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QUARTER REVIEW 2018 Real Estate Market

www.valustrat.com VPI ValuStrat Price Index Residential

Since the ValuStrat Price Index (VPI) began tracking in January 2016, Qatar residential prices have witnessed a fall in values. By benchmarking the index from Q1 2016 at 100 points, we found that values continue to fall displaying market corrections nationwide.

The first quarter 2018 VPI displayed overall 9.4% annual and 1.6% quarterly declines. Villas and freehold apartments saw quarterly price declines of 1.6% and 1.7%, respectively. Whilst a few locations saw marginal declines, others experienced steeper falls. Quarterly capital depreciation between 0.4% and 2.7% was seen in clusters of , Al Khor, Umm Salal Mohammad, Old Airport, , , West Bay Lagoon, New / and declines of 4% to 4.4% were seen in Ain Khalid/ and Umm Salal Ali. Gross yields for residential units averaged at 4.8%, with 6.0% for apartments and 4.2% for villas.

ValuStrat Price Index 13 Villa and 3 Apartment Locations in Qatar [Base: Q1 2016=100]

120

100

100 96.3 94.2

90.9 89.8 87.2 84.9 82.7 81.3 80

60 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1

2016 2017 2018

Source: ValuStrat

1 | Qatar Real Estate Market 1st Quarter 2018 Review MacroEconomicSnapshot

• Government launched a second National Development Strategy (2017-2022) in which they prioritised six sectors; manufacturing, tourism, logistics, financial services, information and communication and scientific research

• Real Gross Domestic Product (GDP) increased 1.8% YoY (QAR 204.2 billion), driven by growth in non-hydrocarbon sector of 3.7% YoY in Q4 2017 - latest estimates released by Ministry of Development Planning and Statistics

• Population is estimated at 2.68 million

1,836,000 2,045,000 2,235,000 2,421,000 2,597,000 2,641,000 2,685,000 2012 2013 2014 2015 2016 2017 2018-Q1

Qatar Population Source: Ministry of Development Planning & Statistics

Consumer Price Index vs. Housing Index • Qatar Central Bank increased January 2015 – YTD deposit rate by 25 basis points after US Federal Funds rate increment by the same amount • International Monetary Fund (IMF) forecasted GDP to grow by 2.6% during 2018 based on Qatar’s move to increase gas production by 30% • In line with a 20% increase in oil prices, oil export revenues and imports expanded 23.3% YoY and 4.2% YoY, respectively • The Consumer Price Index (CPI) decreased 0.5% YoY and increased Jul Jul Jul Oct Oct Oct Jan Apr Apr Apr Feb Jan Jan Jan Jun Jun Jun Feb Feb Feb Sep Sep Sep Mar Nov Dec Nov Dec Nov Dec Aug Aug Aug Mar Mar Mar May May May 0.37% QoQ. Transport, Education, 2015 2016 2017 2018 Food & Beverage and Health were the main drivers of quarterly General Index (2013=100) inflation Housing, Water, Electricity, Gas and Other Fuels • Housing and Utility Expenses Index Source: Ministry of Development Planning & Statistics decreased 5.2% YoY and 0.5% QoQ

www.valustrat.com | 2 ResidentialSupply

400 • Total housing stock by the end of 2017 was Qatar Residential Supply approximately 286,125 units. For Q1 2018, 2015-2019 350 nearly 1,200 units were added 2015 (‘000 UNITS) 300

• Apartment supply consisted of 960 units 250 coming from new additions in Lusail, Fereej 275 200 Bin Mahmoud, Al Sadd and Najma 150 2016 280 • Completion of villa compounds in Ain Khalid, Al Maamoura and Umm Salal Ali added 240 new units to the total stock 286 2017 • An estimated 13,000 units are projected to 286 be completed by the end of 2018, assuming 14.2 no construction delays. These include 14 high rise apartment blocks on The Pearl and 150 36 apartment buildings in Lusail 2018E 300 200 5.4 250

300

2019E Existing 350 Expected Supply* 467 400 *May be subject to significant downward adjustment depending on construction delays Source: Ministry of Development Planning and Statistics, MEED Projects, ValuStrat

ResidentialSales

• YoY and QoQ median transacted prices for Residential Median Transacted Prices residential houses reduced by 5.67%

• Transaction volume for houses declined 14% YoY and 13% QoQ

• Total value of housing transactions -5.7% 1% Last Year Last 6 Months amounted to QAR 1.4 million. The five largest ticket sizes were seen in The Pearl, , New Al Salata, Rawdhat Al Hamama and for developed plots ranging from 1,500 sq m to 7,500 sq m

• Majority of transactions were in Al Rayyan -5.7% (29%) followed by (21%), Al Daayen Last Quarter

(20%) and Umm Salal (12%) Source: Ministry of Justice, ValuStrat

• There were 30 transactions for residential buildings with 45% transactions above the median ticket price (QAR 9,000,000) concentrated in The Pearl, Fereej Abdul Aziz and Old Airport

3 | Qatar Real Estate Market 1st Quarter 2018 Review ResidentialRents

• Compared to 2017, median asking rents Residential Asking Rents declined 11.8% YoY and 3% QoQ • Median monthly asking rents for apartments fell by 2% QoQ. The highest quarterly fall in rentals was seen in West Bay, Old Airport, Lusail and Al Sadd • Median monthly asking rents for villas fell by 7% QoQ -11.8% -6% Last Year Last 6 Months • Mid quality villa locations experienced the highest quarterly decline ranging from 5% to 11% • An emerging flight to quality is becoming apparent as QoQ falls in rental values appear steeper in secondary locations as compared to high end neighbourhoods, as -3% more tenants vacate and trade up Last Quarter • Typical monthly leasing rates for a two bedroom apartment are QAR 9,500-17,000 in The Pearl and QAR 6,000-9,000 in Lusail Source: ValuStrat

Median Monthly Asking Rent (QAR) Median Monthly Asking Rent (QAR) &Quarterly Change (%) - Apartments & Quarterly Change (%) - Villas

9,000 11,000 The Pearl 11,000 -4% Al Muraikh 11,750 -7% 14,000 14,000

6,750 13,000 Al Sadd 7,250 -3% Al Waab 15,000 -6% 9,750 16,000

6,000 10,000 Al Mansoura 6,250 0% Abu Hamour 13,000 -11% 6,500 14,500

7,500 18,250 Fereej Bin West Bay 8,000 -1% 20,000 -5% Mahmoud Lagoon 9,250 23,000

6,250 8,000 Lusail 7,500 -3% Al Wakrah 9,000 -4% 9,000 12,500

One Bedroom Three Bedroom Three Bedroom Five Bedroom Two Bedroom Quarterly Change (%) Four Bedroom Quarterly Change (%)

Source: ValuStrat Source: ValuStrat

www.valustrat.com | 4 OfficeSupply

• As of Q1 2018, the total estimated Qatar Office Supply Gross Leasable Area (GLA) of Qatar’s 2015-2019 office supply stood at 3.94 million sq m (Million sq m GLA)

• Five office buildings were added this 0.58 quarter with two in Lusail (Energy City) 0.96 and one each in Fereej Bin Mahmoud, 4.85 Al Muntazah (C Ring Road) and Al 3.89 3.5 3.89 Aziziya (Salwa Road), comprising 3.0 50,000 sq m GLA

• An estimated 910,000 sq m is in the 2018 pipeline, with at least 70% concentrated in Lusail

2015 2016 2017 2018E 2019E

Existing Stock Expected Supply

Source: MEED Projects, ValuStrat

OfficePerformance

• Compared to 2017, median office Office Median Asking Rent (QAR/sq m) asking rents fell 17.5% YoY and 9% and Quarterly Change (%) QoQ

• Median asking rents per sq m per 0% -2% -6% -9% -11% -17% 0% month in West Bay were QAR 145, while QAR 122 in C/D Ring Roads and 145 QAR 117 in Lusail

• Al Sadd witnessed a significant drop in 122 QoQ median asking rents, resulting 117 110 from below market listing prices on 105 new space being used to help 100 95 encourage occupancy rates

• Citywide increases in vacancies, and new supply stock, is creating downward pressure on office rentals in secondary locations West Bay C/D Ring Lusail Citywide Grand Al Sadd Salwa Road Hammad Road Avenue

Median Asking Rate (QAR/sq m) Quarterly Change (%)

Source: ValuStrat

5 | Qatar Real Estate Market 1st Quarter 2018 Review RetailSupply

• Palms Mall (6,384 sq m GLA) in Muaither Retail Malls & Shopping Centres was completed, expected to feature 32 retail (‘000 sq m GLA) units, 12 restaurants and an entertainment centre 330 • Tawar Mall was officially launched comprising 91,000 sq m GLA • As of Q1 2018, total supply of organised retail space reached 1.76 million sq m, with 197 415,000 sq m GLA (5 malls) in the pipeline for the remaining quarters • Approximately 100,000 sq m GLA of unorganised retail space (street retail stores, supermarkets and traditional souqs) is projected for completion by end of 2018 • Based on GLA and population figures, 22 shopping centre GLA of Qatar is 667 sq m per 1,000 capita compared to the GCC average of 580 sq m per 1,000 capita 6 161 591 981 30

Neighbourhood Community Regional Super Regional 3k-10k sq m 10k-30k sq m 30k-90k sq m > 90k sq m

Existing Stock Expected Supply (till 2019)

Source: ValuStrat

RetailDemand&Performance

• Local companies accounted for 33% of Distribution of GLA of Shopping e-commerce transactions (QAR 4.7 billion) in Centers/Malls Across Municipalities 2017, as per latest statistics released by Ministry of Transport and Communications 41% • The 2nd edition of Shop Qatar festival resulted in increased footfall in all 13 38% participating super regional and regional malls • Despite an influx of supply, rents and occupancy rates remained stable among prime shopping destinations • Median monthly rents per sq m were QAR 400 for small line shops (less than 100 sq m) 15% and QAR 280 for large line shops (250-500 sq m) • Effective rents were negatively impacted by 3% 3% landlords offering increased incentives to existing tenants, in an effort to maintain occupancy rates in the midst of increased competition from new supply Al Khor Al Wakra Umm Salal Doha Al Rayyan

Source: ValuStrat

www.valustrat.com | 6 HotelSupply

• Total number of hotel rooms and Hotel Room Supply apartments stood at 26,246 keys within 134 2015-2019 establishments (‘000 KEYS) • Approximately 50% of total hotel stock is 2.2 5-star, followed by 4-star (37%) and 3-star (11%) • Total hotel rooms expected to reach 32,645 6.4 by year end, with supply coming from 24 hospitality projects currently under construction (46% are 5-star rated) • Two hotels have been re-branded: M Doha Hotel in West Bay as Crowne Plaza Doha 32.6 West Bay (317 rooms) and Movenpick Al 26.2 Aziziya as Boutique Hotel (140 26.2 22.9 keys) 20.7 2019E 2018E 2017 2015 2016

Hotel & Service Apt Rooms Expected Supply

Source: Qatar Tourism Authority, ValuStrat

HotelPerformance

• Total number of visitors during first two months of 2018 was approximately 347,000, down 40% YoY • In a bid to attract more tourists, Qatar Tourism Authority is planning 130 business events locally and 12 internationally this year • As per QTA, there was 84% increase in visitors from Germany during the first two months of Q1 2018 • Average hotel occupancy retreated 9% YoY, with the exception of 3-star hotels which experienced a rise of 1.5% YoY • Hotel apartments experienced a 9% YoY rise in occupancy • Average Daily Rate (ADR) and Revenue per Available Room (RevPAR) declined 14.5% YoY and 23% YoY, respectively. While hotel apartments reduced by 15.5% YoY and 7% YoY

Distribution of Qatar Visitors by Region Feb 2017-Feb 2018

6% 6% 5% 6% 11% 12% 9% 8% 8% 9% 9% 9% 8%

16% 16% 24% 20% 19% 25% 26% 24% 29% 31% 32% 34% 35%

22% 29% 21% 23% 1% 39% 35% 37% 1% 1% 7% 1% 35% 41% 7% 7% 9% 39% 39% 37% 38%

2% 4% 5% 4% 9% 6% 3% 49% 7% 7% 3% 4% 3% 2% 41% 43% 6% GCC 39% 7% 6% 6% 6% 20% 19% 16% 21% 13% Europe 11% 10% 11% 11% Other Asia inc/Oceania Americas Jul Oct Apr Jan Jun Feb Nov Sep Aug Mar Dec May Feb Other Arab Source: Ministry of Development Planning & Statistics, ValuStrat Other Africa

7 | Qatar Real Estate Market 1st Quarter 2018 Review IndustrialInvestment/Supply

• Driven by growth in food, refined petroleum Industrial Production Index and chemical products, manufacturing Q1 2016 – YTD output rose by 4.5% YoY during first two months of 2018, as per latest Industrial Production Index published by MDPS • Phase 1 of Aramex logistical facility in South of Doha, launched by Al Meera was completed adding 20,000 sq m built up area of warehousing space • Al Asmakh Logistics Park in Bu Fasila and Mustawdaat logistic project in Umm Shahraine were completed, adding approximately 500,000 sq m built up area of warehousing space • A 35,000 sq m temperature-controlled warehouse facility in Al Thumama was Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Jan Feb launched by Milaha 2016 2017 2018 • A logistic park in Al Wakrah, covering an area of 1,583 plots (6.3 million sq m) Mining and Quarrying that encompasses three areas, is projected IPI (2013=100) to be completed by end of 2018 Manufacturing

Source: Ministry of Development Planning & Statistics, ValuStrat IndustrialPerformance

• In line with Ministry of Transport and Industrial Area. QoQ rents for such warehouses Communications aim to capture 35% of in Old Industrial Area reduced by 11%, while trade in the Middle East by 2019, cargo traffic remained stable in New Industrial Area at Hamad Port has gradually increased, • Rents in Sailiya and softened peaking in January since its launch. by 5% QoQ, ranging between QAR 12-40 per Underlining a smooth supply of goods and sq m per month increasing demand for logistical and • Bu Sulba Warehousing Park has achieved 70% warehouse space occupancy within one year • Average asking rents for dry/ambient • Average asking rents for cold storage being warehouses in Doha Industrial area leased on per unit basis was QAR 15,000-20,000 reduced by 6% QoQ and 17% YoY per month in Doha Industrial Area with average • Influx of new warehouses in rent regulated unit size ranging from 50-80 sq m logistical parks negatively impacted rentals of older dry/ambient warehouses in Doha

Warehouses Asking Rental Rates 65 65 (QAR/sq m)

30 25 20 20 15 12

Sailiya Wukair New Industrial Area Old Industrial Area

Rent - Upper Range Rent - Lower Range Source: ValuStrat

www.valustrat.com | 8 18.01.18 Realty market in Qatar sees heightened supply activity across sectors ValuStrat Qatar General Manager Pawel Banach MRICS said ’Amid regional challenges, 2017 ended on a high note with the value of real estate transactions reaching QR32.7 billion, 20 percent higher than 2016. Signs of stability were also experienced in transacted prices of residential properties 07.01.18 Boom in hospitality sector as number of hotels nearly double The ValuStrat report early last year had said that Rotana announced two new hotels, Downtown Arjaan and Plaza Rayhaan to open by 2019. Around 1.94 million visitors from across the globe visited Qatar until October 2017. The growth was the result of steps taken by concerned authorities to promote tourism industry and putting the 23.04.18 20.11.17country in the global tourism map of the world. “ ValuStrat Noted ValuStrat debuts Qatar Residential Index - First quarter shows signs of continued Currently, the Ministry of Justice records transactions in majority of the areas, however, it is not always possible to filter the statistics into usable components. ValuStrat recognised the importance of constructing a representative quarterly price index that captures near real-time pricing, complimenting official transactional data. …’ explains Pawel Banach MRICS-General Manager

9 | Qatar Real Estate Market 1st Quarter 2018 Review ValuStrat Qatar is part of a leading consulting firm providing Advisory, Valuation, Research, Due Diligence, and Divestment services ValuStrat is a firm regulated by RICS across a diverse range of industry sectors since 1977. ValuStrat’s office network provides services to over 800 corporate clients including financial institutions, local corporates, multinationals, governments, SMEs, family businesses and start-ups. Some of the key sectors serviced by ValuStrat’s consulting team include real estate, hospitality, healthcare, education, manufacturing, retail, entertainment, transport, and FMCG. ValuStrat is a Royal Institution of Chartered Surveyors (RICS) Doha Regulated Firm and the first company head + 974 4496 8119 quartered in all of MENA and Asia to be [email protected] accepted into the prestigious RICS Tech Affiliate program.

VPI ValuStrat Price Index

The ValuStrat Price Index for Qatar’s residential sector is constructed to represent the quarterly price change experienced by typical residential units within Qatar. The VPI uses a weighted sample representing influential locations across the city and is built by our expert RICS Registered Valuers.

Research Methodology Every effort has been made to ensure the accuracy of this document. New supply data covers all the eight . Only completed and under construction projects are included. The new supply data does not include announced projects, and projects in design phase. The new supply database does not take into account most private building projects. Prices are calculated from actual transactions extracted from the Ministry of Justice data that have been carefully cleansed to exclude duplicates and outliers. Rental data is derived from carefully chosen listings from predetermined areas and districts for commercial and residential properties.

Copyright © ValuStrat LLC 2018 This document is the property of ValuStrat LLC and must not be reproduced or transmitted in any form or by any means, without the prior written consent of ValuStrat LLC. We welcome your constructive feedback and any corrections that may need to be made to this document. ValuStrat LLC does not accept any liability in negligence or otherwise for any damage suffered by any party resulting from reliance on this document.