- 2014 started strongly for Dubai's real estate market due to increased confidence after winning Expo 2020, but growth slowed in the third quarter - Residential property prices saw double-digit growth in the first half of 2014 before declining slightly in the second half, while rents continued to rise - Office and retail markets performed well, with office prices up 45% in Q2 2014 and retail rents increasing 2% in Q4, but hotel occupancy dropped as supply increased - The outlook for 2015 is for a continued modest correction in the high-end residential sector but moderate price growth of 5-7% in mid-range areas, along with further rent increases across sectors

1. DUBAI REAL ESTATE MARKET
Review 2014 - Outlook 2015
www.valustrat.com

2. 1 | ValuStrat - Review 2014 , Outlook 2015
Dubai Real Estate
Market Review 2014
The Dubai real estate market of 2014 was
shaped by events from before the year had
even started - Namely the doubling of property
registration fees at the Dubai Land Department,
introduction of lower Loan To Value (LTV) ratios
by the UAE Central Bank, and the announce-
ment of Dubai’s win to host Expo 2020. Prior to
this, from H2 2012 Dubai’s real estate market
had broadly been recovering from its collapse
in 2008/2009 when property prices fell by up to
60% from its previous peak.
2014 started with resurgent confidence follow-
ing Dubai’s win to host the third largest inter-
national event after the FIFA World Cup and the
Olympic Games, this positive sentiment from
investors and developers alike grew in the first
few months resulting in record appetite for
investments in real estate and announcements
of mega projects. The office market benefited
from this economic growth with many new busi-
nesses being setup in addition to enlargement
by existing firms. Major retail malls continued
to witness increased footfall resulting in many
expansion projects being announced. The hotel
and tourism markets also grew on the back of
continued confidence – Further encouraged by
new incentives for developers of three and four-
star hotels that included waiving of Dubai Mu-
nicipality’s one percent zoning fee, in addition to
a two-year waiver on municipal fees if new hotel
is opened before 2017.
However, by the third quarter of 2014 the real
estate market seemed to be slowing down.
Whilst this deceleration was partly attributed
to the desired effects of the mortgage cap LTV
restrictions and the doubling of DLD fees begin-
ning to show their results, it was mainly due to
a cooling off in the positive sentiment that im-
mediately followed the Expo 2020 win.

3. www.valustrat.com | 2
Furthermore, speculative investment in a
buoyant off plan market was curbed with some
developers imposing self-regulations in not al-
lowing investors to sell on, ‘flip’, a property until
they had paid 40 to 50 per cent of the property
value. Cityscape 2014 witnessed record par-
ticipation and attendances when compared
to earlier years, new off-plan projects were
launched, mega residential, entertainment and
retail projects announced, with many previously
on-hold projects being restarted.
As an oil producing country, the record level of
oil price decline in the fourth quarter, down as
much as 50%, was of concern to some inves-
tors. According to industry experts, the UAE’s
economy is broadly diversified and the non-oil
sectors play a large role in GDP, the country also
has sizable petroleum reserves, nevertheless
many real estate investors become more cau-
tious with a focus on longer term investments.
2014 closed with a calmer real estate market,
possibly saving itself from potential overheat-
ing - Particularly in the residential market
where some areas started to witness sales price
corrections. In comparison, residential rentals
seemed to continue to rise resulting in higher
yields being achieved by investors.
• 2014 started with a huge boost in market
confidence after the Expo 2020 win
• Residential property prices saw double
digit growth during H1
• Office prices leaped by 45% during Q2
• Record participation at Cityscape 2014
• Oil prices fall to record lows during H2
• Dubai’s maturing market continued to
hold a safe haven status as a preferred
location for foreign investment inflow of
capital

4. 3 | ValuStrat - Review 2014 , Outlook 2015
MACRO-ECONOMIC SNAPSHOT
• Economic recovery demonstrated by
4.6% GDP growth
• The construction sector contributed
7.89% to Dubai’s AED 170.7 billion
GDP in the first half of 2014
• Inflation rate in Dubai amounted to
3.37% compared to 2013, the hous-
ing & DEWA expenditure group alone
increased by 5.63%
• On average 43.7% of a household’s
income is spent towards housing, and
utilities
• 69.9 million passengers passed
through the gates of Dubai Airport
(DXB) making it the busiest airport in
the world for international passengers -
Surpassing London Heathrow
• Oil prices fell to under $50 a barrel
during the second half of the year Q2
and Q3 respectively which is a 5.1%
increase when compared to the same
period in 2013
• Dubai’s population grew by 5% to
2.3 million
• Average household size is esti-
mated at 4.4
DUBAI GDP GROWTH RATE
AT CONSTANT PRICES
DUBAI CONSUMER PRICE INDEX INFLATION
RATE VS HOUSING CPI 2014
DUBAI POPULATION

5. www.valustrat.com | 4
Residential
RESIDENTIAL SUPPLY
• There were an estimated 450,000 resi-
dential units in stock at the beginning
of 2014
• 1,159 villas and townhouses were built
in 2014
• Out of the 20,000 apartments scheduled
to complete in 2014 16,000 were actually
handed over in 2014, rolling over approx.
4,000 units for a 2015 completion
• The vast majority of units completed
were located in Dubai Land, Dubai
Sports City, Jumeirah Village and Dubai
Silicon Oasis
• More than 50 off-plan projects were
launched adding more than 10,000 units
to supply in next 3 years
RESIDENTIAL SALES
• In the fourth quarter average residential
prices rose by 8% when compared to
the previous year
• When compared to the previous quarter,
average residential prices fell by -4%
• Average apartment prices peaked dur-
ing the second quarter to AED 15,340
per sq m (AED 1,425 per sq ft)
• Average villa prices also peaked during
Q2 to reach AED 14,757 per sq m (AED
1,371 per sq ft)
2014 DUBAI RESIDENTIAL AVERAGE PRICE
PERFORMANCE
RESIDENTIAL SUPPLY 2012 - 2014

6. 5 | ValuStrat - Review 2014 , Outlook 2015
RESIDENTIAL RENTS
• The first two quarters witnessed asking
rents jump by 25% and 23% respectively
Year-on-Year (YoY). The second half of
2014 saw single digit growth
• Overall residential asking rents growth
rate slowed to -3% in the fourth quarter
when compared Q3, and 1% YoY
Office
OFFICE SUPPLY
• At the beginning of 2014 office gross
leasable area stock is estimated to
have been 7.53 million sq m (81 mil-
lion sq ft). An additional 260,000 sq
m (2.8 million sq ft) were completed
during the year
• Business Bay was most active in
terms of construction activity fol-
lowed by Dubai Silicon Oasis, Sheikh
Zayed Road and DIFC
2014 DUBAI RESIDENTIAL AVERAGE ASKING
RENTS PERFORMANCE
DUBAI OFFICE SUPPLY

7. www.valustrat.com | 6
OFFICE SALES
• An overall positive price performance
with growth slowing down
• Office prices peaked during the sec-
ond quarter with 45% YoY
• Quarter-on-Quarter (QoQ) price per-
formance saw modest growth during
the second half of 2014
• Grade A office space in DIFC and
Downtown Dubai drew the highest
prices, ranging from AED 21,500 -
32,300 per sq m (AED 2,000 – 3,000
per sq ft)
OFFICE RENTS
• YoY asking rent performance saw
double digit increases peaking at 18%
during the third quarter of 2014
• Office asking rents continued to rise
by 2%-6% QoQ during 2014
• Business Bay, TECOM C, DIFC and
Jumeirah Lake Towers rentals saw
continued growth
• Average asking rents in DIFC peaked
at AED 2,200 per sq m (AED 204 per
sq ft) in Q4
2014 DUBAI OFFICE AVERAGE PRICE
PERFORMANCE
2014 DUBAI OFFICE AVERAGE ASKING
RENTS PERFORMANCE

8. Retail
RETAIL SUPPLY
• Average prime mall rents ranged AED 5,750 – 6,250 per sq m (AED 535 – 580 per sq ft)
• Average prime rents increased by 2% during the Q4 quarter when compared to Q3
RETAIL SUPPLY
• In 2014 Dubai had a stock of 93 malls
and shopping centres with a total GLA of
3 million square meters (33 million sq ft)
• New retail mall supply amounted to
28,000 sq m (300,000 sq ft) in 2014
• Key retail mall launches included the
Mall of The World, City Centre Me’aisem
in IMPZ, Arena Mall, Dubai Pearl, Agora
Mall and Nakheel Mall
7 | ValuStrat - Review 2014 , Outlook 2015
DUBAI RETAIL MALLS
BY GLA 2014

9. Hotel
HOTEL SUPPLY
• There were 83,000 hotel and serviced
apartment rooms in 2013
• An estimated 10,000 additional rooms
were added during 2014
• Key additions included the Four Sea-
sons, Double Tree and Pullman
HOTEL PERFORMANCE
• Average hotel occupancy during the year stood at 78.85%, February occupancy peaked at 88.6%,
while July recorded 45.4%
• The number of Russian tourists who represent 20% of nationalities visiting Dubai, had halved as
the Ruble fell
• Generally Dubai hotel demand couldn’t catch up with the new additional supply in 2014
www.valustrat.com | 8
DUBAI HOTEL ROOMS SUPPLY
DUBAI HOTEL PERFORMANCE 2014

10. 9 | ValuStrat - Review 2014 , Outlook 2015
2015 Outlook
Last year Dubai’s real estate market moved from
a heightening boom to a modest correction -
General sentiment was influenced by major an-
nouncements, new regulations and economic
events. This change is expected to continue
during 2015 as investors, vendors, developers,
tenants and tourists keep a close eye on key
economic indicators such as oil prices, currency
exchange rates, interest rates, market launches
and infrastructural projects.
In 2015 Dubai’s population is expected to reach
2.43 million, 2,200 villas are expected to be hand-
ed over, and should all scheduled projects com-
plete on time, more than 30,000 apartments are
due for hand over, a further 452,000 Square Me-
ters (4.8 million sq ft) of office space will be built,
this will be in addition to 162,580 sq m of retail
space and 10,969 hotel rooms under construc-
tion to be ready within 6-18 months.
The residential sector is expected to witness
further pressure on capital values for high-end
properties, whilst properties in mid-affordable
locations are forecast to see their capital values
appreciate moderately by 5%-7%, this is due to
shortage of such properties in Dubai.
Residential rents are expected to climb further
particularly in mid-affordable areas resulting in
favourable high gross yields of +10%. As more
high-end and luxury property supply comes on
line, those locations might see their rents stabi-
lise or slightly dip.
Due to expected handover of ample office space
in 2015, office sales prices are forecasted to be
broadly similar to 2014, however, areas with sig-
nificant new supply may face declines of 5-7%.
The exception will be prime Grade A office space
located in the most sought after locations such
as Emaar Business Square and DIFC.

11. www.valustrat.com | 10
Office rents in Downtown Dubai are expected to
continue to witness reductions in asking rents
until the 2nd quarter of 2015. Landlords in DIFC
may continue to seek higher rents during the 1st
half of the year, but they may have to lower their
expectations during the 2nd half of the year.
Sub-prime office space will continue to see soft
increments to their asking rents.
More hotel rooms and hotel apartments will
open this year and visitor numbers are expected
to increase. However, there is a high probabil-
ity that supply will overtake demand during the
year, as a result these visitors will have more
choice for better room rates which may in turn
encourage increased guest nights.
• Capital value outlook positive for mid-
priced residential properties and cautious
for high-end
• 30,000 apartments and 2,000 villas are ex-
pected to be supplied this year
• Apartment rents to climb in mid-afford-
able areas
• 4.8M sq m of office space will be complet-
ed in 2015
• Office rents to stabilise, some decline in
Q4 2015
• An additional 11,000 hotel and hotel apart-
ment rooms to become available in 2015

12. Methodology
Every effort has been made to ensure the accuracy of this docu-
ment. Supply data covers 38 defined areas in Dubai including
non-freehold areas. Only completed and under construction proj-
ects 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 transac-
tions. Rental data is derived from a carefully cleansed database
of listings that don’t include duplicates, potential errors and
outliers.
Sources
ValuStrat Research Department, Dubai Economic Depart-
ment, Dubai Statistics Centre, Moodys, OPEC, CityScape Global,
REIDIN, Department of Tourism and Commerce Marketing, STR
Global, Airport Council International.
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Declan King, MRICS
Director, Global Head of Real Estate
declan.king@valustrat.com
Haider Tuaima
Research Manager
haider.tuaima@valustrat.com
Saad Umerani
Cheif Operating Office
saad.mehmood@valustrat.om
Vismer Mulenga, MRiCS
Associate Director
vismer.mulenga@valustrat.om
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