transaction levels in older communities such as Arabian Ranches.

• The first Akoya villas and townhouses in Dubailand are also expected to complete by the end of October,

which will increase the amount of supply ready for occupation in the market.

• Finally, numerous new off-plan launches seemed to have diverted some demand away from completed or

close to completed communities, as prices and payment plans have attracted Buyers.

Q3 2016 Report


Dubai Office Sector Q3 2016

Offices

(AED per sq ft pa)

Average Rental Rates % Change

Min Max Q2 - Q3 2016 Q3 2015- Q3 2016

Barsha Heights 80 120 0 -7

Bur Dubai 80 130 0 -5

Business Bay 70 130 5 11

DIFC 150 350 2 -2

Dubai Internet City 185 225 0 8

Dubai Investment Park 60 85 7 4

Dubai Marina 80 200 -10 0

Jumeirah Lakes Towers 60 140 8 0

Sheikh Zayed Road 100 250 -5 -8

Offices

(AED per sq ft)

Average Sales Prices % Change

Min Max Q2 - Q3 2016 Q3 2015- Q3 2016

Barsha Heights 700 1,200 0 0

Business Bay 850 1,700 2 2

DIFC 1,550 2,250 0 -1

Dubai Investment Park 400 800 0 4

Dubai Marina 1,300 1,800 0 0

Jumeirah Lakes Towers 600 1,400 -3 -11

Sales

• The third quarter was relatively subdued for office sales as Buyers were expecting the market to drop

further, whereas Owners felt rates had bottomed out and would start increasing. As a result, there was a

reluctance to sell at a lower rate, which resulted in only a few deals completing.

• There continued to be an interest for development land, although Landowners were unwilling to sell at

current rates. This was especially true in areas such as Majan, Jumeirah Village and Arjan where rates

reached as low as AED 60 per square foot on the GFA. Instead, Sellers were keen to enter into joint-venture

agreements, whereby Landowners would provide the land and the partner would fund the development.

• Whilst there was still appetite for entire buildings, Investors were looking for yields of around 9% (instead of

the previous 7.5% to 8%) as they were factoring in additional future supply, especially in freehold areas such

as Dubailand.

• Buildings in traditional leasehold areas such as Deira and Bur Dubai, where potential for new supply is

limited, continued to sell at yields of around 8%.

Leasing

• The summer months were particularly slow this year, with low levels of enquiries and few deals closing.

Activity did however pick up at the end of Q3, albeit at a significantly slower pace than in the previous year.

• We also noted an increase in Tenants looking to break their leases early, as businesses either closed down

or looked to minimise or consolidate their office space. This was predominantly, but not restricted to, oil and

gas related companies.

• In areas such as DIFC , Landlords were unwilling to reduce asking rates even though it affected take-up.

However, levels of incentives increased, most notably for unfitted space where long rent-free periods were

usually offered. Generally, Landlords are keen to secure Tenants on a long-term lease, especially as more

buildings will enter the market in the next 18-24 months, such as ICD Brookfield (due in Q1 2019).

• Ibn Battuta Gate continued to perform well as the space is suitable for small companies who only require

offices for the purpose of obtaining a company/trading license. In addition, ample car parking, proximity

to Ibn Battuta Mall and a good connection to public transport make it an attractive development. Rates

are from AED 145 per square foot for small units and from AED 85 per square foot for larger shell and core

space.

Q3 2016 Report


Dubai

Dubai Area and Rent Affordability Map1 Akoya2 Al Barari3 Al Furjan4 Al Nahda5 Al Qusais6 Al Warqaa7 Arabian Ranches8 Barsha9 Bur Dubai10 Business Bay11 Culture Village12 Deira13 DIFC14 Discovery Gardens15 Downtown Dubai16 Downtown Jebel Ali17 Dubai Creek18 Dubai Hills19 Dubai Investment Park20 Dubai Land

Residential Complex21 Dubai Marina22 Dubai Silicon Oasis23 Dubai Sports City24 Dubailand25 Emirates Hills26 Green Community27 IMPZ28 International City29 JBR30 Jumeirah31 Jumeirah Golf Estates32 Jumeirah Islands33 Jumeirah Park34 Jumeirah Village35 Jumeirah Lakes Towers36 Living Legends37 Liwan38 Maritime City39 Meydan40 Mirdif41 MotorCity

42 Mudon43 Muhaisnah44 Palm Jumeirah45 Remraam46 Residential City47 Rigga Al Buteen48 Sheikh Zayed Road49 Springs / Meadows50 Studio City51 Tecom C52 The Greens53 The Lakes54 The Villa55 Town Square56 Umm Suqeim57 Uptown Mirdiff58 Victory Heights

Most Expensive

Expensive

Mid Priced

Affordable

Note: Area classification by affordability is provided for indicative purposes only as many areas in Dubai offer various types of residential units, from affordable to high end. As such, the map colour coding takes into account the most prevalent type of product and exceptions of a lower and / or higher price could be available.


Q3 2016 Report

Forecast Overview

GDP to grow by 2.3% this year…

The UAE is one of the most diversified economies in the Gulf, but oil price developments are still key to the

outlook. The oil and gas sector, which makes up around one third of the economy, is expected to rise by 1%

in 2016 after growing 5% last year, influenced by:

• Change in OPEC policy unlikely – we expect no meaningful agreement to freeze or cut production at

OPEC’s informal meeting in September, so UAE oil output should remain high in keeping with the policy

to maintain market share. We expect the oil price to average $43.6 pb in 2016 and $50 pb next year.

• Oil output limited by capacity – production in the UAE reached a record level of 3.07 mbpd in August,

based on IEA numbers. After a 4.4% increase in production last year, we expect only a 1% rise this year

as spare capacity remains limited.

Global Outlook Q3 2016

Who we are Oxford Economics Oxford Economics was founded in 1981 as a commercial venture with Oxford University’s business college to provide economic forecasting and modeling to UK companies and financial institutions expanding abroad. Since then, we have become one of the world’s foremost independent global advisory firms, providing reports, forecasts and analytical tools on 200 countries, 100 industrial sectors and over 3,000 cities. Our best-of-class global economic and industry models and analytical tools give us an unparalleled ability to forecast external market trends and assess their economic, social and business impact.

Headquartered in Oxford, England, with regional centres in London, New York, and Singapore, Oxford Economics has offices across the globe in Belfast, Chicago, Dubai, Mexico City, Miami, Milan, Paarl - South Africa, Paris, Philadelphia, San Francisco, and Washington DC. We employ over 200 full-time people, including more than 120 professional economists, industry experts and business editors—one of the largest teams of macro economists and thought leadership specialists.

To find out more and request your free trial please contact Paul de Cintra on [email protected]

United Arab Emirates Highlights


…with non-oil growth slowing to 2.9% Indicators show that while growth has slowed, recession should be avoided this year. The PMI, a signal of non-oil

activity, remained in expansionary territory at 54.7 in August, with growth in both output and new orders still

robust. We forecast non-oil GDP growth slowing to 2.9% in 2016, with total GDP growth at 2.3%.

• Low oil prices tighten liquidity – domestic liquidity conditions have tightened since 2014, with low oil prices

feeding through to lower government spending, interest rates rising gradually in line with the US, and a need

to finance the large budget deficit.

• Mixed price pressures for consumers – headline inflation remained broadly unchaged at 1.8% in July, and we

forecast a yearly average of 2% in 2016.

• Measures to support the fiscal balance – the government has slowed outlays on non-essential projects,

removed some energy subsidies and a region-wide VAT is expected from 2018.

Medium-term outlook more encouraging

• Over 2017-19, non-oil growth is seen picking-up to 3.2% per year, slightly faster than in most of its

neighbours. An improvement in economic sentiment and gradual rise in oil prices will help to boost growth.

This will be aided by:

• Diversification strategy – the UAE aims to transition to a knowledge based economy by 2021, with oil GDP contributing 20% to total GDP (currently 30%).

• Business hub status and Expo 2020 will support investment – the UAE ranks highly for its ease of doing business and openness to investment and trade, which will support investment.

• Rising business confidence – the IMF suggests that efforts should be made to improve the business environment, ease restrictions on FDI and spur competition. The imminent approval of the bankruptcy law, improving access to finance and broadening the credit bureau’s coverage, should all help improve business confidence.

UAE: REAL GDP GROWTH UAE: INFLATION

F’cast F’cast

14

12

10

8

6

4

2

0

-2

-4

-6

14

12

10

8

6

4

2

0

Middle East and North Africa UAE Middle East and North Africa UAESource: Oxford Economics Source: Oxford Economics

1991 19911994 19941997 19972000 20002003 20032006 20062009 20092012 20122015 20152018 2018

Global Outlook Q3 2016

% Year % Year

Q3 2016 Report

Q3 2016 Report


VALUATION & ADVISORYOur professional advisory services are conducted by suitably qualified personnel all of whom have had extensive Real Estate experience within the Middle East and internationally.

Our valuations are carried out in accordance with the Royal Institution of Chartered Surveyors (RICS) and International Valuation Standards (IVS) and are undertaken by appropriately qualified valuers with extensive local experience.

The Professional Services Asteco conducts throughout the region include:

• Consultancy and Advisory Services• Market Research• Valuation Services

SALESAsteco has established a large regional property sales division with representatives based in the UAE, Qatar and Jordan. Our Sales teams have extensive experience in the negotiation and sale of a variety of assets.

LEASINGAsteco has been instrumental in the Leasing of many high-profile developments across the GCC.

ASSET MANAGEMENTAsteco provides comprehensive Asset Management services to all property Owners, whether a single unit (IPM) or a regional mixed-use portfolio. Our focus is on maximising value for our Clients.

OWNERS ASSOCIATIONAsteco has the experience, systems, procedures and manuals in place to provide streamlined comprehensive Association Management and Consultancy Services to residential, commercial and mixed-use communities throughout the GCC Region.

SALES MANAGEMENTOur Sales Management services are comprehensive and encompass everything required for the successful completion and handover of units to individual unit Owners.

LICENSINGOur brand, network, system and procedures are now available in territories across the MENA region. Our Licensing services currently include Real Estate Brokerage Franchising and associated support services with many of the key elements designed specifically around the franchisee, making it a truly unique and bespoke franchise opportunity.

The Middle East’s largest full service Real Estate services company, Asteco was formed in Dubai in 1985. Over the years, Asteco has gained enormous respect for consistently delivering high quality, professional, value-added services in a transparent manner. It is also widely recognised for its involvement with many of the projects that have defined the landscape and physical infrastructure of the Emirates.

Asteco has an essential combination of local knowledge and international expertise. A deeply established brand, renowned for its application of the latest technological advances, its commitment to transparency, winning strategies and human expertise. Undisputed Real Estate experts, Asteco represents a significant number of the region’s top property Owners, Developers and Investors.

Q3 2016 Report


John Stevens, BSc MRICSManaging Director/Director, Asset Services+971 600 54 [email protected]

Sean McCauley, MBA BComDirector, Agency Services+971 600 54 [email protected]

Omar Binder, BA (Hons)Director, Licensing Services+971 600 54 [email protected]

Zahra Alvi, MScResearch Analyst+971 600 54 [email protected]

John Allen, BSc MRICSDirector, Valuation & Advisory+971 600 54 [email protected]

Julia Knibbs, MScAssociate Director, Research & Advisory (UAE)+971 600 54 [email protected]

James Joughin, BSc (Hons) MRICSAssociate Director, Valuation +971 600 54 [email protected]

Q3 2016 Report

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© Asteco Property Management, 2016

Property Review

DISCLAIMER: The information contained in this report has been obtained from and is based upon sources that Asteco Property Management believes to be reliable, however, no warranty or representation, expressed or implied, is made to the accuracy or completeness of the information contained herein, and same is submitted subject to errors, omissions, change of price, rental or other conditions, withdrawal without notice, and to any special listing conditions imposed by our principals. Asteco Property Management will not be held responsible for any third-party contributions. All opinions and estimates included in this report constitute Asteco Property Management’s judgment, as of the date of this report and are subject to change without notice. Figures contained in this report are derived from a basket of locations highlighted in this report and therefore represent a snapshot of the Dubai market. Due care and attention has been used in the preparation of forecast information. However, actual results may vary from forecasts and any variation may be materially positive or negative. Forecasts, by their very nature, involve risk and uncertainty because they relate to future events and circumstances which are beyond Asteco Property Management’s control. For a full in-depth study of the market, please contact Asteco Property Management’s research team. Asteco Property Management LLC. Commercial License No. 218551. Paid-up Capital AED 4,000,000.

Q3 2016 Dubai Real Estate Report

q3 2016 dubai real estate report

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