OBSERVER Market Overview

After a strong start to 2020, with UAE residential prices and rents showing more stability over the year’s opening months, Contents Covid-19’s economic impact disrupted market performance from Q2 onwards. 4. Economic Overview The rental sector saw broad declines overall, with average After a sharp 2020 apartment rents in and Abu Dhabi falling by 12.4% contraction, the UAE’s and 4.8%, respectively. While villa rents also fell last year, economy is poised for growth the pace of decline eased over H2, supported by a rise in post-lockdown demand for properties with outside space. Annually, Dubai and Abu Dhabi villa rents recorded declines 6. of 5.3% and 3.6%, respectively. Dubai Prices and rents saw broad Sales prices also faced downward pressure, although declines, although agency performance increasingly varied by property type and activity gained pace over H2 location over 2020. Average apartment prices ended the year 9.5% and 3.8% lower in Dubai and Abu Dhabi, respectively. In line with the rental sector, villa prices saw a more moderate 16. fall, declining by 3.6% in Dubai and 3.4% in Abu Dhabi. Abu Dhabi 2020 saw comparatively 2020 witnessed the announcement of several new policy modest declines across initiatives likely to support the UAE’s residential sector, prices and rents, with sales including Dubai Land Department’s ‘fractional title deed’ improving over H2 scheme, Dubai’s new remote working visa and the launch of a new retirement programme. These initiatives should serve to 24. bolster the market, and create new developer opportunities, Northern Emirates moving forward. Key projects made headway, despite an overall challenging While the UAE’s residential sector will likely see greater 2020 stability over 2021, with a broad economic recovery set to buoy market performance, we forecast modest declines in average sales prices and rents overall. Price trends will not 26. be uniform though, and we expect demand for completed UAE Outlook villas, across more-established residential communities, to Residential prices set to see continue over the coming year. greater stability over 2021

OBSERVER - UAE 2020 Review & 2021 Outlook 2 2020Q4 2020Review Economic Overview

UAE Key Economic Indicators (2019 to 2022F) Non-oil private sector expected to 15 rebound over 2021

10

5 Expo 2020 to drive tourist arrivals and 0 bolster market sentiment -5 Annual Change (%)

-10

-15 UAE to vaccinate half the total 2019 2020E 2021F 2022F population by close of Q1 Gross Domestic Product (GDP) Private Consumption Inflation (CPI) Fiscal Balance (% of GDP)

Source: Focus Economics, January 2021 AN ECONOMY POISED FOR GROWTH Key support Expo 2020 to drive tourist measures over 2020 arrivals, boost economic growth

1. Expo 2020, now scheduled to run from October 2021 through The UAE faced a challenging 2020, with the disruption caused IHS Markit Purchasing Managers’ Index (PMI) climbed to 51.2 5% increase in loan-to-value ratios on mortgages for to March 2022, looks set to support a significant increase in by Covid-19, coupled with lower oil prices, hampering economic in December, up from November’s 49.5, marking a 16-month first-time homebuyers, reducing the required down tourist arrivals later this year. While there is still uncertainty performance. The economy is estimated to have contracted by high. The UAE’s hospitality sector also enjoyed clear payment from 25% to 20% across the UAE surrounding travel restrictions internationally, organisers over 6% last year, with hospitality-related sectors especially improvements over Q4, bolstered by growing international forecast around 25 million tourists to visit Expo 2020, affected by social distancing measures and international travel arrivals and a rise in domestic ‘staycations’. providing a welcome boost to Dubai, and the wider UAE’s, restrictions introduced over Q2. 2. hospitality sector after a year of unprecedented challenges. The UAE’s central bank expects the economy to expand by Revised limit on bank real estate exposure, which can The overall economic impact of Covid-19 was, however, eased 2.5% over 2021, driven by increased fiscal spending, a rise in be increased to 30% of a bank's loan portfolio (subject Aside from an economic boost during the Expo itself, the by the proactive policy response from UAE authorities, with the credit availability and employment, in addition to relative real to holding more capital), up from 20% previously Expo’s legacy project, in the form of District 2020, is set to central bank’s Targeted Economic Support Scheme (TESS), first estate market stability. provide longer-term economic benefits. Over 80% of the introduced in March and extended through to June 2021, Expo’s built environment is due to be retained, with the area providing vital private sector support. The speed of the UAE’s vaccination programme, which is set to 3. ultimately set to comprise a community spanning around see half the population vaccinated by the end of March 2021, The UAE Central Bank delivered a comprehensive AED four hectares. The resultant development activity, coupled Economic activity started to gain pace over 2020’s final will also play a key role in supporting private sector growth this 100 billion Targeted Economic Support Scheme to with the continued expansion of the area’s Dubai Exhibition months, building on the modest recovery noted over Q3. The year. assist both individuals and the private sector over 2020 Centre (DEC), is set to bolster GDP growth medium-term.

OBSERVER - UAE 2020 Review & 2021 Outlook 4 OBSERVER - UAE 2020 Review & 2021 Outlook 5 2020Q4 2020Review Dubai Dubai Residential Transactions by Month (2020)

5,000

4,000

3,000

2,000 No of Units 1,000

0 Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec

Sales - O-plan Sales - Completed

Source: REIDIN & Chestertons Research

Despite the annual decline, sales volumes showed signs We expect new off-plan sales launches to be limited in early of recovering over the second half of 2020, and overall 2021, with developers broadly reassessing project plans in the performance varied by property type and location. The total wake of last year’s challenges. We predict, however, that new value of completed property sales, for example, rose by almost launch activity will pick as the year progresses, with developers TRANSACTIONS 14% over 2020, with completed units accounting for almost likely to take advantage of Expo 2020 to showcase new 70% of total transaction value, and around 60% of unit sales projects. GAINED PACE OVER H2 volume, over the second half of last year. 2020, SPURRED BY COMPLETED With residential prices ever-more stable, HOT TOPIC PROPERTY SALES has the market bottomed out?

The final quarter of 2020 saw the pace of price declines across Dubai residential property ease, with average prices within several more-established villa communities showing minor uplifts. The residential sector’s performance also looks set to be supported this After a strong start to 2020, the economic impact of Covid-19, interest in completed villa units over the final months of last year by improvements in the wider economy, with a recovery across the non-oil private sector due to increase employment and, in coupled with continued unit handovers, affected Dubai year. The latter lead to a slight uplift in average villa prices, turn, household incomes. The latter should also serve to support rents, which declined at a sharper rate than prices over 2020, and residential sector performance from Q2 onwards. Dubai across several more-established communities, over Q4. will be crucial in underpinning residential investment demand. apartment prices fell by 9.5% over 2020, with rents declining by an average of 12.4%. Villa prices recorded a more moderate The total value of Dubai residential sales declined by 13.8% While we expect improvements in the overall economy to translate to greater stability in residential performance, the sector will decline of 3.6%, with rents seeing an annual 5.3% fall. over 2020, standing at AED 55.46 billion, compared to the likely see a modest decline in market-wide average prices over 2021, with ongoing unit completions set to place downward pressure AED 64.34 billion achieved over 2019. The annual drop largely on values. Performance will vary between property type and community though, and end-user demand will likely continue to buoy The villa sector’s relative strength was primarily due to increased reflects the sharp fall in agency activity noted over Q2, where villa prices across popular locations this year. demand over the second half of 2020, with tenants seeking total sales value fell by over 36% compared to Q2 2019. more open space following lockdown, along with strong sales

OBSERVER - UAE 2020 Review & 2021 Outlook 6 OBSERVER - UAE 2020 Review & 2021 Outlook 7 5% 5%

11% 2020Q4 2020Review 2020 Transacations Dashboard 47%

32%

Apartment Sales by Unit Type (2020) Villa Sales by Unit Type (2020)

5% 10% 17% Apartment prices continued to fall, although the rate of 25% decline eased over Q4 24%

49% The largest annual price declines in the apartment segment Agency activity gained pace over Q4, with average apartment 29% were witnessed in , with prices falling by prices recording declines of just 1.2% from Q3, compared to an 13.5% annually. Average prices reached AED 498 per sq ft, average 3.4% drop the previous quarter, with a significant 41% down from AED 576 in Q4 2019. Dubai Sports City and Motor minority of locations seeing declines of below 1% quarter-on- City also saw comparatively sharp declines year-on-year (y-o-y), quarter (q-o-q). falling by 13.3% and 12.8%, respectively. Prices averaged AED Studio 1BR 2BR 3BR (and above) 2BR (and below) 3BR 4BR 5BR (and above) 600 per sq ft in Dubai Sports City, down from AED 692 in Q4 Locations witnessing more moderate quarterly declines 2019, with prices in Motor City falling to AED 510 per sq ft, included Downtown and The Views, which both saw falls of just down from AED 585. 0.2%, respectively, over Q4.

Locations witnessing more moderate declines over 2020 Dubai Sports City, Dubai Silicon Oasis and International City 2020 Sales Transactions - Completed Units included and , where prices fell by saw the sharpest quarterly price falls, with average apartment just 3.7% and 4.9%, respectively. Average apartment prices prices declining by 3.3%, 2.8% and 2.4%, respectively. Apartments - Top Communities by Total Transaction Volume (2020) Villas - Top Communities by Total Transaction Volume (2020) across Downtown also performed comparatively well, declining by 6.6% from Q4 2019.

Arjan Arjan Mudon Mudon

Jumeirah Lake TowersJumeirah Lake Towers Golf EstatesJumeirah Golf Estates

Jumeirah Village JumeirahCircle Village Circle The Villa The Villa

Bluewaters IslandBluewaters Island Jumeirah Bay IslandJumeirah Bay Island

Town Square Town Square Damac Hills (Akoya)Damac Hills (Akoya)

Jumeirah Beach ResidenceJumeirahArjan Beach ResidenceArjan Arabian RanchesMudonArabian RanchesMudon

JumeirahPalm Lake Jumeirah TowersJumeirahPalm Lake Jumeirah Towers JumeirahEmirates Golf EstatesJumeirah Hills Emirates Golf Estates Hills

JumeirahDowntown Village Dubai JumeirahCircleDowntown Village Dubai Circle Palm JumeirahThe Villa Palm JumeirahThe Villa

BluewatersBusiness Island BayBluewatersBusiness Island Bay JumeirahDistrict Bay Island OneJumeirahDistrict Bay Island One Dubai Hills EstateDubai Hills Estate DubaiTown MarinaSquare DubaiTown MarinaSquare Damac Hills (Akoya)Damac Hills (Akoya)

Jumeirah Beach ResidenceJumeirah Beach- Residence200 400- 200600 400800 6001,000 8001,200 1,0001,400 1,2001,600 1,4001,800 1,600 1,800 Arabian RanchesArabian- Ranches500- 1,000500 1,5001,000 2,0001,500 2,5002,000 2,500 Villas outperformed the residential average, with late 2020 Palm Jumeirah Palm Jumeirah Emirates Hills No. of Units No. of Units No. of Units No. of Units Downtown DubaiDowntown Dubai Palm Jumeirah Palm Jumeirah seeing price uplifts across several communities Business Bay Business Bay District One District One

Dubai Marina Dubai Marina Dubai Hills EstateDubai Hills Estate

- 200 400- 200600 400800 6001,000 8001,200 1,0001,400 1,2001,600 1,4001,800 1,600 1,800 - 500- 1,000500 1,5001,000 2,0001,500 2,5002,000 2,500 Average villa prices faired comparatively well over 2020, with Villa prices across several communities saw a slight uptick in 2020 SalesJumeirah First TransactionsJumeirah First No. of- Units Off-planNo. of Units Units Arabian Ranches Arabian(Phase 2) Ranches (Phase 2) No. of Units No. of Units

Palm Jumeirah Palm Jumeirah Reem Reem the overall annual decline eased by the strength of sales the average price achieved over Q4, with strong resale demand ApartmentsSobha - Top Hartland CommunitiesSobha Hartland by Total Transaction Value (2020) VillasTown -Square Top CommunitiesTown Square by Total Transaction Value (2020) performance across more established villa communities in late from end-users buoying values. Jumeirah Beach ResidenceJumeirah Beach Residence Serena Serena

District One District One Dubai Hills EstateDubai Hills Estate 2020. Overall, we estimate that villa prices fell by just 3.6%

JumeirahJumeirah Village JumeirahCircle First Jumeirah Village Circle First Arabian RanchesJumeirah Arabian(Phase First 2) RanchesJumeirah (Phase First 2) y-o-y. Average prices in Palm Jumeirah reached AED 1,870 per sq ft PalmBusiness Jumeirah Bay PalmBusiness Jumeirah Bay Emaar SouthReem Emaar SouthReem over Q4, up from AED 1,860 the previous quarter and also SobhaDubai Hartland Harbour SobhaDubai Hartland Harbour TownVillanova Square TownVillanova Square

The LagoonsJumeirah (DubaiThe Beach CreekLagoons ResidenceJumeirah Harbour) (Dubai Beach Creek Residence Harbour) Arabian Ranches Arabian(PhaseSerena 3) Ranches (PhaseSerena 3) Annually, Palm Jumeirah and The Meadows/The Springs saw above the average achieved over the first half of last year. DowntownDistrict Dubai OneDowntownDistrict Dubai One DubaiTilal Hills Al Estate GhafDubaiTilal Hills Al Estate Ghaf the lowest price falls, with average prices declining by just 2.1% Jumeirah Park enjoyed a strong final quarter, with average Jumeirah Village JumeirahCircle - Village Circle500 - 1,000 500 1,5001,000 2,0001,500 2,5002,000 3,0002,500 3,5003,000 3,500 Jumeirah First - Jumeirah200 First - 400 200 600 400 800 600 1,000800 1,2001,000 1,4001,200 1,400 Business Bay Business Bay Emaar South Emaar South and 2.7%, respectively. Values across Jumeirah Park and The prices standing at AED 725 per sq ft, a modest rise of 0.7% AED Million AED Million AED Million AED Million Dubai Harbour Dubai Harbour Villanova Villanova Lakes saw the highest annual drop, across benchmarked from AED 720 in Q3 2020. The Lagoons (DubaiThe CreekLagoons Harbour) (Dubai Creek Harbour) Arabian Ranches Arabian(Phase 3) Ranches (Phase 3) locations, falling by 5.2% and 4.9%, respectively, from Q4 2019. Downtown DubaiDowntown Dubai Tilal Al Ghaf Tilal Al Ghaf

- 500 - 1,000 500 1,5001,000 2,0001,500 2,5002,000 3,0002,500 3,5003,000 3,500 - 200 - 400 200 600 400 800 600 1,000800 1,2001,000 1,4001,200 1,400

AED Million AED Million AED Million AED Million

Source: REIDIN & Chestertons Research

OBSERVER - UAE 2020 Review & 2021 Outlook 8 OBSERVER - UAE 2020 Review & 2021 Outlook 9 RESIDENTIAL 2020Q4 2020Review Sales Prices

The World The Palm Deira Arabian Gulf The Palm Dubai Waterfront -4.9% Y-o-Y -0.5% Change -0.9% -9.1% Q-o-Q Q-o-Q Y-o-Y Change Change Change 0.8% AED980 Q-o-Q DUBAI AED740 Change MARINA AED1,874 PALM Palm Jumeirah JUMEIRAH 0.0% 0.6% Y-o-Y -2.7% Q-o-Q Change Y-o-Y Change Dubai Change Maritime Bluewater -4.4% City AED800 Islands Y-o-Y THE MEADOWS Jumeirah Beach Change /SPRINGS Residence -0.2% -13.5% -1.4% -0.6% Q-o-Q Q-o-Q Q-o-Q Y-o-Y Dubai Marina Dubai Pearl Change Change Change AED810 Change Jumeirah Satwa Media Internet Burjuman Hamriya City THE GREENS City Badaa Centre JLT Al Wasl Deira Ibn Battuta Jumeirah Sufouh Safa AED1,280 Wuheida AED498 Mall The Greens Manara Umm Mamzar Gardens Heights DOWNTOWN Hurair Jebel Ali Freezone DISCOVERY Emirates TECOM DIFC Trade GARDENS Meadows Hills Centre Karama Jebel Ali -0.2% Deira City Discovery /Springs Mall of the Emirates Dubai Mall Centre Downtown Village The Views Q-o-Q Oud Gardens Jumeirah Change Zabeel Metha Jebel Ali Islands The Lakes -6.6% Barsha Y-o-Y Al Nahda Jumeirah Business Bay Change 0.7% Park The Springs Barsha AED1,020 -2.7% Abu Dhabi Q-o-Q Garhoud Sharjah Y-o-Y Airport Change THE VIEWS -6.3% Al Khail Change Free Zone AED970 Y-o-Y Gate Culture Twar Change Village Qusais -1.7% THE LAKES Technology Park AED973 AED725 Q-o-Q Jumeirah -2.3% JUMEIRAH Green Change Village Circle Y-o-Y BUSINESS BAY Umm Community Jumeirah PARK Golf International -0.5% Change Ramool Estates Media Dubai Q-o-Q Production Change Meydan Dubai Investment AEDZone(IMPZ)570 0.3% City Festival City -2.0% Park -1.9% JUMEIRAH Q-o-Q Q-o-Q Y-o-Y -8.5% Change VILLAGE Dubiotech Change Change Y-o-Y CIRCLE Sports Nadd Dubai Change City Shamma World Motor Central -3.3% City AED510 -12.8% Nadd Q-o-Q MOTOR CITY -2.8% Change Y-o-Y Al Hammar Change Q-o-Q City Change Centre Arabian Al Barari -11.5% Ranches -2.4% Mirdif AED600 Living Legends Q-o-Q Y-o-Y Change Change Mizar SPORTS CITY -0.8% -8.6% AED525 Ghoroob Q-o-Q Y-o-Y Al Waha DUBAI SILICON Warqaa Change Change Community AED790 OASIS AED415 Shorooq ARABIAN Dragon Mart INTERNATIONAL -13.3% Layan RANCHES -2.2% Y-o-Y -11.2% International CITY AED640 Y-o-Y City Change Change Y-o-Y Khwaneej Dubailand Change Dubai 0.4% Silicon Oasis Q-o-Q Awir Change Academic City

Figures in AED/Sq Ft Apartment Sales Q4 2020 Villa Sales Q4 2020 Q-o-Q Change Y-o-Y Change Source: Chestertons Research

OBSERVER - UAE 2020 Review & 2021 Outlook 10 OBSERVER - UAE 2020 Review & 2021 Outlook 11 400,000 2% Apartment rents saw broad declines 2020Q4 2020Review 350,000 0% PERCENTAGE CHANGE

over 300,000 2020 -1.6% -2.2% -2% 250,000 -3.3% -4% 200,000 -5.2% -5.5% -4.7% -6.1% -6% Dubai apartment rents saw continued declines over last year, and 16.2%, respectively, with Dubai Motor City also seeing a 150,000 -6.9% withAED PER UNIT ANNUM the economic impact of Covid-19 continuing to place comparatively sharp 15.9% fall y-o-y. -7.5% -8% downward 100,00 0pressure on rates. Average apartment rents fell by 4.1% over Q4, an increase in the 3.6% fall seen over Q3, DIFC and Dubai Silicon Oasis both saw annual declines of contributing 50,000 an overall 12.4% annual decline. -10.1% below 10%, with average rents falling by 8.8% and 6.9%, -10% respectively. All other locations covered saw annual declines in Studio units - saw the sharpest falls over 2020, declining by an excess of 10%. -12% average of 14.8% y-o-y.Ara bOneian and two-bedroom unitsThe fell by an The The Lakes Victory Al Furjan JVT Jumeirah Jumeirah Palm Ranches Springs Meadows Heights Islands Golf Estates Jumeirah average of 13.2% and 11.8%, respectively, with three-bedroom While we expect the pace of rental declines to ease over 2021, units seeing annual declines of 9.2%. the volume of new apartment units forecast to complete will Source: Chestertons Research Studio 1BR likely2 BdriveR further 3reductionsBR Y- ino -Yrents Cha near-term.nge (RHS) On an annual basis, average rents across The Views and Discovery Gardens saw the highest average declines, at 16.3%

Apartments - Average Rents by District/Unit Type and Annual Change

200,000 0%

180,000 -2%

160,000 -4% PERCENTAGE CHANGE 140,000 -6% -6.9% 120,000 -8% -8.8% 100,000 -10% -10.4% -10.5% -11.3% -11.5% 80,000 -12.2% -12% -13.7% -13.0% -12.9% 60,000 -13.8% -14% AED PER UNIT ANNUM 40,000 -16.2% -16.3% -15.9% -16% 20,000 -18%

- -20% Business Bay DIFC Discovery Marina Dubai Dubai Dubailand International JLT JVC The Greens The Views Dubai Gardens Dubai Silicon Oasis Sports City City Motor City

Source: Chestertons Research Studio 1BR 2BR 3BR Y-o-Y Change (RHS)

OBSERVER - UAE 2020 Review & 2021 Outlook 12 OBSERVER - UAE 2020 Review & 2021 Outlook 13 Villa rents buoyed by post-lockdown demand 2020Q4 2020Review over H2 2020

Villa rents proved more resilient, falling by just 0.2% and 5.3% The Lakes, Victory Heights and Arabian Ranches all saw annual on a quarterly and annual basis, respectively. The more declines in excess of 5%. moderate decline in villa rents is mainly due to a rise in tenant interest in landed property, with agents reporting a clear uptick While all areas saw annual falls, Q4 witnessed relative stability in villa enquiries since the easing of social distancing restrictions in average villa rents, with the majority of locations seeing in May. rates hold steady, and a minority seeing modest improvements, leading to an overall quarterly drop of just 0.2%. Palm Jumeirah, Mirroring the trend of apartments, smaller villa units saw the Jumeirah Golf Estates and Arabian Ranches all recorded slight steepest average declines in rents. Two and three-bedroom uplifts in average rents over Q4. Palm Jumeirah saw rents rise villas saw annual rates fall by 9.8% and 6.2%, respectively, by 0.9%, with Jumeirah Golf Estates and Arabian Ranches compared to falls of 4.3% across both four and five-bedroom seeing upticks of 0.4%, respectively, q-o-q. units. With work-from-home policies continuing across the private On an annual basis, The Springs, Al Furjan and The Meadows sector, even if on a part-time basis, we expect villa rents to witnessed the sharpest rental rate falls, with rents decreasing continue to outperform the wider residential average over the by 10.1%, 7.5% and 6.9%, respectively, compared to Q4 2019. coming year.

Villas - Average Rents by District/Unit Type and Quarterly Change

400,000 2%

350,000 0% PERCENTAGE CHANGE

300,000 -1.6% -2.2% -2% 250,000 -3.3% -4% 200,000 -5.2% -5.5% -4.7% -6.1% -6% 150,000 -6.9% AED PER UNIT ANNUM -7.5% -8% 100,000

50,000 -10.1% -10%

- -12% Arabian The The The Lakes Victory Al Furjan JVT Jumeirah Jumeirah Palm Ranches Springs Meadows Heights Islands Golf Estates Jumeirah

Source: Chestertons Research Studio 1BR 2BR 3BR Y-o-Y Change (RHS)

OBSERVER - UAE 2020 Review & 2021 Outlook 14 OBSERVER - UAE 2020 Review & 2021 Outlook 15

200,000 0%

180,000 -2%

160,000 -4% PERCENTAGE CHANGE 140,000 -6% -6.9% 120,000 -8% -8.8% 100,000 -10% -10.4% -10.5% -11.3% -11.5% 80,000 -12.2% -12% -13.7% -13.0% -12.9% 60,000 -13.8% -14% AED PER UNIT ANNUM 40,000 -16.2% -16.3% -15.9% -16% 20,000 -18%

- -20% 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

Source: Chestertons Research Studio 1BR 2BR 3BR Y-o-Y Change (RHS) Abu Dhabi Average Apartment Sales Price (Q1 2017 to Q4 2020)

1,700 2020Q4 2020Review Abu Dhabi 1,500 1,300

1,100

900 AED PER SQ FT

700

500 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 2017 2018 2019 2020

Al Raha Beach Al Ghadeer Al Reef Al Reem Island Saadiyat Island

Source: Chestertons Research

Apartment Prices Villa Prices

Al Ghadeer saw the highest apartment price declines annually, On an annual basis, Al Raha Beach Area saw the highest price with average prices falling by 6.2%, from AED 725 to AED 680 fall, with prices declining from AED 1,100 per sq ft in Q4 2019 per sq ft. Al Reem Island saw the second-highest fall in average to AED 1,050 last quarter, a drop of 4.5%. All other locations prices, reaching AED 920 from AED 965 per sq ft over Q4 2019, studied saw annual price declines of below 4%. representing a 4.7% decline. Al Ghadeer and Al Reef saw the most moderate yearly price ABU DHABI SAW Saadiyat Island was the strongest performing location over falls, at 2.9% and 2.4%, respectively. Average villa prices in Al 2020, with average prices falling by just 1.8%, from AED 1,400 Ghadeer stood at AED 675 per sq ft last quarter, with prices in COMPARATIVELY MODEST in Q4 2019 to AED 1,375 per sq ft last quarter. Saadiyat Island Al Reef averaging AED 600, down from AED 695 and AED 615 saw a minor uplift in average prices over Q3, contributing to per sq ft, respectively in Q4 2019. the moderate rate of annual decline. DECLINES IN 2020 Average villa prices enjoyed comparative stability over the final Average apartment prices declined by 0.7% across the capital quarter of 2020, with price movements remaining within a q-o-q, a minor increase in the 0.6% fall seen over the previous bracket of 0% to -0.7%, with the majority of locations studied quarter. All areas saw quarterly price changes within a bracket seeing prices hold steady q-o-q. Abu Dhabi saw comparatively modest declines across both Developers continued to support sales through various of 0 % to -1.4%. residential values and rents in 2020, with the capital’s residential incentives and promotions, including extended post-handover sector supported by increased agency activity over the second payment plans and fee waivers, in addition to partnering with half of last year. Average apartment prices fell by 3.8% over banks to provide customers access to preferential mortgage 2020, with rents seeing an overall decline of 4.8%. Abu Dhabi’s rates. villa sector saw more moderate declines, seeing annual falls of HOT TOPIC Fee waivers and developer incentives supported transactions 3.4% and 3.6% across prices and rents, respectively. Overall, despite Covid-19’s impact on market performance, 2020 saw greater stability across both sales prices and rents Abu Dhabi's villa sector outperformed apartments over the than over the preceding three years. We expect Abu Dhabi's While the economic impact of Covid-19 challenged 2020 sales performance, the proactive policy response from both UAE and second half of 2020, with prices showing relative stability, residential sector to enjoy a comparatively strong 2021, Abu Dhabi authorities, along with the broad range of buyer incentives offered by developers, bolstered transaction volumes over and rents seeing a reduced rate of decline. Agents reported although upcoming unit completions are likely to drive modest the second half of last year. a rise in demand for resale villas in the final months of 2020, declines in average apartment prices and rents. with buyers looking to take advantage of the suspension of The 5% increase in the loan-to-value ratio applicable for first-time buyers, introduced by the UAE’s central bank, coupled with the registration fees, which expired at year’s end. cancellation of Abu Dhabi Municipality fees, equivalent to 2% of a property’s purchase price, provided welcome support. 2020’s closing months saw an uptick in sales as buyers looked to complete transactions ahead of the latter’s expiry.

Developers also responded to a more challenging operating environment by introducing a range of incentives. 2020 promotions included waiving service charges for up to three years post-handover and offering cash rebates on off-plan purchases. Aldar OBSERVER - UAE 2020 Review & 2021 Outlook 16 OBSERVER - UAE 2020 Review & 2021 Outlook 17 Properties further announced partnerships with several Abu Dhabi-based banks, providing buyers with access to preferential mortgage rates and reduced administrative fees. RESIDENTIAL 2020Q4 2020Review Sales Prices

-0.4% -1.8% Q-o-Q Y-o-Y Change Change AED1,375 SAADIYAT Halat Al -1.1% ISLAND Bahrani Q-o-Q Change

Al Rafiq AED920 Saadiyat Ras Ghurab Al Weheil Island Island Island AL REEM Al Reem Qassabi -4.7% ISLAND Island Al Aryam Y-o-Y Change Al Jubail Island Ba Al Umm Yifenah Ghaylam Island Island 0.0% Al Futaisi Q-o-Q Dubai Change

Zayed AED1,225 Sports AL RAHA City BEACH -2.0% Y-o-Y -0.7% 0.0% Change -2.9% Q-o-Q Q-o-Q Y-o-Y Change Change Change Al Raha 0.0% Samaliyah Beach Q-o-Q Island Change AED675 AED675 Yas Island AL GHADEER AL RAHA -3.6% GARDENS AED1,050 Y-o-Y Al Raha AL RAHA Change Gardens BEACH -4.5% Al Reef Y-o-Y -6.2% Khalifa City Change Y-o-Y Al Ghadeer ICAD II Change Masdar City Abu Dhabi International AED680 Airport AED730 AED830 AL GHADEER AL REEF KHALIFA -4.6% -3.5% CITY Y-o-Y Y-o-Y -1.4% Change -0.7% Change AED600 Q-o-Q Q-o-Q Change 0.0% AL REEF Change Q-o-Q -2.4% Change Y-o-Y Change 0.0% Q-o-Q Change

Figures in AED/Sq Ft Apartment Sales Q4 2020 Villa Sales Q4 2020 Q-o-Q Change Y-o-Y Change Source: Chestertons Research

OBSERVER - UAE 2020 Review & 2021 Outlook 18 OBSERVER - UAE 2020 Review & 2021 Outlook 19 Apartment rents continued to decline, although at 2020Q4 2020Review a comparatively modest rate

Abu Dhabi landlords demonstrated flexibility on payment Apartment rents across Corniche Road, Al Khalidiya and terms to support tenants over the second half of 2020. Multiple Mohammed bin Zayed City performed comparatively well rental cheques were widely expected by tenants, with payment annually, recording average declines of 1.2%, 1.8% and 2.9%, through four to eight cheques becoming increasingly common. respectively. Landlords continued to offer promotional rent-free periods and increasingly listed units with the option of shorter lease lengths. Rents enjoyed relative stability over Q4, declining by just 0.6% The flexibility shown by landlords on lease terms was key to on average. Several locations saw rents holds steady, with Al supporting the rental sector last year. Ghadeer and Muroor area the only locations see declines of above 1%, falling by 3.3% and 1.1%, respectively, q-o-q. The highest average rental declines for apartments over 2020 were seen in Al Ghadeer, where average rents decreased by We expect apartment rents to continue to see greater stability 10.2% from Q4 2019, driven by a decline in rents across studio over 2021, with improvements across the wider economy likely and one-bedroom units. Rents for studio apartments declined to shore up demand, although ongoing unit handovers will by 10% and one-bedroom units by 12.9%, averaging AED likely drive moderate declines on average. 27,000 and AED 37,000 per annum, respectively, over Q4.

Muroor Area saw the second-highest annual declines, with average rents falling by 7%, with Al Reem Island seeing a 6.4% fall.

Apartments − Average Rents by Location/Unit Type and Annual Change

180,000 0%

160,000 -1.2% PE R -1.8% -2% CEN T 140,000 -2.9% -3.8% 120,000 -4% A -4.5% GE CHANGE 100,000 -5.1% -5.1% -6% -6.4% 80,000 -7.0% 60,000 -8% AED PER UNIT ANNUM 40,000 -10.2% -10% 20,000 0 -12% Al Raha Beach Area Al Ghadeer Al Reef Al Reem Island Saadiyat Island Khalifa City Al Khalidiya MBZ Corniche Road Muroor Area

Source: Chestertons Research Studio 1BR 2BR 3BR Y-o-Y Change (RHS)

OBSERVER - UAE 2020 Review & 2021 Outlook 20 OBSERVER - UAE 2020 Review & 2021 Outlook 21

300,000 0%

-0.8% -1.0% -1% PE R 250,000

-2% CEN T 200,000 -2.6% -3% -3.3% -3.4% A

-4% GE CHANGE 150,000 -5% 100,000 -6% -6.8% -7%

AED PER UNIT ANNUM 50,000 -7.7% -8% 0 -9% Al Ghadeer Al Reef Al Raha Khalifa City Al Reem Al Khalidiya MBZ Gardens Island

Source: Chestertons Research Studio 4BR 5BR Y-o-Y Change (RHS) Villa rents saw greater stability over H2, reducing 2020Q4 2020Review the overall annual fall

Average villa rents declined by 3.6% over 2020, with Al Khalidiya Al Raha Gardens, Khalifa City and Al Reef performed 180,000 0% and Al Ghadeer the only locations to see falls in excess of 5%. comparatively well annually, declining by just 0.8%, 1% and

The 160,000more moderate decline in villa rents is, in part, due to a rise 2.6%, respectively. -1.2% PE R -1.8% -2%

in tenant interest in landed property, with agents reporting a CEN T 140,000 clear uptick in villa enquiries over the second half of 2020. Villa rents were largely stable over Q4, seeing an overall decline -2.9% -3.8% 120,000 of just 0.4% q-o-q. The only two locations to record quarterly -4% A -4.5% GE CHANGE Average rents in Al Khalidiya fell 7.7% annually, largely driven declines were Al Khalidiya and Mohammed bin Zayed City, 100,000 -5.1% -5.1% by a decline in average rents across four and five-bedroom which saw average falls of 2% and 0.8%, respectively. -6% units. Average rents in Al Ghadeer fell by 6.8% annually, -6.4% 80,000 -7.0% primarily a result of declines in average rents across three- We expect villa rents to see further stability over 2021, with 60,000 -8% bedroomAED PER UNIT ANNUM units, which fell to AED 95,000 per annum last limited scheduled completions, coupled with sustained tenant quarter 40,000 from AED 105,000 in Q4 2019. demand, set to shore up performance. -10.2% -10% 20,000 0 -12% Al Raha Beach Area Al Ghadeer Al Reef Al Reem Island Saadiyat Island Khalifa City Al Khalidiya MBZ Corniche Road Muroor Area

Source: Chestertons Research Studio 1BR 2BR 3BR Y-o-Y Change (RHS)

Villas − Average Rents by Location/Unit Type and Annual Change

300,000 0% HOT TOPIC Strong tenant demand and limited supply to support villa rents -0.8% -1.0% -1% PE R 250,000

-2% CEN T 200,000 -2.6% -3% Abu Dhabi villas enjoyed an above-average performance over H2 2020, with ongoing tenant demand for properties with outside -3.3% -3.4% A space supporting rents post-lockdown. -4% GE CHANGE 150,000 -5% With private sector companies continuing to embrace work-from-home policies, including on a part-time basis, we expect to see 100,000 -6% requirements for larger, more open residential space continuing into 2021. -6.8% -7%

AED PER UNIT ANNUM 50,000 -7.7% -8% While villas may see a greater share of market demand moving forward, they represent a comparatively small proportion of 0 -9% upcoming Abu Dhabi residential supply, accounting for just 15% of planned unit completions through to 2023. This will likely serve Al Ghadeer Al Reef Al Raha Khalifa City Al Reem Al Khalidiya MBZ to support villa market performance, underpinning both rental rates and sales prices medium-term. Gardens Island

Source: Chestertons Research Studio 4BR 5BR Y-o-Y Change (RHS)

OBSERVER - UAE 2020 Review & 2021 Outlook 22 OBSERVER - UAE 2020 Review & 2021 Outlook 23 2020Q4 2020Review Northern Emirates Northern Emirates Average Apartment Rents (Q4 2020)

45,000 0%

40,000 -2% 35,000 PE R -4% 30,000 CEN T

25,000 -6% A GE CHANGE

20,000 -7.5% -6.2% -8% 15,000 -10% AED PER UNIT ANNUM 10,000 -12% -12.4% -11.8% -12% 5,000

0 -14% Ajman Fujairah Ras Al Khaimah Sharjah Umm Al Quwain

Source: Chestertons Research Studio 1BR 2BR 3BR Y-o-Y Change (RHS)

Source: Chestertons Research SALES PRICES AND RENTS scheduled to handover in early 2021. Around 3,500 units are also showed an increase in net profit, at AED 41m, compared SAW BROAD DECLINES, ALTHOUGH expected to complete over the coming year, with the to AED 34m for the same period in 2019, with the company development ultimately due to house over 70,000 residents citing high sales volumes of residential units within its Marbella upon completion in 2028. Arada reported sales of 2,337 units Villas scheme. KEY PROJECTS MADE HEADWAY over 2020, totalling AED 1.75bn, representing a 35% annual rise in sales revenue. While we expect the Northern Emirates to see comparative stability in residential sales prices and rents over 2021, driven In line with the wider UAE real estate market, residential On average, smaller apartments across the Northern Emirates RAK Properties also reported a comparatively strong by improvements in the wider economy, a modest decline in property across the Northern Emirates faced a testing year, saw a sharper decline in rents, with studio and one-bedroom performance last year, with its Q3 2020 revenue rising to AED Dubai residential performance will likely have a corresponding with Covid-19’s economic impact driving down sales prices and units seeing average falls of 11.3% and 11.9%, respectively. 178m, up from AED 136m in Q3 2019. The reported figures impact overall. rents. Residential sector performance across the Northern This compares to average declines of 7.1% and 9.6%, across Emirates is, to varying extents, linked to Dubai, especially in two and three-bedroom units, respectively. Sharjah and Ajman, which have increasingly provided more cost-effective accommodation options for Dubai-based Despite challenging market conditions, large-scale projects workers in recent years. continued to make headway across the Northern Emirates. Early 2020 saw the completion of Mohamed bin Zayed HOT TOPIC Retirement visa creates opportunities for Northern Emirates Overall, we estimate that Northern Emirates residential Residential City’s housing component in Fujairah. The apartment rents fell by just below 10% in 2020, with Sharjah development comprises 583 five-bedroom, 417 four-bedroom and Ajman seeing the sharpest annual declines, at 12.4% and and 100 three-bedroom villas across a 2.2 sq km site. Located 2020 saw UAE authorities announce a new retirement programme, with a renewable five-year visa being offered to expatriates, 12%, respectively. in the Al Hail area, 3km south of Fujairah airport, the project aged over 55, providing they have either a minimum monthly income of AED 20,000, AED 1m in savings or a property worth at will ultimately include schools, mosques and public parks in least AED 2m. Although the programme will initially focus on existing Dubai-based expatriates, the scheme ultimately aims to Average apartment rents across Umm Al Quwain fell by 11.8% addition to supporting commercial components. attract new international retirees to the UAE. last year, with Ras Al Khaimah and Fujairah seeing more moderate declines of 7.5% and 6.2%, respectively, y-o-y. Q4 saw completion near for the first wave of residential units at While the UAE retiree market has been traditionally limited by expatriates having their residency status tied to employment, the Sharjah’s Aljada development, with three apartment buildings new programme looks set to create a new demand base for retirement-focused residential developments, supported by ready access to leisure and healthcare facilities, medium-term.

We expect that Northern Emirates locations, especially Ras Al Khaimah and Fujairah, will be well placed to accommodate OBSERVER - UAE 2020 Review & 2021 Outlook 24 retirement-focusedOBSERVER - UAE 2020 communities, Review & 2021 Outlookwith their picturesque settings, relative affordability and proximity to Dubai likely to enhance 25 development viability. 2020Q4 2020Review Outlook

UAE’S RESIDENTIAL SECTOR New launches to remain limited, although likely to pick up 2020 policy reforms to support market, create new TO SEE GREATER in late 2021 opportunities

2020 saw a significant fall in the volume of projects launched Last year saw a wave of new policies introduced across the STABILITY OVER 2021 for sale off-plan, with developers revisiting timelines in the UAE, with various initiatives aimed at supporting real estate context of a more challenging sales environment. We expect demand and positioning the UAE as an ever-more attractive new launch activity to remain subdued over the first half of destination to live and work. Of particular note were the UAE’s 2021, with developers likely to focus on clearing built but retirement visa initiative and the introduction of a new remote Residential prices to see greater stability, although Continued tenant demand and attractive prices to unsold inventory near-term. working visa. Both the aforementioned should serve to create moderate declines expected support villa sector new demand bases, with the latter likely to benefit short-stay It is likely, however, that developers will look to introduce new accommodation and the retirement visa set to support broader While we expect the UAE’s residential sector to see more stable Villa demand supported the UAE’s residential sector over the projects as market sentiment improves, with Expo 2020 set to residential demand, and create new retirement-focused prices and rents in 2021, we forecast moderate declines on second half of 2020, with both tenants and buyers showing a provide a backdrop to showcase new projects later in the year. development opportunities across the UAE, medium-term. average. Although a broad economic recovery over the coming general preference for larger, more open space post-lockdown. year should serve to support both tenant and buyer demand, the volume of new supply across Dubai and Abu Dhabi, with We expect demand for villas, across high-end Dubai and Abu around 50,000 and 14,000 residential units scheduled for Dhabi residential locations, to continue over the coming year, completion, respectively, will likely challenge overall as work-from-home policies form a more permanent part of performance. Price trends will increasingly vary by location and private-sector employment. Comparatively attractive pricing, property type though, and we expect comparatively healthy along with competitive mortgage rates, will likely further serve demand for completed properties, across more-established to sustain buyer interest over 2021. residential communities, to continue over the coming year.

OBSERVER - UAE 2020 Review & 2021 Outlook 26 OBSERVER - UAE 2020 Review & 2021 Outlook 27 2020Q4 2020Review About Us Core Services

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