The Official Sales Price Index for the Emirate of Dubai CONTENT

MO’ASHER The Official Sales Price Index for the Emirate of Dubai CONTENT

Introduction ...... 3

Mo’asher - Dubai House Price Index ...... 5

Dubai Sales Price Index ...... 6

Market insights ...... 8

Methodology ...... 9

Mo’asher INTRODUCTION

H.E. Sultan Butti bin Mejren,

Director General of the Dubai Land Department

“We have inked a landmark deal with Property Finder to collectively enhance and increase real estate investment to Dubai. Under this partnership, we created Mo’asher, Dubai’s own House Price Index, the official real estate index designed to provide customers with better insights and to support them in taking well-in- formed property buying decisions, thus encouraging more investment resultant- ly empowering the real estate sector in the Emirate. The index seeks to organise and streamline the property industry in Dubai and to make transactions more transparent and seamless.”

Majida Ali Rashid,

Promotion and Real Estate Investment Management Sector Dubai Land Department

“The monthly publication Moa’sher, Dubai House Price Index, will utilise Prop- erty Finder’s proprietary asking price data coupled with Dubai Land Depart- ment’s transaction data, which will allow the market to see how data can enhance transparency within the real estate sector. This collaboration is part of our continuous efforts to reach an increased level of transparency in the real estate industry. It is part of our vision to increase customer and investor confidence, and thus support the vision of our wise leadership to make Dubai the smartest and happiest city in the world.”

Mo’asher INTRODUCTION

Michael Lahyani,

Founder and Chief Executive Officer of Property Finder

“Property Finder and The Dubai Land Department share the same vision in further professionalising the real estate market. Considering that Property Finder is the largest portal not only in the UAE but across the wider MENA region, we have access to the largest set of proprietary data on asking prices and a number of other metrics that inform the property picture. With the immense amount of data we are able to access, we have created a new entity that is the authority on data under Property Finder. Data Finder will be pow- ering Mo’asher, the first official Dubai House Price Index.

After the creation of Data Finder, launching Mo’asher with the Dubai Land Department was our first priority in providing enhanced data transparency to the market. With this successful launch, we are looking to work with other government entities in the United Arab Emirates in order to replicate and tailor an emirate wide house price index to further enhance our goal of informing and educating our consumers.

Considering how the rest of the region looks to Dubai for inspiration, Mo’asher will serve as a model for how Property Finder Group’s other markets can convey important statistics on their property market to the public. The willingness of Dubai government to partner with the private sector to create the Moasher initiative is an important first step in showcasing the level of transparency that should be the standard across the region.”

Mo’asher Mo’asher Dubai House Price Index

Key Findings According to the Dubai Statistics Center, Dubai’s economy • During H1 2019 Dubai’s economy grew grew 2.1% on a year-to-year basis in H1-2019, with the an estimated 2.1% in comparison to the emirate’s GDP reaching AED 208.2 billion at constant prices same period last year with the Emirate’s in the first six months of 2019. Real estate activity also grew GDP reaching AED 208.2 billion at constant by 2.1% in the first half of 2019 compared to the same period prices in the first six months of 2019 in 2018 and contributed 7.4% to the total GDP, driving the • Real estate activity also grew by 2.1% in overall economy towards growth by 0.2%. Led by production the first half of 2019 compared to the same cuts by OPEC, GDP growth strengthened in 2018 on the back period in 2018 and contributed by 7.4% to of higher oil prices and a strengthening non-oil sector. With the total GDP, driving the overall economy towards growth by 0.2% the World Expo set to open in Dubai in 10 months’ time, government spending on infrastructure and other projects has • In October 2019, there was a 23% increase supported the non-oil sector throughout 2018. in number of investments and 33% increase in value of investments When taking a look at property as an investment, the gross yield in Dubai according to Property Finder currently stands at 6.0%. Looking at property transactions through Novem- “Transaction summary from Dubai Land ber 2019, the Dubai Land Department has reported a total of Department up to November 2019 shows a total 37,384 sales transactions. Of those transactions, 21,860 or of 37,384 sales transactions. Of those transactions, 21,860 or 58% are attributed to the off-plan market 58% transactions are attributed to the off-plan market and and 15,524, or 42%, to the secondary market” 15,524, or 42%, to the secondary market.

Initiatives from the Dubai government that aim to impact businesses and residents alike, along with objectives set out by the Dubai Land Department indicate that these are likely to have a positive impact on both domestic and foreign demand. As residency policies are evolving and becoming Lynnette Abad more resident-centric, we will continue to see a shift from Property Finder Group people renting long-term to buying their own property. Along Director, Research and Data with the introduction of more affordable housing options in 2018, our view is that the sustained contraction in property “Dubai Sales House Price Index increased by 1.4% prices is an important correction as many residents want the in November 2019 and reached 1.134 points driven ability to live in Dubai long-term and thus make the city a by a set of initiatives that motivated the real estate investments and shaped the future of the real estate more permanent home. If any changes on the LTV rate from sector for the coming few years.” the UAE Central Bank were to come, that would be a further boost in increasing homeownership.

Ms. Latifa Ibrahim Ahmed Dubai Land Department Senior Director of Real Estate Studies & Research Dept.

Mo’asher Dubai Sales Price Index

DubaiDubai Index 1.6 1.6

1.4 1.4

1.2 1.2

1 1

0.8 0.8

0.6 0.6 Index Number Index

0.4 0.4

0.2 0.2

0 0 2012-01 2012-03 2012-05 2012-07 2012-09 2012- 11 2013-01 2013-03 2013-05 2013-07 2013-09 2013- 11 2014-01 2014-03 2014-05 2014-07 2014-09 2014- 11 2015- 01 2015- 03 2015- 05 2015- 07 2015- 09 2015-11 2016-01 2016-03 2016-05 2016-07 2016-09 2016- 11 2017-01 2017-03 2017-05 2017-07 2017-09 2017- 11 2018-01 2018-03 2018-05 2018-07 2018-09 2018- 11 2019-01 2019-03 2019-05 2019-07 2019-09 2012-01 2012-03 2012-05 2012-07 2012-09 2012-11 2013-01 2013-03 2013-05 2013-07 2013-09 2013-11 2014-01 2014-03 2014-05 2014-07 2014-09 2014-11 2015-01 2015-03 2015-05 2015-07 2015-09 2015-11 2016-01 2016-03 2016-05 2016-07 2016-09 2016-11 2017-01 2017-03 2017-05 2017-07 2017-09 2017-11 2018-01 2018-03 2018-05 2018-07 2018-09 2018-11 2019-01 2019-03 2019-05 2019-07 2019-09 2019-11

Year - Months Index base year 2012

Average HouseDubai Avg Prices: Prices Dubai 1,800, 000 1800000

1,600, 000 1600000

1,400, 0001400000

1,200, 0001200000

1,000, 0001000000

800,000800000

600,000600000

Average Price in AED Average 400,000400000

200000 200,000

Year - Months Index base year 2012

Dubai Sales House Price Index increased by 1.4% in November 2019 and reached 1.134 points compared to 1.121 points in October 2019; this increase is driven The Sales House by a set of initiatives and incentives that motivated real estate investments and is shaping the future of the real estate sector for the coming few years. Price Index

The overall performance of the index reflects Dubai’s economic cycle and shows increased the responses of the real estate market to the different economic conditions. In by 1.4% in 2014, after Dubai won the bid to host Expo 2020, the real estate market reached the peak in the index value, with the highest value in October 2014 by 1.58 November 2019 points. This could have been driven by investors who had an optimistic outlook and reached and expected to benefit from competitive rental yields. 1.134 points More recently, a price correction has been witnessed due, in part to historically lower oil prices and other global economic conditions such as trade tensions between the US and China as well as regional competition.

6 Mo’asher Dubaiprice_index_base_2012 Apartments Index 1.8 1.8

1.6 1.6

1.4 1.4

1.2 1.2

1 1

0.8 0.8

0.6 0.6 Index Number Index

0.4 0.4

0.2 0.2

0 0 2012-01 2012-03 2012-05 2012-07 2012-09 2012-11 2013-01 2013-03 2013-05 2013-07 2013-09 2013-11 2014-01 2014-03 2014-05 2014-07 2014-09 2014-11 2015-01 2015-03 2015-05 2015-07 2015-09 2015-11 2016-01 2016-03 2016-05 2016-07 2016-09 2016-11 2017-01 2017-03 2017-05 2017-07 2017-09 2017-11 2018-01 2018-03 2018-05 2018-07 2018-09 2018-11 2019-01 2019-03 2019-05 2019-07 2019-09 2019-11 2011- 11 2012-01 2012-03 2012-05 2012-07 2012-09 2012- 11 2013-01 2013-03 2013-05 2013-07 2013-09 2013- 11 2014-01 2014-03 2014-05 2014-07 2014-09 2014- 11 2015- 01 2015- 03 2015- 05 2015- 07 2015- 09 2015-11 2016-01 2016-03 2016-05 2016-07 2016-09 2016- 11 2017-01 2017-03 2017-05 2017-07 2017-09 2017- 11 2018-01 2018-03 2018-05 2018-07 2018-09 2018- 11 2019-01 2019-03 2019-05 2019-07

Year - Months Index base year 2012

Dubai Villa/Townhouseprice_index_base_2012 Index

1.8 1.8

1.6 1.6

1.4 1.4

1.2 1.2

1 1

0.8 0.8

Index Number Index 0.6 0.6

0.4 0.4

0.2 0.2

0 0 2011- 12 2012-02 2012-04 2012-06 2012-08 2012- 10 2012- 12 2013-02 2013-04 2013-06 2013-08 2013- 10 2013- 12 2014-02 2014-04 2014-06 2014-08 2014- 10 2014- 12 2015- 02 2015- 04 2015- 06 2015- 08 2015-10 2015-12 2016-02 2016-04 2016-06 2016-08 2016- 10 2016- 12 2017-02 2017-04 2017-06 2017-08 2017- 10 2017- 12 2018-02 2018-04 2018-06 2018-08 2018- 10 2018- 12 2019-02 2019-04 2019-06 2019-08 2012-01 2012-03 2012-05 2012-07 2012-09 2012-11 2013-01 2013-03 2013-05 2013-07 2013-09 2013-11 2014-01 2014-03 2014-05 2014-07 2014-09 2014-11 2015-01 2015-03 2015-05 2015-07 2015-09 2015-11 2016-01 2016-03 2016-05 2016-07 2016-09 2016-11 2017-01 2017-03 2017-05 2017-07 2017-09 2017-11 2018-01 2018-03 2018-05 2018-07 2018-09 2018-11 2019-01 2019-03 2019-05 2019-07 2019-09 2019-11

Year - Months Index base year 2012

The improvement in the Index Value for November 2019 is reflected in There was a 0.2% the average sales price for the same month, which reached AED1.177 increase in the million compared to AED1.161 million in October 2019. sales index value

for apartments Breaking down the index by property types shows that apartments and and 1% increase villas/townhouses varies in terms of index value and average prices. The in the sales index Sales Price Index for apartments shows a marginal increase by 0.2% in value for villas/ November 2019 compared to October 2019.Bar charts for value townhouses in

However, for villas and townhouses, the Sales Price Index shows a November 2019 greater increase than for apartments, reaching 1.058 points in Novem- compared to ber 2019 compared to 1.049 in October 2019. October 2019

Mo’asher 7 Market Insights

Monthly Volume and Value of Investments Monthly Number and Value of investments 10,00010000 9,0009000 8,0008000

7,0007000 6,0006000

5,0005000

Volume 4,0004000 3,0003000

2,0002000

1,0001000

0 08/2019 09/2019 10/2019 11/2019 08/2019 09/2019 10/2019 11/2019

numberNumber of investments of Investments ValueValue ofof Investmentsinvestments (UAE (UAE Million) Million)

Months-Year

Monthly Volume and Value of Sales Transactions Monthly Number and Value of Sales Transactions

10000

90009000

80008000

70007000

60006000

50005000

Volume 40004000 3000 3000 2000 2000 1000 1000 0 0 JAN FEB MAR APR MAY JU N JU L AUG SEP OCT NOV JAN FEB MAR APR MAY JUN JUL AUG SEP OCT NOV

NumberNumber of sales of Salestransactions Transactions ValueValue of of Transactions transactions (AED (AED Million) Million)

Months-Year

Dubai’s real estate market recently witnessed new initiatives and products to stimulate real estate investments and has increased transparency to the market by providing more data as well as market studies. In October 2019 alone, 23% On 2nd of September 2019, His Highness Shaikh Mohammad Bin Rashid Al Maktoum, UAE Vice-President and Prime Minister and Ruler of Dubai, increase in announced the formation of the “Higher Real Estate Planning Committee”, which number of will be chaired by Shaikh Maktoum Mohammad Bin Rashid Al Maktoum, Deputy investments Ruler of Dubai. and 33% The committee’s purpose is to ensure that semi-government real estate compa- increase nies do not compete with private investors and to develop a comprehensive stra- in value of tegic plan and vision for all major real estate projects in the emirate for the next 10 years. investments After the formation of this committee, the real estate market witnessed a remark- able improvement in both real estate transactions and real estate investments.

In October 2019 alone, there was a 23% increase in number of investments and 33% increase in value of investments.

8 Mo’asher METHODOLOGY

House price indices serve as important guides that consumers, financial institutions, govern- ments and investors look to in order to understand the market movements of a particular city or country’s housing market. An index will allow one to show the value of an asset over time by tracking its performance. An index is created by selecting a base year in a data set and then indexing that number as 100, which is the natural base for what all other price points will be measured against. When an index is updated monthly it will produce an updated average house price as well as the % changes in price for a given time period such as the last three months, six months or twelve months.

Mo’asher will be created using a hedonic regression model, which is a model that is based on attributes such as view, number of bedrooms and bathrooms and other important features in a property that have an impact on its value. These methods utilize information on the relevant property characteristics to estimate quality-adjusted price indices using regression techniques, though it may prove difficult to sufficient control for location. One of the challenges of building a property price index is to isolate the effect of the properties price change over time. Nevertheless, this is challenging because the quality mix in the real estate market is diverse. The characteristics of every property is unique, and it is hard to keep track of individual property features because they continue to be upgraded or modified without informing the authorities.

Hedonic Imputation Index

In any given housing market, each property has unique characteristics or attributes which can in- dividually increase its actual worth. Thus, explaining the housing market’s prices is not as simple as calculating the average for a given period of time. There will be times where more luxurious properties are sold which will cause the average price to be higher than times where such transactions have not taken place. Calculating a simple average would otherwise indicate that property prices overall have increased, indicating increased value in individual properties when in reality the overall market has benefited from property transacted at above average levels, not individual properties.

The hedonic imputation method recognizes that the housing market is comprised of heterogene- ous goods and can be described by their attributes or their characteristics. The hedonic method serves two purposes:

To estimate the willingness of individuals to pay for a property’s unique attributes. The construction of quality-adjusted price indices.

t The main assumption behind the hedonic imputation is that the price pn of a property n in period t is can be explained by K different characteristics znkt from the base period 0 to the current period T

where nt is a normal distributed error. The previous model can be specified as a logarithmic-linear model in order to estimate the marginal contributions for each characteristic

where are the marginal contributions (model parameters) for every property attribute znk. The decision to use a log-linear model is to reduce the problem of heteroskedasticity as prices tend to be log-normally distributed (Diewert, 2003b). Market conditions in Dubai are constantly changing, thus the assumption of coefficients varying over time.

Laspeyres

Assuming that the log-linear hedonic model holds true for all t periods, the quality-adjusted price index is defined as

Other house price indices most often will utilize the repeat sales method, which will track a particular property’s sale price each time it has been sold, and index that against other properties that have been repeatedly sold, showing how total wealth within those properties fluc- tuates over time. While no index can predict which direction a market will take, it often is a good indicator of the overall market’s health and can help inform decisions of where the market is currently sitting and thus if one should speed up their buying process while deals are still able to be had or if they can hold off if the market appears it may decline further. Each market has different dynamics and will therefore utilize the appropriate method that best fits with the data that is available.

9 MO’ASHER Disclaimer At present, we do not provide any accuracy metrics, and although all due care and statistical rigour is taken with the index generation, we do not claim any forecast accuracy. Property Finder and the Dubai Land Depart- ment reserve the right to adjust methodologies at any given time, and these changes will be published with appropriate user notes. Users seeking financial guidance from the DHPI do so at their own risk and should note that some external macroeconomic features will not be captured in the model.

The DHPI should not be used for any commercial purposes, including pricing and investment decision making or performance measurement.

RESEARCH

Carla Maria Emanuel Issa Mahmoud Ahmed Farghally

Senior Research Analyst Research and Studies Specialist Research and Data Department of Real-Estate Studies and Research Property Finder Dubai Land Department [email protected] [email protected]

MARKETING

Faisal Zaidi Manal Mahmoud Haroun

Head of Marketing Corporate Communication Officer Research and Data Dubai Land Department Property Finder manal.haroun@dubailand.gov.ae [email protected]

Dubai Land Department, Deira, Bni Yas Road, P.O.Box: Dubai 1166, Dubai, UAE

propertyfinder FZ LLC, Dubai Media City, Shatha Tower, 15th Floor, Office #1505, P.O. Box 50954, Dubai, UAE

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