Dubai House Price Index - Colliers · 2017-09-26 · Dubai House Price Index | Q2 2014 | Colliers International Executive Summary Overview The overall quarterly index increased in

Dubai House Price IndexSecond Quarter 2014

Dubai House Price Index | Q2 2014 | Colliers International

Executive Summary

Overview

The overall quarterly index increased in Q2 2014, reaching 170 index points compared with 165 in Q1 2014,

registering a 3% increase. The blended average rate for residential property in Q2 2014 was AED 1,512 per ft² (AED

16,275 sq m) compared to AED 1,463 ft² (AED 15,747 sq m) in Q1 2014.

The Annual Dubai House Price Index increased 20% in Q2 2014. The blended average rate for

residential property in Q2 2014 was AED 1,512 per ft² (AED 16,275 per m²) compared with AED

1,255 per ft² (AED 13,509 m²) in Q2 2013.

2

2% 6% 5% 3%

DUBAI HOUSE PRICE INDEX:

YEAR ON YEAR

Q2 2013 / Q2 2014

Dubai House Price Index | Q2 2014 | Colliers International3

BREAKDOWN OF TRANSACTIONS

BY PROPERTY TYPE Q2 2014

Q2

2014

Apartments Townhouses VillasSource: Colliers International

Compared to the same period of last year, the

Apartments’ prices in the Palm Jumeirah

increased by 58%, recording the highest

increase in prices for developments covered

in the HPI. The second largest increase was

recorded in Apartments’ prices in Motor

City, where prices increased 55% compared

to Q2 2013.

Dubai Marina recorded the highest number of transactions in

the HPI, equating to 14% of the total transactions. Downtown

Dubai obtained a 10% share of the total transactions followed

by Jumeirah Lake Towers at 9% with Motor City and Business

Bay at 7%.


Overall Factors Influencing

The Residential Real Estate Market

Factors

Influencing

the Residential

Real Estate

Market

Availability of

Finance

Unrest in the

Arab Region

Government

Regulations

Improved

Investor & End-

User Sentiment

Tax-Free

Investments

Better

Economic

Outlook

Improved

Status of

Complete

Developments


Factors Influencing

the Residential

Real Estates market

in Q2 2014

1. Increased Rental Rates

The escalating rental costs in prime locations have led

many tenants to relocate to more cost effective locations

such as Jumeirah Village, Dubai Sports City, Dubai

Silicon Oasis and Discovery Gardens. As tenant demand

increased so has the attraction to investors with the

overall impact being a consecutive increase in rents and

sale prices in these aforementioned areas. Motor City

particularly, has seen increased activity.

2. Mortgage Cap Announcement

In the last quarter of 2013 a mortgage cap rule was

confirmed by the UAE government, taking effect in

December 2013. 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 Dhs 5 million. Properties over Dhs 5

million in value were limited to 65% of the value for

expatriates and up to 70% for nationals. In Q3 2013,

prior to the new law taking effect the expectation of the

new mortgage cap put pressure on the market, with

investors accelerating their acquisitions in an attempt to

take advantage of the mortgage finance available at that

time (85% for both expatriates and UAE nationals). This

increase in demand by investors caused a significant

increase in values and also an opportunistic increase in

asking prices beyond the market values. In Q4 2013 the

unrealistic increase in asking prices together with an

increase in transfer fees may have discouraged buyers

causing a drop in transacted demand, decreasing the

total volume of transactions by 41% (from 866 in Q3 to

507 in Q4). In Q1 and Q2 2014, purchase and asking

prices continued to increase, however, the volume of

properties actually transacted fell again below Q4 2013

totals. It appeared that the government measures to

stabilize the property market were starting to have an

impact. This was further illustrated in the stabilisation of

the villa index in

Q2 2014.

3. Increase in Transfer Fees

The Dubai Land Department (DLD) doubled the transfer

fees for all property sales, with the exception of the first

direct sale from developer to buyer which will stay at the

previous rate. Transaction costs now consist of the

transfer fee to the DLD (4%), commission to the agent

(2%), 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 appears

to be designed to temper the increase in sales prices and

its affect has been evident in Q2 2014.


Forthcoming Supply

At the end of 2013, there were an approximate 431,300

residential units in Dubai. At the end of 2014, the total

number of residential units is expected to increase by

3% adding approximately 14,200 units compared to an

increase of approximately 22,700 units in 2013. By the

end of 2017, the total number of residential units is

expected to increase by 8.8% adding approximately

38,275 units.

At the end of 2013, there were approximately 187,000

freehold Units. By the end of 2014, the number of

freehold units is expected to increase by 6% reaching

an approximate 197,500 units to add approximately

10,500 units and constitute 44% of the total number of

residential units in Dubai. By the end of 2017, the total

number of freehold units is expected to increase by

14% adding around 27,000 units.

10 470

41 391

56 974

22 233 20 647 20 401

13 437

22 728

14 251

18 479

10 905 8 891

5% 18% 21% 7% 6% 5% 3% 6% 3% 4% 2% 2%0%

5%

10%

15%

20%

25%

-

10 000

20 000

30 000

40 000

50 000

60 000

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

% C

hange

Additio

nal U

nits

Forthcoming supply

Additional Supply % Change (Total)

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 U

nits

Additional Freehold Units

Source: Colliers International



Alternative Analysis

Real Estate Returns

In Q2 2014, the Dubai Financial Market (DFM)

performed positively, increasing 18% of its value while

the HPI has seen a 3% increase in performance.

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 seven years period,

generated returns of circa 70%. A similar investment

in the DFM for the same period has generated returns

of 30% in Q2 2014.

-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

2007 2008 2009 2010 2011 2012 2013 2014

DFM / HPI ComparisonVolatility of Returns - Quarter on Quarter

DFM HPI

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

2007 2008 2009 2010 2011 2012 2013 2014

DFM / HPI ComparisonInvestment Performance

DFM HPI




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; the higher the ratio is

away from its long run average indicates the onset of an

above the average market price. 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 Q2 2014 has experienced an increase,

standing at 1.39 compared to 1.36 in Q1 2014. The

long term average (excluding the mid-2008 boom)

stands at 1.32, meaning that in Q2 2014 the average is

5.3% above the long term average. When comparing

the ratio during this quarter (Q2 2014) to the ratio in Q2

2013, there has been a 7.8% decrease.

0.800

0.900

1.000

1.100

1.200

1.300

1.400

1.500

1.600

1.700

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

2007 2008 2009 2010 2011 2012 2013 2014

Valu

e

Price to Rent Ratio



Apartment Index

Year on Year

The Annual Overall Apartment Index increased 18% in

Q2 2014 compared with Q2 2013, increasing to 157

points from 133 points.

The blended average rate per ft² for apartments

in Dubai in Q2 2014 was AED 1,584 (AED 17,050

per m²) compared with AED 1,341 per ft² (AED 14,434

per m²) in Q2 2013.

Quarterly

The Quarterly Overall Apartment index grew by 5%

in Q2 2014 compared to a 2% increase in Q1 2014.

The blended average rate per ft² for apartments in

Dubai in Q2 2014 was AED 1, 584 (AED 17,050 per

m²) compared with AED 1,504 (AED 16,182 per m²)

in Q1 2014.

133

157

18%

0

20

40

60

80

100

120

140

160

180

Q2 - 2013 Q2 - 2014

Index P

oin

ts

APARTMENT INDEX: YEAR ON YEARQ2 2013 / Q2 2014

Index Points % Change

133142 146 149

157

0

20

40

60

80

100

120

140

160

180

Q2 Q3 Q4 Q1 Q2

2013 2014

Index P

oin

ts

APARTMENT INDEX: QUARTERLYQ2 2013 / Q2 2014




3% 7% 3% 2% 5%


Townhouse Index

Year on Year

The Annual Overall Townhouse Index increased 18%

in Q2 2014 compared with Q2 2013, increasing to 160

points from 136 points.

The blended average rate per ft² for townhouses in

Dubai in Q2 2014 was AED 1,269 (AED 13,659 per

m²) compared with AED 1,077 per ft2 (AED 11,592

per m²) in Q2 2013.

Quarterly

The Quarterly Overall Townhouse index saw a 5%

increase in Q2 2014 compared to a 6% increase in Q1

2014.

The blended average rate per ft² for townhouses in

Dubai in Q2 2014 was AED 1,269 (AED 13,659 per

m²) compared with AED 1,208 ft2 (AED 13,002 per

m²) in Q1 2014.

136

160

18%

0

20

40

60

80

100

120

140

160

180

Q2 - 2013 Q2 - 2014

Ind

ex P

oin

ts

TOWNHOUSE INDEX: YEAR ON YEARQ2 2013 / Q2 2014


136 133143

152160

4% -2% 8% 6% 5%

-20

0

20

40

60

80

100

120

140

160

180

Q2 Q3 Q4 Q1 Q2

2013 2014

Index P

oin

ts

TOWNHOUSE INDEX: QUARTERLYQ2 2013 / Q2 2014






Villa Index

Year on Year

The Annual Overall Villa Index increased 26% in Q2

2014, compared with Q2 2013, increasing to 204 points

from 162 points.

The blended average rate per ft² for villas in Dubai in

Q2 2014 was AED 1,474 (AED 15,866 per m²)

compared with AED 1,173 per ft2 (AED 12,626 per

m²) in Q2 2013.

Quarterly

The Quarterly Overall Villa index saw no change in Q2

2014 compared to a 12% increase in Q1 2014.

The blended average rate per ft² for villas in Dubai in

Q2 2014 was AED 1,474 (AED 15,866 per m²)

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

m²) in Q1 2014.

162

204

26%

0

50

100

150

200

250

Q2 - 2013 Q2 - 2014

Ind

ex P

oin

ts

VILLA INDEX: YEAR ON YEARQ2 2013 / Q2 2014


162170

183

205 204

2% 5% 8% 12% 0%

-50

0

50

100

150

200

250

Q2 Q3 Q4 Q1 Q2

2013 2014

Index P

oin

ts

VILLA INDEX: QUARTERLYQ2 2013 / Q2 2014





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

We have used the weighted average method to construct the overall index. Based on our coverage of 19 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 67%, 27% and 6% 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]

Catherine Clarke, BSc (Hons) MRICS

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.

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annual revenue

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under management

15,800professionals

and staff

485 offices in

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Canada: 44

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EMEA: 84

Documents

Dubai House Price Index - Colliers · 2017-09-26 · Dubai House Price Index | Q2 2014 | Colliers International Executive Summary Overview The overall quarterly index increased in