1. Dubai Real Estate Market
Review: THIRD Quarter 2015
www.valustrat.com
2. 1 | ValuStrat - Real Estate Research Report - Quarter 3, 2015 www.valustrat.com | 2
ValuStrat in the Media
What’s behind the real estate
slowdown in the UAE?
Haider Tuaima, ValuStrat Research
Manager, (Q2 research) reveals: “Around
5,400 residential units were completed
during the first half of 2015, and a further
28,500 units scheduled for completion in
2016.” This includes “a number of projects
with approximately 3,000 units originally
scheduled for handover this year moving
their schedule forward for completion in
2016”
For end-users: 1BR from Dh500k
in Dubai as home developers take
longer-term view
According to an advisory from ValuStrat,
“New affordable developments can greatly
benefit from the well-established public
transport, particularly the Dubai Metro.
Within five years Dubai Metro’s Route 2020
and Etihad Rail will connect Dubai South,
and further afield towards the northern
emirates and Abu Dhabi.”
Pros and cons of off-plan and ready
Haider Tuaima – ValuStrat Research Manager
says “Even if the asking price and payment
plan seems within the budget, detailed
checking is still required prior to making any
property purchase; buyers should ask about
the developer’s history and study the master
plan and development layout carefully.
Research the location, the infrastructure, the
road and metro links, find out more about
retail options, schools, parks, ask about the
quantity and quality of future supply in the
area as well the neighbourhood”.
Less volatile, more predictable
The market now appears to be maturing
further - it’s relatively more stable, less
volatile, and therefore more predictable in
the short or medium term. Past performance
offers investors some insight on the market’s
dynamics and a helpful rule in trying to gauge
future trends. Most commentators feel that
this stability offers both buyers and sellers
the benefit of a calmer property market
where decisions can be made in a much less
rushed fashion.
Dubai South – The evolution of a new
district
Supply analysis by ValuStrat indicated “…
Dubai South saw most hospitality launches
during the first half of 2015. Hilton, Holiday
Inn, Studio M, Aloft, Millennium and Stay
Bridge Suites will add 2,535 hotel rooms
between 2018 and 2019. Recent residential
launches in Dubai South include MAG 5
Boulevard by Mag Property Developments,
with a total of 13 buildings under
construction, contributing 1,118 apartments
by the second quarter of 2018…”
7 September 201516 September 2015
5 September 2015 2 September 2015
30 August 2015 19 August 2015
Property buyers turn scarce in Dubai
Prospective buyers are seemingly in no
hurry to pick up property in Dubai — this
disinterest is pushing prices even further
into soft territory. Based on estimates by
the consultancy ValuStrat, apartment prices
in Business Bay saw a drop of 6 per cent in
the second quarter of the year compared to
what they were in the first three months.
9 July 2015
Picking and choosing the winning
locations
Within five years, Discovery Gardens, Al
Furjan, Green Community and Jumeirah
Golf Estates could benefit from the Metro
2020 expansion plan. When completed, this
could potentially add a price premium for
both sales and rentals of buildings within
5-10 minutes walking distance to the Metro
station.
3. ValuStrat Price Index (VPI)
September 2015
Residential Base = 100 Jan 2014
Source: ValuStrat
3 | ValuStrat - Real Estate Research Report - Quarter 3, 2015 www.valustrat.com | 4
Q3 2015 - Real Estate
Indicators
• Consumer Price Index (CPI) for Dubai
increased by 3.9% in September when
compared to last year
• Annual housing and utility expenses
rose by 6.58% in September
• Housing and utility costs rising faster
than the overall CPI
• Year-on-year CPI growth rate for the
first half of 2015 grew by 4.3%, from 2.7%
in 2014, and 0.7% in 2013
• CPI month-on-month growth rate for
July was 0.45%, 0.82% for August and
0.28% in September
Source: Dubai Statistics Centre
*Residential & commercial trans.
Source: DLD, Valustrat
Source: REIDIN, ValuStrat Source: REIDIN, ValuStrat
Source: REIDIN, ValuStrat Source: REIDIN, ValuStrat*Residential & commercial trans.
Source: DLD, Valustrat
Source: Hotel News Now – STR
Global, ValuStrat
Source: Hotel News Now – STR
Global, ValuStrat
dubai Population
98pts
-17%
Transactions Volume
Q-o-Q
-6%
Villa Rents
Q-o-Q
-7%
Hotel ADR
Q3 Y-o-Y
-5%
Office Prices
Q-o-Q
-1%
Apartment Rents
Q-o-Q
-4%
Hotel Occupancy
Q3 Y-o-Y
-7%
Office Rents
Q-o-Q
6%
Average
Ticket Size
Q-o-Q
2011
2,003,000
2012
2,105,000
2013
2,210,300
2015 Q3
2,411,700
2014
2,320,800
Source: Dubai Statistics Centre
Consumer Price Index vs Housing Index
January 2012 – SEPTEMBER 2015
130
J J J J JJ J J JJ J JF F F FM M M MM M M MA A A AA A A AS S S SO O ON N ND D D
2012 2013 2014 2015
125
120
115
110
105
100
95
90
CPI General Rate (2007=100)
Housing, Water, Electricity, Gas and other fuels
Macro-Economic Snapshot
• The latest publication of Dubai’s GDP figures saw a year-on-year growth rate of 3.9% in the first
quarter of this year
• Hospitality and Construction contributed to 5.6% and 8.1% of the GDP, respectively
• Fastest growing sectors were Electricity, Gas and Water at 10.5%
• Dubai’s population as of September 2015 was 2.41 Million
• Population growth rate was 5% in 2014 with an average size of 4.2 individuals per household
4. 5 | ValuStrat - Real Estate Research Report - Quarter 3, 2015 www.valustrat.com | 6
• After a 10.3% YoY decline, investor interest
has increased for bargains and distressed
sales with a sentiment of improved market
activity in the coming months
• Dubai apartment and villa markets saw
values marginally decline by 0.7% and 1.1%
QoQ respectively
• The median apartment value in September
was AED 14,122 per sq m (AED 1,312 per sq
ft) and for villas was AED 14,660 per sq m
(AED 1,362 per sq ft)
ValuStrat Price Index -
Residential Residential
• Compared to Q2, apartments in Business Bay
saw an average value drop of 2.1%, followed
by a 2% decline in International City, and a
1.7% dip in Discovery Gardens
• Villas in Arabian Ranches saw a 2.7% decline
in value, followed by a 1.6% drop in the
Meadows, other areas saw less than 1%
decrease in values, with no change for villas
in Emirates Hills when compared to the
second quarter
TheValuStratPriceIndex,whichisbasedonreal-timeopinionsofcurrentpricingwithinarepresentative
sample of properties in Dubai, has shown a 10.3% decline of values in last twelve months. However
the quarterly rate of decline has decelerated to a marginal 1%. July’s residential VPI registered 98.4
points, August was 98.2 points and September’s VPI dipped by a marginal 0.2% to 98.1 points. With a
steady decline in prices, stagnant investor interest, delayed supply, stable rents and decreasing sale
volumes, statistical analysis suggest that the next year may witness a plateau in prices, indicating a
buyer’s market with deals being encouraged as a result of price negotiation by vendors.
Residential Supply
• An expected supply of 18,000 apartments and
3,770 villas in 2015 bringing the total number
of residential units in Dubai to almost half a
million
• 8,500 units were completed during the first
nine months of 2015
• 27% of this year’s residential projects with
approximately 7,800 units scheduled for
completion are delayed and have been
rescheduled for handover during the next
two years, reflecting general construction
sector slowdown
• As per above, evidence this quarter indicates
a further 38,800 apartments and 4,900 villas
are slated for completion 2016. As in recent
years this volume is subject to adjustment
• Fifteen off-plan residential projects were
launched in Q3 to add more than 30,000 units
to the residential pipeline by 2025. Projects
included Meydan One, 1/JBR and a relaunch
of Mirdif Hills
• Announced master planned projects during
this year’s Cityscape included Jebel Ali
Gardens by Nakheel and The Villages by
Dubai South (previously known as Dubai
World Central)
Residential Prices
• Average residential transaction prices
witnessed a decline of 14.7% year on year
• When compared to the previous quarter,
average residential prices dropped by 5.6%
• The median transacted apartment price
stands at AED 10,850 per sq m (AED 1,008
per sq ft). Declining by 15% year-on-year
and dropping 6% on a quarterly basis
• The median transacted villa price stands
at AED 11,496 per sq m (AED 1,068 per sq
ft). Declining by 17% over the last twelve
months, and 11.7% since the last quarter
Source: ValuStrat
Valustrat Price Index – dubai residential sector
[Base: Jan 2014=100]
Jan
100
103
107
109
111 111
110
108
106
103
104
103
101
100 100
99 98 98 98 98
JanFeb FebMar MarApr AprMay MayJun JunJul JulAug AugSep SepOct Nov Dec
2014 2015
113
Source: Dubai Statistics Centre, REIDIN, Lookup, MEED Projects, ValuStrat
dubai Residential Supply 2013-2016
(‘000 Units)
Existing New Apartments New Villas
2014
2016 489 39
18
4.96
3.77467
467
4502013
2015
Source: REIDIN, ValuStrat
Dubai average residential price
performance
Last 2 Years
-2.1%
Last Year
-14.7%
Last 6 Months
-10.8%
Last Quarter
-5.6%
5. Office Office Supply
• 2015 began with an estimated 7.88 Million
square meters (84.8 Million sq ft) of office
Gross Leasable Area (GLA)
• 570,000 sq m (6.1 Million sq ft) GLA is expected
to be delivered during 2015 and 620,000 sq m
(6.6 Million sq ft) during 2016
• Key completions this quarter included The
Bay Gate by Akar Properties, delivering 37,174
sq m (400,148 sq ft) of GLA, and The Exchange
by Tanmiyat, delivering 27,809 sq m (299,334
sq ft) of GLA, both located in Business Bay
• A notable launch in Q3 was Burj 2020 District
in Jumeirah Lake Towers by DMCC which will
feature the world’s tallest commercial tower,
promising over one million sq m BUA (10
million sq ft)
Office Prices
• Overall office prices fell by 4.6% year on year
• Negative growth of 5.2% seen when compared
to the previous quarter
• Average prices of shell and core office space
in Downtown Dubai have increased by an
estimated more than 10%, to an average of
AED 26,372 per sq m (2,450 per sq ft) since Q2
• Average prices in Business Bay ranged from
AED 9,700 – 15,000 per sq m (AED 900 – 1,400
per sq ft)
• Dubai Silicon Oasis average office prices fell by
14% quarter-on-quarter to an average of AED
7,750 per sq m (AED 720 per sq ft)
Office Rents
• Asking rents for office space fell by 2.4%
compared to last year
• Quarter on quarter asking rents are
down by 7.4%
• The median asking rent for office space
is AED 1,141 per sq m (AED 106 per sq ft)
• DIFC saw the highest asking rents of
AED 3,218 per sq m (AED 300 per sq ft)
7 | ValuStrat - Real Estate Research Report - Quarter 3, 2015 www.valustrat.com | 8
Source: REIDIN, ValuStrat
Dubai average OFFICE PRICE PERFORMANCE
Last 2 Years
22.1%
Last Year
-4.6%
Last 6 Months
-6.1%
Last Quarter
-5.2%
Source: REIDIN, ValuStrat
dubai average office asking rent
performance
Last 2 Years
15.5%
Last Year
-2.4%
Last 6 Months
-10.1%
Last Quarter
-7.4%
Residential Rents
• Residential asking rents dipped by
4.1% when compared to the same
period last year
• Generally, asking rents in Dubai are
still 1.6% higher than the same period
two years ago
• Average residential asking rents began
to decline during this quarter after a
stable first half
• Apartment asking rents saw a 4% drop
YoY and a 1% dip QoQ
• Villa asking rents fell by 4% YoY and
6% QoQ
Source: REIDIN, ValuStrat
Dubai average residential asking
rent performance
Last 2 Years
1.6%
Last Year
-4.1%
Last 6 Months
-1.9%
Last Quarter
-1.6%
Source: REIDIN, Lookup, ValuStrat
dubai OFFICE Supply 2012-2016
(MILLION SQ M GLA)
Existing Stock Expected Supply
2014
2016 8.46 0.62
0.577.88
7.88
7.532013
2015
6.0 6.5 7.0 7.5 8.0 8.5 9.0 9.5
2012 6,97
6. Hotel Performance
• The average occupancy in Q3 was 69%
• July and August saw occupancy rates of 57.6% and 74.2% respectively, while September’s occupancy
rate was similar to last year, at 76%
• We note that July’s occupancy rate was below 50% during the Ramadan period after which it peaked
to 70%
• With increasing new hotel room supply, year-on-year Average Daily Rate (ADR) for July slipped 3.8%,
August dropped by 13.9% and September dipped by 3.9%
• Continued downward pressure on room rates is expected in the next quarter
Retail Supply
• This year will see an additional 230,000 sq m (2.4
Million sq ft) of Gross Leasable Area (GLA) added
to the existing 3.1 million sq m (33.4 Million sq ft)
of retail mall GLA. Representing a 7.3% increase
• Dubai’s latest mall addition is phase one of City
Centre Me’aisem; strategically located in IMPZ
(International Media Production Zone). Serving
residents in Jumeirah Village and Dubai Sports
City. Having been constructed in 15 months, the
mall has 23,850 sq m of GLA (325,000 sq ft) and
includes anchors such as Carrefour and Magic
Planet
• 25,000sqm(270,000sqft)ofGLAhasbeenadded
to the existing Mall of The Emirates, adding 40
retail outlets to include a new 24 screen cinema
complex
• Arabian Ranches II saw the opening of Carrefour
Market Store located within Ranches Souq,
adding 1,140 sq m (12,270 sq ft) of GLA
Hotel Supply
• The estimated total number of hotel rooms
and hotel apartments during the first nine
months of 2015 stood at 97,409
• 1,635 hospitality units were added in Q3
• New hotel openings include Hyatt Place in
Baniyas Square, Ibis Styles Jumeirah, Auris
Hotel in TECOM and Auris Fakhruddin hotel
apartments in Dubai Sports City
• Fourteen new hotels were announced adding
6,413 keys to the pipeline in the next 4 years,
of which eight hotels are mid-market 3-4 star
• Notable hotel announcements included Royal
AtlantisinPalmJumeirah,JumeirahBusiness
Bay, AVANI Deira Dubai Hotel on Deira Islands
and three Marsa Al Seef hotels in Bur Dubai
Retail Performance
• With prime mall food courts enjoying near
full occupancy, asking rents for food court
outlets have increased to an average of AED
9,000 per sq m (AED 830 per sq ft)
• Average prime mall rents for anchors and
entertainment ranged between AED 970 –
1,400 per sq m (AED 90 – 130 per sq ft)
• Prime line shop rentals averaged AED 6,700
per sq m (AED 622 per sq ft)
• MasterCard and CresentRating have ranked
Dubai number one in the Muslim Travel
Shopping Index 2015, followed by Kuala
Lumpur and Singapore, while Sharjah and
Abu Dhabi ranked 12th and 13th respectively
9 | ValuStrat - Real Estate Research Report - Quarter 3, 2015 www.valustrat.com | 10
Retail Hospitality
Source: REIDIN, ValuStrat
RETAIL MALL & SHOPPING CENTRE SUPPLY
(MILLION SQ M GLA)
Stock Expected
2014
2016 3.27 0.13
0.173.10
3.10
3.072013
2015
1.00 1.50 2.00 2.50 3.00 3.50 4.00
Food Courts
Restaurants
Hypermarket
Entertainment
Anchors
AED / SQM
PRIME RETAIL MALL RENTS
High Low
Line Shops
- 2,000 4,000 6,000 8,000 10,000 12,000
Dubai hotel room supply 2013 - 2016
(‘000 keys)
Source: REIDIN, ValuStrat
83 93 97 97
5.8 9.9
103
2013 2014 2015
Q1-Q3
2015F
Q4
2016F
Hotel and Serviced Apt Rooms New Supply
Source: Hotel News Now – STR Global, ValuStrat
dubai hotel performance
Jul Aug Sep Oct Nov Dec Jan Feb Mar Apr May Jun Jul Aug Sep
800
600
400
200
-
1,000
1,200
40.00%
30.00%
20.00%
10.00%
0.00%
50.00%
60.00%
70.00%
80.00%
90.00%
100.00%
ADR RevPAR Occupancy %
