OBSERVER Market Report Q2 / 2019 Services Report Highlights

Valuations Mortgage and Secured Lending Sales prices Values. Transactions involving completed properties reflected an increase in values of 31% from AED 5.64 billion in Q1 Portfolio Valuations Further price declines were witnessed in Q2 2019 with average 2019 to AED 7.37 billion in Q2 2019. Conversely, there was a apartment and villa sales prices down 4% from Q1 2019; a decrease in value for off-plan properties of 8% from AED 7.85 Advisory and Research result of continued oversupply in the Emirate’s residential real billion in Q1 2019 to AED 7.19 billion in Q2. Financial Feasibilities estate market. Despite price declines across the board, there is some positive sentiment in Dubai’s property market as a result Market outlook Highest and Best Use Studies of increased transaction volumes in the completed unit and Market Research off-plan sectors. The Dubai Government is working hard to ensure its real Conceptual Advisory and Project Positioning Studies estate sector shows positive growth in the medium to long Project Redevelopment/Repositioning Advisory Rental rates term. This has involved the recent introduction of a number of Government initiatives such as the 10 year residency visa Investment Strategies – Acquisition and Disposal As in previous quarters, there was continued downward pressure and economic stimulus package. One positive result of such on rents in Q2 2019. This was a consequence of additional initiatives has been a significant increase in the number of new Sales and Leasing supply being added to the market, thus offering more choice to business licenses issued during the first half of 2019, which Commercial potential tenants. However, Q2 saw a more marked decrease increased 35 percent compared with the same period in 2018. Industrial in rents than in Q1. Average rents saw a further 5% decrease Furthermore, a framework for a Foreign Direct Investment in the apartment market and 8% in the villa market when Committee is being developed, which aims to increase foreign Residential compared with Q1 2019. ownership to 100% (in specific sectors) and attract inward FDI. Retail Transactions In the short term, however, oversupply will continue to hamper Property/Facilities Management the Dubai real estate market. Over 20,000 new residential units Volumes. The market for completed units witnessed an were delivered in 2018 and the projections for the remainder of Commercial increase in transactional volumes in Q2 2019 with a 2% uplift 2019 are significantly higher. This will ensure Dubai’s residential Mixed-Use compared with Q1 2019, from 3,230 to 3,280 units. The market remains highly occupier and buyer friendly, due to the Residential volume of off-plan transactions was up 4% on Q1 2019. wide variety of options available at competitive prices/rates.

International Properties London Off-Plan Residential International Homes and Investments International Relocations Dubai Residential Market Q2 2019 Snapshot

Price Movements Completed Unit Transactions Apartments Villas Volumes Values QoQ −4% QoQ −4% QoQ +2% QoQ +31%

Rental Movements Off-Plan Unit Transactions Apartments Villas Volumes Values QoQ −5% QoQ −8% QoQ +4% QoQ -8%

The Observer - Dubai Residential Q2 2019 1 Transaction volumes up in Q2, despite oversupply

Further price declines were witnessed in Q2 2019 with average continuing to be generated through incentives such as 5-year apartment and villa sales prices down 4% from Q1 2019; a post-handover payment plans, the rebate of registration fees, result of continued oversupply in the Emirate’s residential freezing property service charges and guaranteed rental returns. real estate market. A total of 47,502 apartments, villas and townhouses* are set to be completed this year which is almost The completed units market saw a 31% increase in transaction twice what was delivered in 2018. Increased supply, especially values which suggests that end-users are still active and as developers work to complete projects before Expo 2020, is purchasing homes in Dubai. Prices in the secondary market likely to result in further price declines across the remainder of have been increasingly affordable as sellers have been highly the year. motivated due to competition with off-plan, completed stock.

Despite price declines across the board, the Emirate’s property *Based on figures from Dubai Pulse, the data platform initiative from the Smart Dubai market is displaying some positive sentiment as a result of office increased transaction volumes in the completed unit and off- plan sectors. In terms of the latter, there was a 4% increase between Q2 and Q1 2019, which indicates that demand is

HOT TOPIC Evidence of developers becoming increasingly innovative to stay relevant in a competitive market, has come from industry-leader Emaar. In partnership with the Dubai Multi Commodities Centre, Emaar will offer buyers of its Executive Residences in Dubai Hills Estate, a free three-year renewable business license, a free three-year renewable family residency visa as well as 100% business ownership. This unprecedented move will allow entrepreneurs to legally start a home-based business and will assist with absorption rates of a particular segment of properties. The product is targeted at SMEs who currently contribute 80 per cent to the Emirate’s economy.

Apartments: Quarter-on-Quarter movement: (–4%) Apartments: Quarter-on-Quarter movement: (–4%)

Modest price declines were seen in the apartment segment Market sentiment in the villa community of Palm Jumeriah in The Greens, and with a 2% remained the most positive, witnessed by a small movement decrease from the previous quarter. Average apartment prices in prices from Q1 2019, with a 1% decline from AED 1,984 per decreased from AED 925 per sqft to AED 907 per sqft, AED 722 sqft to AED 1,967 per sqft. per sqft to AED 706 per sqft and AED 713 per sqft to AED 700 per sqft respectively. In contrast to the previous quarter, The Lakes witnessed the highest price decline of 6% since Q1 2019, followed by The The highest price declines were witnessed in The Views and Meadows and Springs with a 5% decline from the previous with a 9% decrease, from AED 1,197 per sqft quarter. to AED 1,090 per sqft and a 7% decrease from AED 1,511 per sqft to AED 1,401 per sqft respectively.

In contrast to the previous quarter, the most resilient apartment location in Q2 was International City, which saw no price movement when compared with Q1. 7% declines were witnessed in Q1 2019 down from Q4 2018.

The Observer - Dubai Residential Q2 2019 2 Apartments and Villas − Residential Sales Prices and Quarterly Change

The World The Palm Deira Arabian Gulf The Palm Dubai -5% Waterfront Q-o-Q Movement AED872 AED1,090 LAKE TOWERS AED921 -5% JUMEIRAH Q-o-Q LAKE TOWERS Movement -1% Q-o-Q AED1,153 Movement DUBAI MARINA AED1,984 AED1,967 -5% PALM AED854 Q-o-Q JUMEIRAH PALM THE MEADOWS Movement JUMEIRAH Dubai /SPRINGS Maritime Bluewater City AED897 Islands AED592 Jumeirah Beach THE MEADOWS Residence -7% DISCOVERY /SPRINGS AED907 Q-o-Q GARDENS Movement Dubai Marina THE GREENS AED925 Jumeirah Satwa Media Internet Burjuman Hamriya City THE GREENS City Badaa Centre -6% Ibn Battuta JLT Al Wasl AED1,401 Deira Q-o-Q AED627 Jumeirah Sufouh -2% Safa AED1,511 Wuheida Mall The Greens Manara DOWNTOWNUmm Mamzar Movement Gardens Heights Q-o-Q DOWNTOWN Hurair Jebel Ali Freezone DISCOVERY Emirates TECOM Movement DIFC Trade GARDENS Meadows Hills Centre Karama Jebel Ali Deira City Discovery /Springs Dubai Mall Centre Downtown Village The Views Oud Gardens Jumeirah Zabeel Metha Jebel Ali Islands The Lakes AED1,090 Barsha Al Nahda Jumeirah THE VIEWS -4% Park The Springs Barsha AED1,197 Abu Dhabi Q-o-Q Garhoud Sharjah Movement Airport THE VIEWS Al Khail -9% Free Zone AED859 AED1,107 Q-o-Q Gate Culture Twar JUMEIRAH Movement Village Qusais PARK THE LAKES -6% Technology Park -3% AED1,038 AED827 Q-o-Q Jumeirah Q-o-Q Green Village Circle Movement Umm JUMEIRAH Community JumeirahMovement Golf International Ramool PARK Estates Media Dubai AEDProduction728 Meydan Dubai Investment Zone(IMPZ) AED1,038 -2% AEDCity 1,011 Festival City Park AED708 JUMEIRAH Q-o-Q -3% JUMEIRAH VILLAGE THE LAKES Movement AED700 Q-o-Q BUSINESS BAY Dubiotech Movement VILLAGE CIRCLE Sports Nadd Dubai CIRCLE City MOTOR CITY Shamma World Motor Central City AED713 -3% -1% Nadd Q-o-Q MOTOR CITY Al Hammar Movement Q-o-Q AED697 Movement City Centre DUBAI SILICON 0% Arabian Al Barari Q-o-Q Ranches OASIS Mirdif AED737 Living Legends Movement AED713 -2% Ghoroob Mizar SPORTS CITY AED703 SPORTS CITY Q-o-Q Al Waha DUBAI SILICON Warqaa Movement Community AED860 OASIS AED481 AEDShorooq481 INTERNATIONAL ARABIAN AED833 Dragon Mart INTERNATIONAL Layan CITY RANCHES ARABIAN International CITY AED722 RANCHES City AED706 Khwaneej DUBAILAND DUBAILAND Dubailand Dubai -3% Silicon Oasis Q-o-Q Awir Movement Academic City

Figures in AED/Sq Ft Villa Sales Q1 2019 Villa Sales Q2 2019 Apartment Sales Q1 2019 Apartment Sales Q2 2019 QoQ Movement Source: REIDIN & Chestertons

The Observer - Dubai Residential Q2 2019 4 The Observer - Dubai Q2 2019 5 Softening rental market provides tenant-friendly conditions for the foreseeable future

As in previous quarters, there was continued downward compared with Q1 2019. A typical 2 bedroom apartment pressure on rents in Q2 2019. This was a consequence of rented for AED 70,000 per annum in Q1, dropping to additional supply being added to the market, thus offering AED 60,000 per annum in Q2, representing a 14% decline for more choice to potential tenants. However, Q2 saw a more that format. marked decrease in rents than in the previous quarter with a further 5% decrease in the apartment market and 8% in the Dubailand and were the next most affected villa market when compared with Q1 2019. Whether tenants locations with an average 8% decline from the previous quarter. want to upgrade, downsize, or remain in their current property, Typical three bedroom units in Discovery Gardens rented for the ongoing downward correction in Dubai’s rental market is AED 100,000 per annum in Q1, dropping to AED 85,000 in Q2, providing leverage for them to get the best possible deal. reflecting a 15% decline.

Communities with significant upcoming supply in 2019 are The Views, The Greens, JLT and were the likely to see the largest rent reductions. These include Jumeirah most resilient communities in Q2 with declines of 1% and 3% Village Circle and Business Bay as well as locations in Dubailand for the latter three locations. and . The popular established communities of Dubai Marina and Older units in central locations will be under pressure to Business Bay, which saw no movement in rental rates in Q1 generate demand with tenant preferences shifting to outlying 2019 when compared to Q4 2018, witnessed a 5% decline in areas where newer and competitively priced options are Q2. increasingly becoming available. Villas: Quarter-on-Quarter movement: (– 8%) As residential rents continue to soften, landlords are offering lower rental rates and incentives to attract and retain tenants. In the villa market, the biggest rental declines were witnessed The number and range of incentives has increased with rent- in , The Meadows and with free periods, some up to three months, being the most popular. an average 11% decline from the previous quarter. Typical four Other incentives include multiple rent cheques, waiver of bedroom villas rented for AED 250,000 per annum in Q1 security deposits, multiple cheques to cover utility bills, shorter dropping to AED 210,000 per annum in Q2 in Jumeirah Islands. term leases and the inclusion of maintenance within the rent. Similarly, in The Meadows, a typical four bedroom villa rented The bottom line is that Dubai will continue to be a tenant- for AED 210,000 per annum in Q1 dropping to AED 180,000 friendly market for the foreseeable future. per annum in Q2 and in Arabian Ranches the decrease was from AED 175,000 per annum in Q1 to AED 160,000 per annum in Q2. Apartments: Quarter-on-Quarter movement: (– 5%) The most resilient location in the villa rental market was Palm In the apartment market, the biggest average rental decline Jumeirah with a 2% decline from Q1 2019. was witnessed in Dubai Silicon Oasis with a 12% decrease when

HOT TOPIC At the beginning of May 2019, The Dubai Land Department confirmed it was studying a proposal to freeze residential rents for three years after landlords and tenants sign rental contracts. This could have a positive impact on people’s decision to move to the UAE as rentals are the biggest item of expenditure and under this new proposal they would be able to fix their costs for a designated period of time. However, the downside is it could remove some of the incentive for residents to become property buyers, as well as potentially put off buy-to-let investors as their future income could be affected against rising mortgage and maintenance costs.

The Observer - Dubai Residential Q2 2019 6 The Observer - Dubai Residential Q2 2019 7 400,000 0%

350,000 -2% 300,000 PERCENTAGE CHANGE -4% 250,000

200,000 -6%

150,000 -8% AED RENTAL RATES AED RENTAL 100,000 -10% 50,000 - -12% Arabian The The The Lakes Victory Al Furjan JVT Jumeirah Jumeirah Palm Ranches Springs Meadows Heights Islands Golf Estates Jumeirah

Figures in AED/Sq Ft 2BR 3BR 4BR 5BR QoQ Movement Source: Propertyfinder & Chestertons

400,000 0%

350,000 -2% 300,000 PERCENTAGE CHANGE -4% 250,000

200,000 -6%

150,000 -8%

Apartments RATES AED RENTAL − Residential Market Rent and Quarterly Change 100,000 -10% Figures in AED/Sq Ft Studio 1BR 2BR 3BR QoQ Change 50,000 Source: Propertyfinder & Chestertons - -12% Arabian The The The Lakes Victory Al Furjan JVT Jumeirah Jumeirah Palm Ranches Springs Meadows Heights Islands Golf Estates Jumeirah 200,000 0% Figures in AED/Sq Ft 2BR 3BR 4BR 5BR QoQ Movement Source:18 Propertyfinder0,000 & Chestertons -2% 160,000 PERCENTAGE CHANGE 140,000 -4%

120,000 -6% 100,000 -8% 80,000 AED RENTAL RATES AED RENTAL 60,000 -10% 40,000 -12% 20,000

- -14% Business Bay DIFC Discovery Downtown Dubai Marina Dubai Dubai Dubailand International JLT JVC The Greens The Views Dubai Gardens Dubai Silicon Oasis Sports City City Motor City

Figures in AED/Sq Ft Studio 1BR 2BR 3BR QoQ Change Source: Propertyfinder & Chestertons

200,000 0% 180,000 Villas − Residential Market Rent and Quarterly Change -2% 160,000 PERCENTAGE CHANGE 140,000 -4%

120,000 -6% 400,000 0% 100,000 -8% 350,000 80,000 -2% PERCENTAGE CHANGE

AED RENTAL RATES AED RENTAL 300,000 60,000 -10% -4% 250,000 40,000 -12% 200,000 -6% 20,000 150,000 -8% - -14% RATES AED RENTAL Business Bay DIFC Discovery Downtown Dubai Marina Dubai Dubai Dubailand International JLT JVC The Greens The Views Dubai 100,000 Gardens Dubai Silicon Oasis Sports City City Motor City -10% 50,000 - -12% Arabian The The The Lakes Victory Al Furjan JVT Jumeirah Jumeirah Palm Ranches Springs Meadows Heights Islands Golf Estates Jumeirah

Figures in AED/Sq Ft 2BR 3BR 4BR 5BR QoQ Movement Source: Propertyfinder & Chestertons

The Observer - Dubai Residential Q2 2019 8 The Observer - Dubai Residential Q2 2019 9

Figures in AED/Sq Ft Studio 1BR 2BR 3BR QoQ Change Source: Propertyfinder & Chestertons

200,000 0%

180,000 -2% 160,000 PERCENTAGE CHANGE 140,000 -4%

120,000 -6% 100,000 -8% 80,000 AED RENTAL RATES AED RENTAL 60,000 -10% 40,000 -12% 20,000

- -14% Business Bay DIFC Discovery Downtown Dubai Marina Dubai Dubai Dubailand International JLT JVC The Greens The Views Dubai Gardens Dubai Silicon Oasis Sports City City Motor City Completed units show a 31% increase Volume of Residential Transactions Q2 2019 (Number of Units) in transactional values in Q2

Transactional activity was on the rise in the second quarter of The volume of off-plan transactions was up 4% on Q1 2019. This 6,000 2019 (detailed figures below). This could be due to a combination follows a 10% increase in Q1 2019 and a 33% increase in volumes of factors to include the announcement of Government initiatives in Q4 2018 compared with Q3 2018. This could be a result of 5,000 such as the retirement visa, foreign company ownership and the attractive incentives offered to entice buyers, coupled with 4,965 5,158 4,000 long-term residency visas. the fact that inventories are mostly focused on mid-market, affordable properties. 3,000 Completed Properties Property developers, such as Emaar, recently revealed the 3,230 3,280 announcement regarding long-term visas has been well-received Dubailand continued to be the most popular community in 2,000 O-plan as enquiries from foreign buyers, especially from China, grew terms of completed unit transaction volumes as it was in Q1 significantly. 2019 and Mohammed Bin Rashid City was the most popular off 1,000 6,000 plan location. Figures in AED/Sq Ft 0 5,000 Source: REIDIN & Chestertons The completed unit market continued to exhibit increasing Q1 2019 Q2 2019 4,965 5,158 market resilience in Q2 with a 31% increase in transactional Transaction Values 4,000 values when compared with Q1. This demonstrates that buyers may be more inclined to take the lower risk option of property Quarter-on-Quarter Movement (Completed Units): +31% 3,000 Completed Properties that is move-in ready so there are no issues with delayed Quarter-on-Quarter Movement (Off-Plan Units): –8% 3,230 3,280 Figures in AED/Sq Ft Completed Properties O-plan handovers. We expect this trend to continue throughout 2019 Source: REIDIN 2,00 &0 Chestertons O-plan as developers offer attractive incentives such as 5% deposits and Transactions involving completed properties increased in value long-term payment plans on newly completed stock. by 31% from AED 5.64 billion in Q1 2019 to AED 7.37 billion in Q2 HOT TOPIC 1, 0 00 2019. Conversely, there was a decrease in the value of off-plan In our last issue of the Dubai Observer, we outlined the Dubai Land Department’s goal to secure AED 1 billion ofFigures foreign in AED/Sqdirect Ft 0 Transaction Volumes properties of 8% from AED 7.85 billion in Q1 2019 to AED 7.19 investment into the UAE in 2019. A major boost to this plan will come in the form of American billionaire, WarrenSource: Buffet, REIDIN who & recently Chestertons Q1 2019 Q2 2019 billion in Q2. announced that his company, Berkshire Hathaway, will work with local company Gulf Properties to help connect prospective buyers Quarter-on-Quarter Movement (Completed Units): +2% and sellers across to complete real estate transactions throughout the UAE. Quarter-on-Quarter Movement (Off-Plan Units): +4% Downtown Dubai was the most popular location in terms of completed unit transaction values at AED 1.13 billion and The The market for completed units witnessed an increase in Lagoons for off-plan units at AED 820 million. Figures in AED/Sq Ft Completed Properties O-plan transactional volumes in Q2 2019 with a 2% increase compared Source: REIDIN & Chestertons with Q1 2019, from 3,230 to 3,280 units.

7.19 7.37 Value of Residential Transactions Q2 2019 (AED Billions)

6,000

5,000 4,965 5,158 4,000

3,000 Completed Properties 3,230 3,280 2,000 7.19 7.37 O-plan

1,000 Figures in AED/Sq Ft 0 Source: REIDIN & Chestertons Q1 2019 Q2 2019

Figures in AED/Sq Ft Completed Properties O-plan Source: REIDIN & Chestertons

The Observer - Dubai Residential Q2 2019 10 The Observer - Dubai Residential Q2 2019 11

7.19 7.37 Q2 2019 Sales Transactions Q2 2019 Sales Transactions Completed Units Off-plan Units

Top 10 Areas Based on Transaction Volumes (Number of Units) Top 10 Areas Based on Transaction Volumes (Number of Units)

Dubailand MBR City DubailandDubailand Dubai Marina DubailandMBRMBR CityCity DubaiDubai MarinaMarina Jumeirah Village Circle DowntownDubailandDubailand Dubai JumeirahJumeirah VillageVillage CircleCircle Downtown DowntownThe Lagoons Dubai InternationalInternational CityCity TheThe LagoonsLagoons Emirates Living EmiratesEmirates LivingLiving DubaiDubai SouthSouth Downtown Dubai Business Bay DowntownDowntown DubaiDubai BusinessBusiness BayBay Business Bay Jumeirah Village Circle BusinessBusiness BayBay JumeirahJumeirah VillageVillage CircleCircle Palm Jumeirah Dubai Harbour PalmPalm JumeirahJumeirah DubaiDubai HarbourHarbour Dubai Sports City DubaiDubai SportsSports CityCity JumeirahJumeirah LakeLake TowersTowers Al Furjan Meydan City AlAl FurjanFurjan MeydanMeydan CityCity 5050 100100 150 200 250 300 350 400 100 200 300 400 500 600 700 800 900 1000 5050 100100 150150 200200 250250 300300 350350 400400 100100 200200 300300 400400 500500 600600 700700 800800 900900 10001000 Source: REIDIN & Chestertons Source: REIDIN & Chestertons Source:Source: REIDINREIDIN && ChestertonsChestertons Source:Source: REIDINREIDIN && ChestertonsChestertons

Top 10 Areas Based on Transaction Values (in million AED) Top 10 Areas Based on Transaction Values (in million AED)

Downtown Dubai The Lagoons TheThe LagoonsLagoons DowntownDowntownDubai Marina DubaiDubai Dubailand DubailandDubailand EmiratesDubaiDubai MarinaMarina Living Dubai Harbour DubaiDubai HarbourHarbour EmiratesEmiratesDubailand LivingLiving Business Bay BusinessBusiness BayBay DubailandDubailandMBR City Dubai South DubaiDubai SouthSouth Palm MBRJumeirahMBR CityCity Palm Jumeirah Palm Jumeirah ArabianPalmPalm JumeirahJumeirah Ranches Palm JumeirahJumeirah Arabian Ranches Jumeirah ArabianBusiness Ranches Bay Jumeirah VillageJumeirah Circle Business Bay Jumeirah Village Circle Jumeirah BusinessVillage Circle Bay JumeirahDubai Village Marina Circle JumeirahJumeirah VillageVillage CircleCircle Dubai Marina Al Furjan JumeirahDubai Lake MarinaTowers AlAl FurjanFurjan JumeirahJumeirah LakeLake TowersTowers 200200 400400 600600 800800 1,0001,000 1,2001,200 100 200 300 400 500 600 700 800 900

Source: REIDIN & Chestertons 200200 400400 600600 800800 1,0001,000 1,2001,200 Source: REIDIN & Chestertons 100100 200200 300300 400400 500500 600600 700700 800800 900900 Source:Source: REIDINREIDIN && ChestertonsChestertons Source:Source: REIDINREIDIN && ChestertonsChestertons The Observer - Dubai Residential Q2 2019 12 The Observer - Dubai Residential Q2 2019 13 Contact Us

Nick Witty, BSc (Hons) MRICS Mena Head Office Managing Director 1802, Blvd. Plaza Tower 1 MENA Sheikh Mohammed Bin Rashid Blvd. [email protected] Downtown Dubai PO Box 28336, Dubai Adam Wilson, BSc (Hons) MRICS ACIArb Office: +9714 381 0200 Director Fax: +9714 325 3359 Head of International Valuations Email: [email protected] [email protected]

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Disclaimer: All articles and data presented herein is intended for information purposes and has been compiled from sources deemed reliable including the Valu- ations and Research Department of Chestertons, sales and leasing staff, published data, and secondary sources. Though information is believed to be correct, materials presented is subject to errors, omissions, changes, or withdrawal without notice. www.chestertons-mena.com