Q2 Market Overview The UAE saw a notable increase in residential sales over Q2, with renewed market confidence, and improvements in the wider economy, buoying demand. Contents Dubai’s total residential transaction value recorded a near 50% rise quarter-on-quarter (q-o-q), reaching AED 31.02 billion, up 4. from AED 20.77 billion in Q1, marking a seven-year high. Abu Economy Dhabi developers reported strong sales across off-plan schemes Key indicators point to overall over Q2, with the quarter further witnessing the announcement improvements of new project pipelines. Villas across Dubai and Abu Dhabi saw sustained interest, with average Dubai prices rising by 5.7% q-o-q. Abu Dhabi villa prices 6. also rose over Q2, albeit by a more marginal 0.3%, following a Dubai 2.2% rise the previous quarter. Villa prices across both emirates 6. Overview surpassed their Q2 2020 averages, up by 9.1% in Dubai and 2.2% Residential sales reached seven-year in Abu Dhabi, year-on-year (y-o-y). high 8. Prices Villa rents also fared comparatively well over Q2, with continued Villas saw notable uplifts; apartments tenant demand for larger accommodation and outside space saw modest improvements supporting uplifts across both emirates. 12. Rents Villas saw quarterly rises; apartments Apartment values increased moderately on average, with prices recorded marginal declines rising by 0.8% in Dubai and 0.5% in Abu Dhabi, q-o-q. Performance continued to vary by location, however, with more established residential areas typically seeing modest uplifts and secondary locations often recording declines. Annually, Dubai and Abu Dhabi 16. apartment prices were down 3.7% and 0.8%, respectively. Abu Dhabi 16. Overview Apartment rents across both emirates recorded modest Q2 Developers reported strong sales on new declines, with continued unit handovers, along with changing off-plan launches tenant preferences, placing downward pressure on rates. 17. Prices Villas and apartments saw marginal While upcoming supply may challenge apartment sector uplifts performance over H2 2021, we expect demand for villas to 20. Rents continue, with ongoing international buyer interest, along with Villas recorded clear improvements; sustained tenant demand, set to underpin both sales prices and apartments dipped marginally rents medium-term. OBSERVER - UAE REPORT Q2 2021 2 Q4Q2 20202021 Economic Overview UAE IHS Markit PMI (50-threshold) April 2019 to June 2021 60 58 56 54 52 50 Index Value Index 48 46 44 42 40 Jul-20 Jul-19 Jun-21 Jun-20 Jun-19 Jan-21 Jan-20 Oct-20 Oct-19 Apr-21 Apr-20 Apr-19 Feb-21 Feb-20 Sep-20 Sep-19 Dec-20 Dec-19 Aug-20 Aug-19 Nov-20 Nov-19 Mar-21 Mar-20 May-21 May-20 IHS Markit PMI Threshold Source: Focus Economics May-19 ECONOMIC OUTLOOK IMPROVES OVER SECOND QUARTER Key drivers Easing travel restrictions and Expo 2020 to support tourism Economic activity continued to gain pace over Q2, with key H1 2021 results for several leading UAE banks further indicators suggesting that the UAE is on track for an overall indicated general economic improvements. Emirates NBD, Expo 2020 Expo 2020, scheduled to run from October through to March recovery this year. Abu Dhabi Commercial Bank (ADCB) and First Abu Dhabi Expo forecast to attract 25 2022, looks set to support a significant increase in tourist Bank (FAB) all reported rises in net profits, broadly supported million visitors over its six arrivals from Q4 onwards. The non-oil private sector purchasing managers’ index (PMI) by declines in loan loss provisions, reduced operating costs month duration While there is still uncertainty surrounding travel restrictions achieved a higher quarterly average, reflecting improved and improved non-interest income. business conditions, with the index remaining above the internationally, organisers maintained their forecast of 25 50-threshold throughout the quarter, indicating continued Oil Output million visitors over its six month duration. However, international travel restrictions continued to weigh monthly expansion. June’s PMI reading revealed improvements Increased output, coupled on the UAE’s all-important tourism industry, with the in employment levels for the first time in five months, and at with higher oil prices, look set This should come as a welcome boost to Dubai, and the wider to support state finances the strongest rate in nearly two and a half years. hospitality sector still somewhat reliant on domestic travel UAE’s, hospitality sector, which has remained largely reliant over Q2. on ‘staycations’ over H1 2021. While Dubai and Abu Dubai Oil production increased over Q2, with June’s output marking a hotels both recorded rises in average occupancy rates over ten-month high. Following the OPEC+ decision to continue a The UAE’s Central Bank (CBUAE) forecasts 2.4% growth in Vaccine Rollout June, Dubai’s average daily rate (ADR) remained under gradual easing of production cuts from August, oil production real GDP, and 3.8% in non-oil real GDP, over 2021, with real The UAE reached a 70% pressure, with improvements likely contingent on renewed vaccination rate over Q2 looks set to rise further. This, coupled with higher oil prices over GDP and non-oil real GDP growth expected to reach 3.8% and international arrivals. recent months, bodes well for government finances. 3.9%, respectively, in 2022. OBSERVER - UAE REPORT Q2 2021 4 OBSERVER - UAE REPORT Q2 2021 5 Q4Q2 20202021 Dubai Dubai Total Residential Transaction Value by Quarter (Q1 2017 to Q2 2021) 35 30 25 20 15 AED Billion 10 5 0 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 2017 2018 2019 2020 2021 Sales - Completed Sales - O-plan RESIDENTIAL TRANSACTIONS Source: REIDIN & Chestertons Research REACHED SEVEN-YEAR HIGH OVER Q2 With transactions at near-record highs, what's driving sales? HOT TOPIC Dubai witnessed a notable rise in residential transactions Strong villa demand continued over Q2, with price rises over Q2, with positive market sentiment, coupled with gaining further pace. Average villa values rose by 5.7% continued international buyer interest, driving sales. q-o-q, following a 3.9% increase the previous quarter, and Increased international interest has been a key factor in Q2 performance, with Dubai’s handling of Covid-19 supporting post- supporting a 9.1% rise y-o-y. lockdown demand from buyers drawn by visa reforms, the emirate’s quality of life and comparatively attractive pricing. Total transaction value saw a near 50% rise q-o-q, reaching AED 31.02 billion, up from AED 20.77 billion the previous Apartment prices saw a modest 0.8% uplift q-o-q, following We have seen a clear improvement in market sentiment among UAE residents this year, with a desire to buy ahead of anticipated quarter. Total transaction value reached its highest level their 0.1% rise the previous quarter, although they remained price rises, coupled with favourable mortgage rates and generous developer incentives, spurring sales. since Q4 2013, which recorded total residential sales worth 3.7% below their Q2 2020 average. Performance continued AED 31.67 billion. Transaction volume totalled 14,426 units to vary by location, with more-established residential areas There is also a broader international context, with several key markets enjoying robust demand over 2021. Chestertons London in Q2, up from 10,648 in Q1, a rise of 35.48%. typically seeing modest uplifts and largely secondary saw its strongest residential sales performance on record over H1, for example, and Hong Kong residential sales volumes have also locations recording further declines. rebounded sharply this year. While drivers vary by market, there was an overarching trend of pent-up 2020 demand underpinning Completed property sales continued to comprise the sales. majority of transactions, accounting for 71% of total value, Villa rents rose by 2.6% q-o-q and surpassed their Q2 2020 and 59% of volume, with off-plan sales yet to approach average by 3.5%. Apartment rents fell by 0.5% q-o-q and their pre-pandemic share. remained 8.7% below their Q2 2020 level. OBSERVER - UAE REPORT Q2 2021 6 OBSERVER - UAE REPORT Q2 2021 7 5% 5% 11% Q4Q2 20202021 Q2 2021 Transaction Dashboard 47% 32% Apartment Sales by Unit Type Villa Sales by Unit Type Apartment prices saw modest uplift, although performance 12% 11%11% 17%17% varied by location 25% Apartment prices saw a modest uplift, with average values 5.1%, followed by Discovery Gardens, at 2.6%. Average 25% rising by 0.8% q-o-q, although they remained 3.7% below prices in Dubailand stood at AED 590 per sq ft, down their Q2 2020 level. from AED 622 last quarter, with Discovery Gardens seeing 28%28% 44%44% prices reach AED 483 per sq ft, down from AED 496 in Q1 38% The Views recorded the highest quarterly rise, at 5.3%, with 2021. prices averaging AED 1,085 per sq ft, up from AED 1,030 the previous quarter. Downtown Dubai also saw a clear uplift, On an annual basis, Downtown Dubai, The Views, The Studio 1BR 2BR 3BR (and above) 2BR (and below) 3BR 4BR 5BR (and above) with prices increasing by 4.5% q-o-q. Both Jumeirah Lake Greens and Business Bay saw prices rise by 4.4%, 3.3%, Towers (JLT) and The Greens saw quarterly price rises of 2.9% and 0.3%, respectively. 3.0%, reaching AED 765 and AED 860 per sq ft, respectively. All other locations saw prices decline, with Dubai Sports Sales Transactions - Completed Units Dubai Marina, Motor City, Business Bay and International City, Dubailand and Dubai Silicon Oasis all recording City achieved more moderate quarterly uplifts of 2.2%, double-digit falls of 12.4%, 11.3% and 10.5%, respectively, Apartments - Top Communities by Total Transaction Value Villas - Top Communities by Total Transaction Value 1.8%, 1.5% and 0.7%, respectively.