Dubai Residential Market Report - Q3 2015

Dubai Residential Market Report

Q32015

© Cavendish Maxwell 2015 | www.cavendishmaxwell.com2

Dubai Residential Market Report - Q3 2015

© Cavendish Maxwell 2015 | www.cavendishmaxwell.com 3

• Dubai residential market headlines

• Macro-economic factors

• Sale price performance

• Rental rates performance

• Residential supply

• Cavendish Maxwell Residential Market Survey Q3 2015

Content



• As the Dubai market continues to go through a correction phase, overall market prices have continued to decline by 2% throughout Q3 2015.

• Apartment and villa prices have both dropped by an average of 2% in Q3 2015, consistent with the declines in the previous quarter.

• Apartment rents have remained stable in Q3 2015, whilst villa rents decreased in most of the major villa communities.

• Approximately 6,000 residential units have been introduced into the market in Q3 2015, in areas such as Dubai Sports City, Dubailand, International City, Jumeirah Golf Estates and Jumeirah Village Circle.

• Cavendish Maxwell Residential Market Survey Q3 2015 results show that buyer inquires continued to decrease whilst seller instructions increased. The number of agreed sales, however, has remained the same.

Dubai residential market headlines

Q2 2015 - Q3 2015

-2% -2%

Q3 2014 - Q3 2015

-6% -9%


“Inflation rate as of August 2015 stood at 4.41, the highest level since 2008.”

“Petrol prices in the UAE have dropped by approximately 16% in October 2015 from the hiked prices of August.”

• Dubai Consumer Price Index (CPI) and inflation rate increased during August to the highest levels in years. This was mainly driven by a 10% increase in transportation cost in August, due to the deregulation of petrol prices.

• CPI represents the prices paid by consumers for a select basket of goods allocated into 12 categories, including food, clothing, housing, transport, etc. The three categories with the highest weight are housing and utilities, transportation and food and non alcoholic beverages.

• Following the hike in petrol prices in August, the Fuel Prices Committee reduced prices by 8% in September and a further 9% with the recently released petrol prices for the month of October 2015.

• Over the course of 2015, food and non-alcoholic beverages prices have increased by 5.14% from January to August 2015, followed by an increase of 2.59% during the same period in the housing, water, electricity, gas and other fuels category.

Macro-economic factors

128.00

126.00

124.00

122.00

120.00

118.00

116.00

114.00

112.00

110.00

108.00

5%

4%

3%

2%

0%

-1%

-2%

-3%

Inflation rateCPI

2014 June201120102009 August2012 2013

CPI

% in

flatio

n

Source: Dubai Statistics Centre

Figure 1



• As overall apartment prices continue to drop, the rate of decline in prime locations such as Business Bay, Downtown Burj Khalifa and Palm Jumeirah has decreased.

• In Q3, prices continued to drop at the same rate as Q2 2015 in Dubai Marina, the Greens and Views, Jumeirah Beach Residence and International City, whilst prices in Dubai Sports City and Motor City declined at a more accelerated rate throughout this quarter.

• Prices in secondary locations such as International City, Motor City and Discovery Gardens have declined the most at 10%, 10% and 9% respectively over a 12 month period from Q3 2014. In the more central and established areas, prices have dropped between 4% and 5% during the same period.

• These slower rates of decline may suggest that prices will level out and stabalise leading to the end of this year.

Apartments: market wide“Apartment prices declined by 2% in Q3 2015”

Figure 2

Sale price performance

Apartments pr ice performance

Dubai Marina

Palm Jumeirah (Shoreline

Apartments)

Emirates Living (Views and Greens)

Dubai Sports City

Business Bay

Motor CityJumeirah Beach

Residences

Discovery Gardens

Downtown Burj Khalifa

International City

3,000

2,500

2,000

1,500

1,000

500

0

0%

-2%

-4%

-6%

-8%

-10%

-12%

Ave

rag

e p

rice

(AED

/ s

q. f

t.)

% c

hang

e

Q2 2015 Q3 2015 QoQ % changeQ2 – Q3 2015

12 Month % changeQ3 2014 - Q3 2015

-1%

-5% -5% -5%

-4% -4%

-6%

-7%

-10%

-9%

-10%

-2%

-1% -1% -1% -1%

-2% -2% -2% -2%

Source: Property Monitor Index


• The decline in villa prices slowed in Q3 2015 in communities such as Jumeirah Golf Estates, the Meadows, Springs and Lakes.

• Price declines accelerated significantly in Jumeirah Islands, Victory Heights, Arabian Ranches and Al Furjan during the third quarter in comparison to Q2 2015.

• Jumeirah Golf Estates villa prices dropped by 1% in Q3, a notable improvement from the 3% in the previous quarter. The Meadows and Springs prices declined at a slower rate in Q3 than in Q2 2015

• The villa market prices have dropped by approximately 4.4% throughout the first three quarters of 2015 and 9% over a 12 month period with further supply of these units being launched and completed during this time period.

Villas: market wide“Average villa prices declined at a rate of 2% in Q3 2015, consistent with the decline in Q2.”

Figure 3

Vi l las pr ice performance

1,800

1,600

1,400

1,200

1,000

800

600

400

200

0

0%

-3%

-6%

-9%

-12%

-15%

-18%

-21%

-24%

-28%

Ave

rag

e p

rice

(AED

/ s

q. f

t.)

-1%

-6%-5%

-8%

-7% -7%

-12%

-7%

-20%

-12%

-7%

-2%-1%

-2%-3%

-2% -2%

-5%

-2% -2%

Jumeirah Golf Estates

The MeadowsJumeirah Islands

Arabian Ranches

The Lakes The SpringsJumeirah Park

Jumeirah Village Triangle

Victory Heights

Al Furjan Villas

Q2 2015 Q3 2015 QoQ % changeQ2 – Q3 2015

12 Month % changeQ3 2014 - Q3 2015

% c

hang

e







• Whilst rents remained stable in most locations across Dubai, rents in Business Bay dropped by approximately 2% and by 3% in Dubai Sports City.

• Prime locations still demand premium rents with a one bed apartment in Downtown Burj Khalifa ranging from AED 110,000 to AED 125,000 per annum. Similarly a one bed in the Views or Greens ranges from AED 95,000 to AED 110,000.

Apartments: “Apartment rents remained stable in most locations in Q3 2015.”

Figure 4

Rental rates performance

Dubai Marina

The Views

The Greens

Business Bay

Jumeirah Beach Residence


Dubai Sports City

Motor City

Discovery Gardens

International City

2 bed1 bedStudio

Rental rate/sq.ft./annumSeptember 2015

96

149

148

99

110

180

95

84

88

71

114

122

112

95

114

138

72

67

67

62

106

110

100

89

112

118

70

71

-

59

Apartment rents by unit type Q3

Average annual rent - 2 bedroom apartment

250,000

200,000

150,000

100,000

50,000

0Dubai Marina

The Views The Greens Business Bay

Jumeirah Beach Residences


Dubai Sports City

Motor City International City

Figure 5

Ave

rag

e an

nual

rent

(AED

)




• Rents have declined on average by 1% in the Meadows, Springs and Lakes. These communities continued to have strong rental activity throughout this year.

• In locations such as Victory Heights and Jumeirah Park, rents have dropped by up to 3% in Q3 2015 from the previous quarter.

Villas: “Villa rents have marginally declined in most of the major villa communities in Q3 2015.”

Figure 6

Villa rents by unit type Q3

Jumeirah Golf Estates

Jumeirah Islands

The Lakes

Jumeirah Park

Victory Heights

The Meadows

Arabian Ranches

The Springs

Jumeirah Village Triangle

Al Furjan Villas

5 bed4 bed3 bed

-

-

79

65

-

62

72

72

-

50

67

56

85

63

78

64

68

75

60

-

61

64

-

60

71

66

69

-

50

44

Rental rate/sq.ft./annumSeptember 2015

Average annual rent - 4 bedroom vi l la

400,000

350,000

300,000

250,000

200,000

150,000

100,000

50,000

0Jumeirah

Golf EstatesJumeirah Islands

The Lakes Jumeirah Park

Victory Heights

The Meadows Arabian Ranches

The Springs Jumeirah Village Triangle

Figure 7

Ave

rag

e an

nual

rent

(AED

)





• During the first three quarters of this year, 6,000 residential units have been introduced into the market. These figures exclude any serviced/hotel apartments.

• The completed developments in the first three quarters of 2015 are in locations such as Dubai Sports City, Dubailand, International City, Jumeirah Golf Estates and Jumeirah Village Circle.

• Over 70% of the completed developments in 2015 have been apartment units, the remaining percentage are villas and townhouses.

• Some of the most densely developed areas such as Dubai Marina, Jumeirah Lakes Towers and Downtown Burj Khalifa have had a limited number of newly launched residential developments during this year as the reach their development capacity.

Completions:“Approximately 6,000 residential units have been completed in the first three quarters of 2015.”

Figure 8

Residential supply

1

1220

3

2

19

21

29

28

7

10

13

26

21

18

24

6

11

8

16

4

5

22

25

7

6

5

4

3

2

1

15

27

9

17

23

14

1 Al Furjan2 Al Jaddaf3 Arabian Ranches4 Business Bay5 DIFC6 Discovery Gardens

7 Downtown Burj Khalifa8 Dubiotech9 Dubai Creek Harbour10 Dubai Festival City11 Dubai Investment Park I and II12 Dubai Marina

13 Dubai Silicon Oasis14 Dubai South15 Dubai Sports City16 Dubailand17 Emirates Living18 IMPZ

19 International City20 Jumeirah Beach Residences21 Jumeirah Golf Estates22 Jumeirah Islands23 Jumeirah Lake Towers24 Jumeirah Park

25 Jumeirah Village Circle26 Jumeirah Village Triangle27 Mohammed Bin Rachid City28 Motor City29 Palm Jumeirah

< - 2,000

2,001 - 6,000

6,001 - 10,000

10,001 - 14,000

14,001 - 18,000

18,001 - 22,000

22,001 - <

Range


6

5

4

3

2

1

21

16

2

3

9

1319

29

12

11

1

25

74

15

23

14

27

16

1 Al Furjan2 Al Jaddaf3 Arabian Ranches4 Business Bay7 Downtown Burj Khalifa9 Dubai Creek Harbour

11 Dubai Investment Park I and II12 Dubai Marina13 Dubai Silicon Oasis14 Dubai South15 Dubai Sports City16 Dubailand

19 International City23 Jumeirah Lake Towers25 Jumeirah Village Circle27 Mohammed Bin Rachid City29 Palm Jumeirah

< - 2,000

2,001 - 4,000

4,001 - 6,000

6,001 - 8,000

8,001 - 10,000

10,001 - <

Range

• There were approximately 18,000 residential units scheduled to enter the market in 2015. Of those 6,000 units have been completed so far. We have seen many developments initially scheduled to be completed at the end of 2015, delayed to the first half of 2016 or to a later date in 2017.

• The recently launched community The Villages in Dubai South is set to deliver 20,000 residential units with Cluster 1 providing 6,000 units to be completed by 2019, ahead of the Expo 2020.

• A number of residential developments have been launched in Mohammed Bin Rashid City and Dubai Creek Harbour over the past two quarters. We see areas such as these being a focus of development moving forward as new communities are created.

• Additional supply entering the market could place further pressure on prices to the end of 2015 and through 2016. Factors such as the estimated population and job growth leading to the year 2020, alongside the UAE’s initiatives to encourage investment, should help support the absorption of this upcoming supply.

Pipeline Supply:“Whilst a number of residential projects entered the market during the first three quarters of this year, other projects have been delayed to 2016 and 2017.”

Figure 9



Q4 2015 sales out lookApartmentsPercentage of agents who predicted apartment prices would:

VillasPercentage of agents who predicted villa prices would:

Q4 2015 rents out lookApartmentsPercentage of agents who predicted apartment rents would:

VillasPercentage of agents who predicted villa rents would:

increase by more than 5% increase by up to 5% not change decrease by up to 5% decrease by more than 5%

increase by more than 5% increase by up to 5% not change decrease by up to 5% decrease by more than 5%

Figure 10

Figure 11

Source: Cavendish Maxwell Residential Market Survey

Source: Cavendish Maxwell Residential Market Survey

28% 36%

0% 0%

40%32%

28% 28%

4% 4%

16%

24%64%

44%

8%12% 20%

4% 4% 4%

Looking back - Q3 2015Cavendish Maxwell Residential Market Survey

The majority of agents surveyed had predicted apartment and villa prices to decline by up to 5%

predictions vs reality

Apartment and villa prices fell by 2% during Q3 2015.


Miles Phillips BSc (Hons) MRICS ACIArbPartnerHead of Operations - UAE

M: +971 56 604 2750 E: [email protected]

Adam Wisher BSc (Hons) MRICSPartnerHead of Development Advisory and Real Estate ResearchM: +971 56 139 4315E: [email protected]

Sofia Underabi BPropEc AAPI PartnerHead of Residential Valuation M: +971 50 435 6527 E: [email protected]

Dima Isshak BScResearch Manager


PROPERTY SERVICESMIDDLE EAST & AFRICA

Jay Grant MSc IRRV (Hons) Managing Partner


T: +971 (0) 4 453 9525 E: [email protected]

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Dubai Residential Market Report - Q3 2015