QUARTER REVIEW 2018 Qatar Real Estate Market VPI ValuStrat Price Index Residential The third quarter 2018 Valustrat Price Index (VPI)-Residential, displayed overall 10.7% annual and 2.4% quarterly declines in capital values. Villas and freehold apartments saw quarterly price declines of 3.2% and 2.2% respectively. Amongst freehold apartments, The Pearl witnessed the highest overall decline in values followed by West Bay Lagoon and Lusail. Whilst some villa locations had only marginal reductions, others experienced steeper falls. Quarterly capital depreciation between 0.8% to 3.0% was seen in clusters of Umm Salal, Old Airport/Najma, Muaither/New Al Rayyan and Ain Khaled/Abu Hamour. Declines of 3.0% to 8.0% were seen in Al Wakrah/Wukair, West Bay Lagoon, Al Dafna and Al Thumama. Gross yields for residential units averaged at 4.9% with 5.9% for apartments and 4.4% for villas. ValuStrat Price Index 13 Villa and 3 Apartment Locations in Qatar [Base: Q1 2016=100] 110 100 100 96.3 94.2 90.9 89.8 90 87.2 84.9 82.7 81.3 80 77.7 75.8 70 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 2016 2017 2018 Source: ValuStrat 1 | Qatar Real Estate Market 3rd Quarter 2018 Review MacroEconomicSnapshot • The Real Gross Domestic Product (GDP) increased 2.5% YoY (QAR 204.37 billion), driven by growth in non-hydrocarbon sector of 6.1% YoY in Q2 2018 - as estimated by Ministry of Development Planning and Statistics (MDPS) • As per “The Global Competitiveness Report 2018”, Qatar was ranked second-most competitive economy in the region and took 30th position out of 140 countries globally • Government of Qatar forecasted a budget surplus by 2019 based on projection of growth in oil prices, introduction of VAT (Value-Added Tax) and lower expenditure • Population is estimated at 2.71 million in Q3 2018 1,836,000 2,045,000 2,235,000 2,421,000 2,597,000 2,641,000 2,717,000 2012 2013 2014 2015 2016 2017 2018-Q3 Qatar Population Source: Ministry of Development Planning & Statistics • Qatar Central Bank increased deposit rate by 25 basis points to 2.25%, after US Federal Fund increment by the same amount • Global credit rating agency, Moody's, upgraded Qatar’s banking sector outlook to ‘stable’, aided by a forecasted 2.7% growth in Qatar’s GDP in 2018 on back of public spending Consumer Price Index vs. Housing Index • During Q3 2018, oil export revenue and January 2015 – YTD imports expanded by 36% YoY and 27% YoY respectively • The Consumer Price Index (CPI) was 108.6 (base year 2013) marginally increased by 0.14% YoY as well as QoQ. Transport, Education, Food & Beverage and Health were the main drivers of inflation • Housing and Utility Expenses Index decreased 3.0% YoY and 0.2% QoQ Jul Jul Jul Oct Oct Apr Apr Apr Jan Jan Jan Jun Jun Jun Feb Feb Feb Sep Sep Sep Nov Dec Nov Dec Aug Aug Aug Mar Mar Mar May May May 2016 2017 2018 General Index (2013=100) Housing, Water, Electricity, Gas and Other Fuels Source: Ministry of Development Planning & Statistics, ValuStrat ResidentialSupply 400 • A mix of 635 apartments and villas were Qatar Residential Supply added, total stock stood at 288,735 units as 2015-2019 350 of quarter end 2015 (‘000 UNITS) 300 • Apartments supply consisted of 560 units 250 coming from delivered projects in Al 275 200 Mansoura, Lusail (Fox Hills & Marina) and Al 150 2016 Thumama/Al Wukair 280 • Expected completions for 2018 have been adjusted downwards from 12,800 to 10,600 286 units due to delayed deliveries 2017 286 • Sidra residential compound, comprising 10.6 1,165 units, was delivered to Qatar Foundation for Education, Science, & 150 Community Development 2018E 297 200 6.5 250 300 2019E Existing 350 Expected Supply* 467 400 *May be subject to significant downward adjustment depending on construction delays Source: Ministry of Development Planning & Statistics, MEED Projects, ValuStrat ResidentialSales • Median transacted prices for houses Residential Median Transacted Prices expanded 2.9% QoQ and remain unchanged compared to 2017 • Transactional volumes for houses increased 7% QoQ and 26% YoY • Median transacted price of a residential unit was QAR 2.8 million. Five largest ticket 0.0% -1.1% Last Year Last 6 Months sizes were seen in The Pearl, Fereej Bin Omran, Fereej Abdul Aziz and Al Aziziyah for developed plots ranging from 1,000 sq m to 5,000 sq m • Majority of transactions were in Al Rayyan (28%) followed by Doha (17%) and Al Daayen (16%) 2.9% • 48 transactions were recorded for Last Quarter residential buildings, with 50% of Source: Ministry of Justice, ValuStrat transactions above the median ticket price of QAR 8.35 million (fall of 17% QoQ) concentrated in Old Al Ghanim, Fereej Abdul Aziz, Umm Ghuwailina, Najma, Rawdhat Al Khail and Al Sadd 3 | Qatar Real Estate Market 3rd Quarter 2018 Review ResidentialRents • Median asking rents declined 12.4% YoY and Residential Asking Rents 3.9% QoQ • Median monthly asking rents for apartments fell 4.2% against Q2 2018. Areas such as West Bay, Al Sadd, Old Airport and Al Wakrah experienced quarterly declines up to 8% -12.4% -6.4% Last Year Last 6 Months • Median monthly asking rents for villas fell by 2.3% QoQ • Villas in areas away from city centre experienced the highest quarterly decline ranging from 2% to 6% -3.9% Last Quarter • Some landlords of new residential properties in The Pearl and Lusail offered incentives in the form rent-free periods of up Source: ValuStrat to 2 months, on minimum one year contracts, in addition to waiving utility expenses Median Monthly Asking Rent (QAR) Median Monthly Asking Rent (QAR) & Quarterly Change (%) - Apartments & Quarterly Change (%) - Villas 5,250 7,500 Al Mansoura 6,000 -1% Al Wakrah 8,000 -5% 6,250 11,500 5,750 9,250 Lusail 7,250 -4% Al Muraikh 10,500 -1% 8,500 14,000 6,250 9,750 Al Sadd 7,250 -2% Abu Hamour 12,000 -2% 9,000 14,500 7,500 12,750 Fereej Bin 8,000 -1% Al Waab 13,750 -6% Mahmoud 8,250 14,500 8,750 18,250 West Bay The Pearl 11,000 -1% 19,500 -2% Lagoon 13,250 21,000 One Bedroom Three Bedroom Three Bedroom Five Bedroom Two Bedroom Quarterly Change (%) Four Bedroom Quarterly Change (%) Source: ValuStrat Source: ValuStrat OfficeSupply • Gross Leasable Area (GLA) of Qatar’s Qatar Office Supply office supply as of Q3 2018 stood at 4 2015-2019 million sq m (Million sq m GLA) • Three office buildings were added this 0.76 quarter in Fereej Abdul Aziz (Salwa 0.60 Road) and Lusail, comprising 27,000 4.49 sq m GLA 3.89 3.5 3.89 3.0 • Projected supply for 2018 has been adjusted downwards from 720,000 sq m to 600,000 sq m GLA due to delayed deliveries 2015 2016 2017 2018E 2019E Existing Stock Expected Supply Source: MEED Projects, ValuStrat OfficePerformance • Median office asking rents fell 16.8% Office Median Asking Rent (QAR/sq m/Month) YoY and 3.0% QoQ and Quarterly Change (%) • With average occupancy within the range of 60-65% in West Bay, median -1% -3% -6% -3% 0% 0% 0% asking rents for offices stood at QAR 143 per sq m/month 143 • With the addition of office buildings in Energy City and Marina, Lusail 117 experienced the highest quarterly fall 110 106 as median monthly asking rents 103 dropped to QAR 110 per sq m 100 90 • There was no change in median asking rents in Al Sadd and C-Ring Road • Some landlords offered incentives in the form of rent-free West Bay C/D Ring Lusail Citywide Grand Al Sadd Salwa Road Hammad Road periods (1-2 months) in contracts of a Avenue one year minimum, or would include Median Asking Rate (QAR/sq m) Quarterly Change (%) utility expenses within the base rent Source: ValuStrat 5 | Qatar Real Estate Market 3rd Quarter 2018 Review RetailSupply • As of Q3 2018, total supply of organised Retail Malls & Shopping Centres retail space reached 1.8 million sq m (‘000 sq m GLA) • Approximately 534,000 sq m GLA (8 337 shopping centres and City Centre expansion) is projected for completion by end of 2019 159 • Mall of Qatar and Dar Al Salam Mall announced expansion of the existing outlets to include more shops and entertainment zones to be completed by 2022 • Based on GLA and population figures, shopping centre GLA of Qatar is 665 sq m 22 per 1,000 capita compared to the GCC average of 590 sq m per 1,000 capita 6 161 629 981 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 RetailPerformance • As per ValuStrat’s research, driven by growth Distribution of GLA of Shopping in retail spending retail demand is expected to Centers/Malls across Municipalities grow at an annual average of 5% by 2020 • During quieter summer months, Qatar Summer Festival and Eid Al Adha were successful in drawing footfall at regional malls 3% (up to 1.8 million during the quarter) and super 14% regional malls (up to 2.5 million during the quarter) 40% • Rising competition and falling occupancy in relatively older regional and super regional malls may lead to fall in the rents in the 39% medium term. Monthly rents for line shops 4% (less than 500 sq m) in malls range from QAR 260-420 per sq m • Falling occupancy of street retail outside Doha put pressure on landlords to reduce rents by as Al Khor Al Wakra Umm Salal much as 15% when compared to 2017 Doha Al Rayyan Source: ValuStrat HotelSupply • Total number of hotel rooms and Hotel Room Supply apartments stood at an estimated 26,170 2015-2019 units within 124 establishments (‘000 KEYS) 4.5 • Al Najada Doha Hotel Apartments (Oaks) & Souq Al Wakrah Hotel (Tivoli) were unveiled, adding 352 keys to the total supply 3.5 • Due to delays in project deliveries, the projected hotel supply has been adjusted downwards from 5,300 to 3,500 keys for 2018 28.7 25.2 25.2 22.9 20.7 2019E 2018E 2017 2015 2016 Hotel & Service Apt Rooms Expected Supply Source: Qatar Tourism Authority, ValuStrat HotelPerformance • As of August 2018, number of visitors to Qatar was 1.2 million, down 28% when compared to same period last year • Average occupancy of hotels remained unchanged compared to same period of 2017, while hotel apartments grew 18% YoY • 1-3-Star hotels achieved approximately 20% YoY rise in occupancy during first eight months of 2018 • Average Daily Rate (ADR) and Revenue per Available Room (RevPAR) for hotels declined by 13.8% YoY.