ValuStrat-Q1-2015-Dubai-Real-Estate-Research

Dubai Real Estate MarketREVIEW: FIRST QUARTER 2015

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1 | ValuStrat - Real Estate Research Report - Quarter 1, 2015 www.valustrat.com | 2

ValuStrat in the Media17 April 2015 - New Dubai Metro extension ‘could lift house prices by 15%’ValuStrat said the new route recognises the mass transit demands of 240,000 residents with new stations planned in Discovery Gardens, Al Furjan, Jumeirah Golf Estates, Dubai Investment Park and the Expo 2020 site.

15 April 2015 - Affordable housing quotas in Dubai: A middle-class dreamAccording to Declan King, Director and Group Head of Real Estate at ValuStrat: “More mature western property markets display a precedence of affordable housing quotas being introduced for developers — several such models exist. Wider discussion would be necessary to understand if any of these concepts would be suitable for the Dubai market.”

25 March 2015 – Dubai’s rentals remain stuck on a highIt has become extremely challenging for single-income families with one or two children and in certain occupations, such as teaching or nursing to come upon an “affordable” two-bedroom apartment in Dubai, according to analysis by ValuStrat.

11 February 2015 – To buy or to rent, the million dollar question“Anecdotal evidence is that some tenants have already started buying because of sales price drops compared to the continued upward move of rents, thus making it more attractive for tenants to consider home purchase,” said Declan King, Director and Group Head, Real Estate, ValuStrat

12 January 2015 – Dubai developer targets Dh9k-Dh15k earnersA recent report by ValuStrat, an advisory, valuation and asset divestment services company, said buying an apartment than renting made sense as the monthly outgo (mortgage) is lesser than the rent paid.

08 January 2015 – Buying Dubai property cheaper than renting?“Our analysis reveals that many tenants may now be able to purchase a property similar to the one they are renting at a lower monthly cost. This appears to be particularly the case for lower cost starter type homes,” says Declan King, Director & Group Head – Real Estate Valuations, ValuStrat.

10 December 2014 – Real estate remains our main focus: KaziIn an exclusive interview with Gulf Property, Shahid Kazi, CEO of ValuStrat claims that the team adopts the best practices to deliver customized solutions to the clients and offer best possible strategic advice at every step of the business cycle.

03 December 2014

– Prime mall rates in Dubai riseDeclan King – Director & Group Head Real Estate at ValuStrat points out that growing rates in The Dubai Mall and Mall of the Emirates illustrates high demand from retailers and the importance they now place on being in Dubai.


Q1 2015 - Real Estate Indicators

MACRO-ECONOMIC SNAPSHOT

• Dubai’s announced 2015 budget amounted to AED 41 Billion with no deficit - representing a 9% increase compared to 2014

• 36% of the budget is allocated towards supporting the economy, infrastructure and transportation

• Dubai’s population as of March 2015 amounted to 2.36 Million

• Between 2011 and 2015 the population growth rate was 5% per annum with an average house hold size of 4.4.

• The Consumer Price Index (CPI) for Dubai increased by 4.33% when compared to the same period last year

• Housing and DEWA expenses continue to rise, albeit at a slower pace

• The CPI growth rate is showing signs of slowing down

• January’s month on month growth rate was 1.88%, February 0.65% and March 0.23%

Source: Dubai Statistics Centre

Source: Dubai Statistics Centre

Source: ValuStrat

Source: DLD Real Estate Dashboard, ValuStrat

Source: REIDIN, ValuStrat Source: REIDIN, ValuStrat Source: REIDIN, ValuStrat Source: REIDIN, ValuStrat

Source: DLD Real Estate Dashboard, ValuStrat

Source: Hotels Now - STR Global, ValuStrat

Source: Hotels Now - STR Global, ValuStrat

DUBAI POPULATION

CONSUMER PRICE INDEX VS HOUSING INDEX JANUARY 2012 – MARCH 2015


ValuStrat Price Index - Residential

Residential

• Index of residential values broadly back to where it was at start of 2014

• Dubai apartment and villa markets saw values decline 3.1% and 4% QoQ respectively during the first quarter

• High-end apartment locations saw most of the value correction; namely Palm Jumeirah, JBR, and Downtown Dubai

• The VPI this quarter displays a higher QoQ decline compared to DLD data for the same period (see pg 6). We observe that this variance is primarily due to the more representative basket employed in the VPI and the possible lagging of DLD data in a changing property market

Since the ValuStrat Price Index began tracking in January 2014, Dubai residential prices have witnessed a rise and fall of values. By benchmarking the index from Jan 2014 at 100 points, we found that values peaked in June 2014 at 113, then returned to 100 points in March 2015, displaying a maturing market price correction within a span of just over a year.

RESIDENTIAL SUPPLY

• An estimated 467,000 residential units in stock at the beginning of Q1

• An expected supply of 29,000 apartments and 2,200 villas in 2015, followed by 23,000 units in 2016

• Four off-plan projects were launched in Q1 adding 22,000 units to the residential pipeline between 2016 and 2025

RESIDENTIAL PRICES

• According to the DLD Real Estate Dashboard, residential transaction volumes declined by 11% when compared to Q4 2014, with a lower average ticket size of AED 1.5 Million

• Average residential transaction prices witnessed negative trend year on year, declining by 1.9%

• When compared to the previous quarter, average residential prices were stable

• The median apartment price per square meter stands at AED 12,109 per sq m (AED 1,125 per sq ft)

• Villa transaction prices rebounded with a growth rate of 6% Q-o-Q

• The median villa price stands at AED 13,896 per sq m (AED 1,291 per sq ft)

Source: REIDIN, Lookup, ValuStrat

Source: REIDIN, ValuStrat

Source: ValuStrat

VALUSTRAT PRICE INDEX – DUBAI RESIDENTIAL SECTOR [BASE: JAN 2014=100]

DUBAI AVERAGE RESIDENTIAL PRICE PERFORMANCE

DUBAI RESIDENTIAL SUPPLY 2013-2016(‘000 UNITS)

OfficeOFFICE SUPPLY

• 2015 began with an estimated 7.88 Million square meters (84.8 Million sq ft) of office gross leasable area (GLA)

• 590,000 sq m (6.3 Million sq ft) GLA is expected to be delivered during 2015 and 500,000 sq m (5.3 Million sq ft) during 2016

• Key completions include Central Park in DIFC delivering 81,000 sq m (876,997 sq ft) of GLA and part of Dubai Design District with 4,000 sq m (430,500 sq ft) of GLA

OFFICE PRICES

• Office Prices increased 6% year on year

• Negative growth of 4% seen during this quarter when compared to Q4 last year

• Prices of Grade A office space in Downtown Dubai ranged from AED 21,528 – 25,830 per sq m (AED 2,000 – 2,400 per sq ft)

• Prices for office space in JLT, Business Bay and TECOM ranged from AED 11,355 – 12,900 per sq m (AED 1,055 – 1,200 per sq ft)

OFFICE RENTS

• YoY asking rents continue to see double digit increase, currently standing at 17%

• Quarter on quarter asking rents also increased by 6%

• The median asking rent for office space is AED 1,205 per sq m (AED 112 per sq ft)





RESIDENTIAL RENTS

• Residential asking rents have dipped by 1% when compared to the same period last year

• Quarter on Quarter asking rents grew by just 1%

• Apartment asking rents saw a 1% decrease YoY, however showed no change QoQ

• Villa asking rents dipped by 2% YoY but increased 9% QoQ

DUBAI AVERAGE RESIDENTIAL ASKING RENT PERFORMANE

Source: REIDIN, Lookup, ValuStrat

DUBAI OFFICE SUPPLY 2012-2016(MILLION SQ M GLA)

DUBAI AVERAGE OFFICE PRICE PERFORMANCE

DUBAI AVERAGE OFFICE ASKING RENT PERFORMANCE

RETAIL SUPPLY

• Dubai has a stock of 93 malls, shopping centres and hypermarkets

• Total retail GLA of 3 Million sq m (33 Million sq ft)

• 44 units at Boxpark in Al Wasl were completed this quarter

• Key new retail launch announcements during Q1 included Al Khail Avenue in JVT (350 outlets) to be completed in Q3 2018, Wasl Hub in Al Karama to be completed in Q4 2016 and retail space in the Golden Mile at Palm Jumeirah (70 outlets) to be opened Q2 this year

HOTEL SUPPLY

• The total number of hotel rooms and hotel apartments at the beginning of 2015 stood at 93,000

• 2,351 hospitality units were added in Q1• New hotel openings include Hyatt

Regency and Taj Dubai• Ten new hotels were announced adding

3,828 keys to the pipeline between Q3 2015 and Q3 2018

• Notable hotel announcements included Royal Atlantis Resort, Venu Bluewaters Island Hotel, Park Inn by Radisson and Anantara Dubai Creek Hotel

HOTEL PERFORMANCE

• This quarter showed a continued strong occupancy rate of 86%, dipping 1.8% when compared to the same period last year

• With increasing new hotel room supply, the Average Daily Rate (ADR) this quarter slipped 10% YoY

• We note that there is increased competition to the hospitality sector from landlords leasing their apartments on short-term basis

RETAIL PERFORMANCE

• The 32-day long 20th edition of the Dubai Shopping Festival saw Visa card spending in its first two weeks rise by 12% when compared to the same period during the previous DSF

• Dubai Duty Free announced record breaking 2014 sales of AED 7 Billion, achieving an average of 74 thousand transactions per day Source: REIDIN, ValuStrat


Retail Hospitality


Source: Hotels Now - STR Global

Source: Dubai Statistics Centre, ValuStrat

NUMBER OF MALLS IN DUBAI DUBAI HOTEL ROOM SUPPLY 2012 - 2015(‘000 KEYS)

DUBAI HOTEL PERFORMANCE

MethodologyEvery effort has been made to ensure the accuracy of this document. Supply data covers 38 defined areas in Dubai including non-freehold areas. Only completed and under construction projects are included. The supply data does not include announced projects, and projects in design phase. The 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.

The 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.

Copyright © ValuStrat Consulting FZCo. 2015This 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, Valuations, Research, Due Diligence and Divestments across a diverse range of industry sectors since 1977. Offices in UAE, Saudi Arabia and Qatar serve over 750 corporate clients in the Middle East. Client base includes financial institutions, local corporates, multinationals, governments, SMEs, 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, Real [email protected]

Haider TuaimaResearch [email protected]

Saad UmeraniChief Operating [email protected]

Vismer Mulenga, MRICSAssociate [email protected]

DUBAI +971 4 326 [email protected]

RIYADH+ 966 11 293 [email protected]

JEDDAH+ 966 12 [email protected]

DOHA+974 [email protected]

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ValuStrat-Q1-2015-Dubai-Real-Estate-Research