1. Dubai Real Estate Market
Review: FOURTH Quarter 2015
www.valustrat.com
2. 1 | ValuStrat - Real Estate Research Report - Quarter 4, 2015 www.valustrat.com | 2
ValuStrat in the Media
Falling property prices seen helping Dubai to stay competitive
Earlier this month, Standard & Poor’s said real estate prices in Dubai will probably decline as much as 20
percent this year and could keep falling in 2016. Consultants at ValuStrat said property prices in Dubai
have declined by more than 10 percent over the past year as investor interest has fallen. Its third quarter
2015 real estate report said that with a steady decline in prices, stagnant investor interest, delayed
supply, stable rents and decreasing sale volumes, next year may witness a plateau in prices, indicating
a buyer’s market.
Preparing for new challenges
For 2016, all eyes will be on the Federal
Reserve’s interest rate policy decisions in
the United States, the regional geo-political
situation, as well as any effect from the
planned removal of sanctions on Iran. With
a continued safe-haven status for Dubai,
ValuStrat expects the residential market
to stabilise. Resulting in a rise in inquiries
for ready properties in prime areas, in
anticipation of capital appreciation, as well
as in mid-affordable areas as investors
search for higher rental yields. Off-plan
developers will continue to offer improved
product and more competitive payment
plans, in an effort to attract buyers.
More Dubai housing in the pipeline
but experts warn of delivery delays
Real Estate Consultancy firm ValuStrat said in
its Q3 report that Dubai’s residential market
anticipates a total supply of 18,000 apartments
and 3,770 villas in 2015. Fifteen off-plan
projects were launched in Q3 to add more
than 30,000 units to the residential pipeline
by 2025. Research manager at ValuStrat,
Haider Tuaima, said: “27 per cent of this year’s
residential projects with approximately 7,800
units scheduled for completion, are delayed
and have been rescheduled for hand-over
during the next two years, reflecting some
construction slowdown in this sector.”
No drop in average Dubai property prices
in November
Average property prices in Dubai showed no
decline in November, the first month since the
start of a market correction in March 2014,
according to a new report. The November
ValuStrat Price Index (VPI) for Dubai’s
residential market showed that, on average,
there was no monthly change in values across
the 26 areas it monitors for apartments and
villas. The November VPI registered 98 index
points, similar to the previous two months, the
first time the residential market registering no
effective monthly change since March 2014,
ValuStrat said.
Revealed: Areas in Dubai where
residential property prices fell in Q3
In Q3 this year, 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, according to the latest
third quarter 2015 real estate report issued
by Dubai-based consulting firm ValuStrat.
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,
based on the ValuStrat Price index, a 100
point index that tracks residential values in
26 key locations in Dubai from January 2014.
16 December 201519 December 2015
19 November 2015
16 November 2015 16 November 2015
1 November 2015
Dubai’s nine-month land transactions hold steady
According to research by the consultancy ValuStrat, compared with the second quarter, the transacted
price for residential property in Dubai during the third quarter was down by an average of 5.6 per cent
(this is based on transactional activity garnered from 26 key freehold locations in Dubai and based
on which the firm has set up a ‘residential index’). “The median transacted apartment price stands at
Dh1,008 per square feet, while the median for a villa was Dh1,068 per square foot,” according to the
ValuStrat report. “Statistical analysis suggests that 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”.
3. ValuStrat Price Index (VPI)
Residential
Source: ValuStrat
3 | ValuStrat - Real Estate Research Report - Quarter 4, 2015 www.valustrat.com | 4
2015 Q4 - Real Estate
Indicators
• Consumer Price Index (CPI) for Dubai
increased by 3.0% in December when
compared to last year
• Overall 2015 inflation rate was 3.99%, as
housing and utility expenses registered a
7% increase when compared to 2014
• Monthly inflation rates decreased for the
first time in 2015 with October at -0.43%,
-0.19% for November and -0.04% in
December
• Housing and utility expenses inflation
increased between 0.25%-0.5% on a
monthly basis
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
-14%
Average Ticket Size
Q-o-Q
-2%
Apartment Asking Rents
Q-o-Q
-6.4%
Q4 Y-o-Y
-5%
Office Prices
Q-o-Q
-2%
Villa Asking Rents
Q-o-Q
0%
Office
Asking Rents
Q-o-Q
6%
Transactions
Volume
Q-o-Q
-2%
Hotel Occupancy
Q4 Y-o-Y
-12%
Hotel ADR
Q4 Y-o-Y
2011
2,003,000
2012
2,105,000
2013
2,210,300
2015
2,450,000
2014
2,320,800
Source: Dubai Statistics Centre
Consumer Price Index vs Housing Index
January 2012 – DECEMBER 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
• Dubai’s 2016 budget of AED 46.1 billion has been approved - 12% increase over the previous year,
no deficit
• Infrastructure, transport and economics amounts to AED 16.6 billion as Dubai prepares to host
Expo 2020, maintaining the size of its investments in infrastructure over the next five years
• 37% of spending will go towards social development, 21% for security, justice and safety sectors
and 6% for government excellence sector
• Dubai’s population as of December 2015 was 2.45 Million
• Population annual growth rate was 5.6% in 2015 with an average household size of 4.2 individuals
O N D
4. 5 | ValuStrat - Real Estate Research Report - Quarter 4, 2015 www.valustrat.com | 6
• After a 6.4% YoY decline, more cash investors
are seeking projects by well reputed
developers particularly for ready properties
• Dubai apartment and villa markets saw
values marginally decline by 0.1% and 0.4%
QoQ respectively
• The median apartment value in December
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)
• ComparedtoQ3,apartmentsinInternational
City, Discovery Gardens and Business Bay
saw a marginal value dip of 0.4% to 0.5%,
while remaining apartment locations saw
no significant change in values
• VillasintheMeadowsandJumeirahParksaw
marginal declines in value of 1% and 0.8%
respectively, however, other villa locations
monitored by the VPI remained stable
ValuStrat Price Index -
Residential Residential
A comparison of values of a fixed basket of properties in 26 freehold locations over time, has given
the ValuStrat Price Index (VPI) the ability to compare like with like, factoring in property specifications
such as quality, views, amenities and age. The Q4 VPI has shown a 6.4% decline of values YoY. However,
the quarterly rate of decline has shown no significant change in values. October and November’s
residential VPI both registered 98.0 points, while December saw a marginal decline of 0.1% to 97.9
points. This marks the first time the residential market has registered no effective quarterly change
since the current period of correction that began after the peak growth in March 2014. Statistical
analysis suggests that 2016 may witness a plateau in prices, indicating a buyer’s market, anticipating
higher rental yields for mid-affordable properties, and increased interest in prime properties in a
search for capital appreciation.
Residential Supply
• The estimated total supply of residential
apartments and villas in 2015 amounted
to 17,328 units, bringing the total
number of residential units in Dubai to
approximately 485,000
• Around half of the residential projects,
with approximately 15,000 units, originally
scheduled for completion in 2015, are
delayed and have been rescheduled for
handover during 2016 and 2017. Reflecting
continued construction sector slowdown
• Carryover from 2015, and planned 2016
completions, indicate 30,000 apartments
and 5,300 villas are slated for completion
this year. However, as in recent years
this volume may be subject to significant
downward adjustment
• Seven off-plan residential projects were
launched in Q4 to add more than 1,500
units to the residential pipeline by 2018.
Projects included Address Residence
Dubai Opera, Ritz Residence Al Furjan
and the Park Ways at Dubai Hills
Residential Prices
• The median residential transaction price
witnessed a decline of 11.7% YoY
• When compared to the previous quarter,
the median residential price was up for
the first time in 18 months by 3.8%
• The median transacted apartment price
stands at AED 11,324 per sq m (AED
1,052 per sq ft), down by 12% YoY and up
by 4% QoQ
• The median transacted villa price stands
at AED 11,582 per sq m (AED 1,076 per
sq ft). Declining by 13% YoY and up by
0.7% QoQ
• ValuStrat observes that the above
Dubai Land Dept statistics may include
transaction prices agreed historically.
Additionally, Q4 2015 included the
October 31st Oqood deadline for property
registrations
Source: ValuStrat
Valustrat Price Index
16 APARTMENT AND 10 VILLA LOCATIONS IN DUBAI
[Base: Jan 2014=100]
* May be subject to significant downward adjustment
Source: Dubai Statistics Centre, REIDIN, MEED Projects, ValuStrat
dubai Residential Supply 2013-2016
(‘000 Units)
Existing New Apartments* New Villas*
2014
2016E 485 30
14
5.31
3.46467
467
4502013
Source: REIDIN, ValuStrat
RESIDENTIAL MEDIAN TRANSACTED PRICES
Last 2 Years
-3.5%
Last Year
-11.7%
Last 6 Months
-3.4%
Last Quarter
-5.6%
Jan
100
103
107
109
111 111
110
108
106
103
104
103
101
100 100
99 98 98 98 98 98 98 98
JanFeb FebMar MarApr AprMay MayJun JunJul JulAug AugSep SepOct OctNov NovDec Dec
2014 2015
113
3.8%
2015E
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)
• 510,000 sq m (5.5 Million sq ft) GLA is
expected to have been delivered during
2015, with 533,000 sq m (5.7 Million sq ft)
during 2016
• Key completions include One JLT by DMCC
delivering 27,000 sq m (290,000 sq ft) of
GLA, and Iris Bay located in Business Bay,
adding 34,000 sq m of GLA (370,000 sq ft)
• The newly established free zone in Dubai
World Trade Centre has added 90,000 sq
m (970,000 sq ft) of office space in Dubai
Trade Centre District (DTCD) phase one
Office Prices
• Overall office prices fell by 13% year on year
• Negative growth of 4.6% seen during this
quarter when compared to the previous quarter
• Average prices of shell and core office space
in Downtown Dubai decreased by an estimated
5% to 7% since Q3, to an average AED 24,760
per sq m (2,300 per sq ft)
• Average shell and core prices in Business Bay
and Jumeirah Lake Towers ranged from AED
10,200 – AED 13,000 per sq m (AED 950 – AED
1,200 per sq ft)
• Dubai Silicon Oasis remained stable quarter-
on-quarter with an average asking price of
AED 7,750 per sq m (AED 720 per sq ft)
Office Rents
• Median asking rents for office space
remained relatively stable during Q4
• Only marginal change in median office
market rentals were recorded in the last
12 months
• The median asking rent for office space
was AED 1,173 per sq m (AED 109 per sq ft)
• DIFC saw the highest asking rents of AED
3,767 per sq m (AED 350 per sq ft)
7 | ValuStrat - Real Estate Research Report - Quarter 4, 2015 www.valustrat.com | 8
Source: REIDIN, ValuStrat
OFFICE MEDIAN TRANSACTED PRICES
Last 2 Years
15.4%
Last Year
-13.0%
Last 6 Months
-6.7%
Last Quarter
-4.6%
Source: REIDIN, ValuStrat
OFFICE MEDIAN ASKING RENT PERFORMANCE
Last 2 Years
21.7%
Last Year
-0.5% -0.5% -0.4%
Last 6 Months Last Quarter
Residential Rents
• Overall residential asking rents declined by
5% YoY
• Asking rents this quarter were 10.4% lower
than the same period two years ago
• Villa and apartment asking rents saw a 3%-
5% drop YoY and a 2.3% dip QoQ
• Apartment asking rents were 11% lower than
the same period two years ago
• Dubai’s 2015 residential rental performance
led to most areas being negatively adjusted
by the RERA 2016 Rental Increase Calculator
Source: REIDIN, ValuStrat
RESIDENTIAL MEDIAN ASKING RENTALS
Last 2 Years Last Year
-5.0%-10.4%
Last 6 Months
-6.2%
Last Quarter
-2.3%
Source: REIDIN, MEED Projects, ValuStrat
dubai OFFICE Supply 2013-2016
(MILLION SQ M GLA)
Existing Stock Expected Supply
2014
2016E 8.39 0.53
0.517.88
7.88
7.532013
2015E
6. Hotel Performance
• The average occupancy in Q4 was 80%
• October and November saw occupancy rates of 80% and 83% respectively
• With increasing new hotel room supply, year-on-year Average Daily Rate (ADR) for October dropped
by 14.7%, November declined by 9.1%
• Continueddownwardpressureonroomratesisexpectedinthemediumtermduetosupplyexceeding
demand, currency fluctuations, oil prices and geo-political situations affecting general sentiment
Retail Supply
• This quarter saw an additional 167,000 sq
m (1.8 Million sq ft) of retail mall Gross
Leasable Area (GLA)
• 130,000 sq m (1.4 million sq ft) of GLA has
been added with the opening of Nakheel’s
Dragon Mart 2 located in International City
• Nakheel also inaugurated the 37,000 sq
m (400,000 sq ft) Golden Mile Galleria on
Palm Jumeirah
• Retail announcements this quarter included
a 72,000 sq m (775,000 sq ft) GLA Avenues
Mall, located in Dubai Silicon Oasis and a
second 20,440 sq m (220,000 sq ft) Irish
Village within Dubai Parks and Resorts
• This quarter, Dubai saw the opening of the
region’s largest Apple Store at the Mall of
the Emirates
Hotel Supply
• The estimated total number of hotel rooms
and hotel apartments in 2015 stood at more
than 100,000
• Six hotels with 2,138 hospitality units were added
in Q4, five of which are 5-star and one 4-star
• New hotel openings included Palazzo Versace
in Culture Village, St. Regis Al Habtoor City,
Steigenberger Hotel Business Bay and Hilton
Garden Inn Mall of the Emirates
• Eleven new hotels were announced adding 4,251
keys to the pipeline over the next three years
• Notable hotel announcements included St.
Regis Dubai - The Palm, Mercure Hotel in JVT,
Taj Arabia in Dubai Land and The Rosemont
Hotel & Residences in TECOM
Retail Performance
• Prime mall in-line retail space continued
to command high rentals ranging from
AED 3,800 per sq m (AED 353 per sq ft)
and up to AED 8,100 per sq m (AED 750
per sq ft)
• Finding vacant food court outlets within
prime malls remained a challenge,
asking rentals ranged from AED 7,600
per sq m (AED 706 per sq ft) and AED
10,800 per sq m (AED 1,000 per sq ft)
• Dubai Duty Free recorded AED 6.892
billion in sales during 2015, 1.5% lower
than 2014, which in turn was 7.3% higher
than 2013. December ’15 sales reached
AED 720 million compared to AED 749
million in December ‘14
9 | ValuStrat - Real Estate Research Report - Quarter 4, 2015 www.valustrat.com | 10
600
300
-
900
1,200
37
1,711
852
391
160
Convenience
(<3k sq m)
Community
(<10k-30k sq m)
Regional
(<30k-90k sq m)
SuperRegional
(>90k sq m)
Neighborhood
(<3k-10k sq m)
Retail Hospitality
Source: REIDIN, ValuStrat
Source: REIDIN, ValuStrat
RETAIL MALLS & SHOPPING CENTRES 2015
(‘000 SQ M GLA)
Food Courts
Restaurants
Hypermarket
Entertainment
Anchors
AED / SQM
PRIME RETAIL MALL ASKING RENTS
High Low
Line Shops
1,000
1,000
1,200
4,000
3,800
7,600
8,100
1,400
1,300
1,900
5,600
10,800
Source: Hotel News Now - STR Global, ValuStrat
* Expected
aed
monthly hotel performance 2014-2015
Jan
2014 2015
JanFeb FebMar MarApr AprMay MayJun JunJul JulAug AugSep SepOct OctNov Nov Dec*Dec
22.50%
0.00%
45.00%
67.50%
90.00%
ADR RevPAR Occupancy %
Source: REIDIN, ValuStrat
HOTEL ROOM SUPPLY 2013 - 2016
(‘000 KEYS)
Hotel and Serviced Apt Rooms New Supply
2014
2016E 101 9.9
7.793
93
832013
2015E
