Dubai Real Estate Report Q4 2017
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Historic Review and Outlook Dubai Real Estate Report Q4 2017 Property Historic Highlights 2 map 3 Review 4 and Outlook Apartment Villa and Office Apartment Villa and In the Middle East for over 30 Years 5 Rentals 6 Rentals 7 Sales 8 Office Sales Dubai | Property Map 1 Akoya 32 IMPZ Most Expensive 2 Al Barari 33 International City 3 Al Barsha 34 JBR Expensive 4 Al Furjan 35 Jumeirah Arabian Gulf 5 Al Nahda 36 Jumeirah Golf Estates Mid Priced 6 Al Qusais 37 Jumeirah Islands Affordable 7 Al Warqaa 38 Jumeirah Park 8 Arabian Ranches 39 Jumeirah Village Circle 9 Bur Dubai 40 Jumeirah Village 49 10 Business Bay Triangle 50 11 City Walk 41 Jumeirah 12 Culture Village Lakes Towers 35 34 9 13 Deira 42 Living Legends 61 25 11 11 41 53 13 14 DIFC 43 Liwan 52 57 56 14 11 15 Discovery Gardens 44 Meydan 3 11 58 16 5 16 Downtown Dubai 45 Mirdif 38 37 10 15 30 44 17 Downtown Jebel Ali 46 MotorCity 11 17 54 4 21 18 Dubai Creek 47 Mudon 19 12 6 44 44 19 Dubai Design District 48 Muhaisnah 40 311 22 48 39 20 Dubai Festival City 49 Palm Jumeirah 32 31 20 21 Dubai Healthcare 50 Pearl Jumeirah 44 311 18 City Phase 2 51 Remraam 36 63 28 22 Dubai Hills 52 Rigga Al Buteen To Abu Dhabi To Sharjah 46 23 23 Dubai Investment 53 Sheikh Zayed Road 27 55 311 Park 54 Springs / Meadows 42 62 8 2 24 Dubailand 55 Studio City 311 45 1 Residential Complex 56 Tecom C 7 51 29 47 25 Dubai Marina 57 The Greens 611 33 43 26 Dubai Silicon Oasis 58 The Lakes 59 26 60 27 Dubai South 59 The Villa 24 28 Dubai Sports City 60 Town Square 29 Dubailand 61 Umm Suqeim 611 30 Emirates Hills 62 Uptown Mirdif 611 31 Green Community 63 Victory Heights Note: Area classification by affordability is provided for indicative purposes only as many areas in Dubai offer various types of residential units, from affordable to high end. As such, the map colour coding takes into account the most prevalent type of product and exceptions of a lower and / or higher price could be available. 611 2 DUBAI Dubai | Historic Review Recession Recovery and Growth Stabilisation Downturn 2009-2011 2012-2013 2014-2015 2016-2017 • The Dubai real estate market has gone through significant fluctuations over • The market began to show signs of • The market peaked in Q2 2014 • 2016 and 2017 saw a significant amount the years. Following the introduction of a decree allowing International recovery in 2012 when the Euro Crisis and corrected thereafter due to a of new project launches and deliveries Freehold Ownership in 2002, the market recorded rapid growth up until Q1 and Arab Spring conflict led to Dubai combination of factors such as the resulting in moderate but steady 2009. being an attractive alternative and ’safe’ reduction in LTV’s, low oil prices and a declines in sales prices and rental rates. haven to invest and live in. strong US dollar. • This period was marked by large scale developments and project launches. • Tenants and Investors drove the market The real estate market was fuelled by both strong demand from a rapidly • In November 2013, Dubai was awarded • Due to the substantial number of as more and more people looked for expanding economy and workforce (leading to double digit rental growth to host Expo 2020, which led to growth in launches witnessed in the previous value-for-money options, which resulted and Investor returns) and, more problematically, Investor speculation. market confidence, a rise in new project years, concerns of an oversupply and in affordable developments out- launches and increased sales prices and lack of demand particularly for high-end performing luxury accommodation in • With the onset of the global financial crisis, loss of confidence, erosion of rental rates. properties motivated Developers to terms of transaction activity. capital and drying-up of liquidity, speculators were driven from the market. focus on the mid and affordable housing This resulted in significant value contractions and ultimately the collapse of • Established communities and quality sector, and to offer incentives such as • The number and range of incentives fundamentals underpinning the real estate market. buildings experienced increased extended payment plans during the post increased as Landlords tried to retain demand whilst newer developments completion stage. Tenants and increase take-up. • Asteco also recorded noticeable Tenant migration from neighbouring saw improved take-up in line with emirates due to decreased rental rates in Dubai. enhancements in infrastructure and • Lower deposits also made off-plan sales • Developers increasingly offered smaller, connectivity. a more attractive option compared off-plan units at lower price points • Sales activity remained subdued although transaction levels picked up with flexible post-completion payment slightly by the end of 2011. to the minimum 25% down payment • Whilst increased job security and market required for a mortgaged property. plans, which resulted in an increase in • Many projects were delayed, put on hold or cancelled. confidence created demand for Tenants first-time Buyers and End-users as home to upgrade, rapid rental growth also ownership became more accessible to restricted Residents to move within people who were previously unable to Dubai and thus resulted in an upsurge in jump on the property ladder due to high relocations to the Northern Emirates in down payments. This resulted in a drop search of more affordable housing. in demand for completed properties. 240 • In anticipation of the growing Investor demand, the Dubai Government doubled 200 the land registration fee to 4%, and introduced new loan-to-value rules to limit property speculation. 160 120 Index Base 100 = March 2010 80 40 Mar Jun Sep Dec Mar Jun Sep Dec Mar Jun Sep Dec Mar Jun Sep Dec Mar Jun Sep Dec Mar Jun Sep Dec Mar Jun Sep Dec Mar Jun Sep Dec Mar Jun Sep Dec 2009 2010 2011 2012 2013 2014 2015 2016 2017 Apartment Sales Villa Sales Office Sales Apartment Rentals Villa Rentals Office Rentals The line graph above demonstrates the average percentage sales and rental trend on a quarterly basis. © Asteco Property Management, 2018 3 Sales Rental Project Incentives Supply Demand - Demand - Prices Rates Launches Off-plan Completed Dubai 2017 2018 Highlights and Outlook TRENDS 2017 Highlights 2018 Outlook • Apartment rental rates recorded steady declines throughout 2017 ranging from 2% to 4% per • Asteco expects 2018 to follow similar trends as compared with the previous year, although project quarter, on average. Drops in sales prices were slightly less pronounced with variations of 0% to launches are anticipated to ease off as the market finds a new equilibrium. 4%. • The centre of Dubai continues to shift away from its traditional core (around the Dubai • The villa market fared similarly with average quarterly decreases in sales prices and rental rates of International Airport and along Sheikh Zayed Road (E11)), and towards the new Al Maktoum 2% and 3%, respectively. International Airport and the area surrounding the Sheikh Mohammed Bin Zayed Road (E311), a move encouraged by ongoing infrastructure and development projects in the lead up to the Expo • 2017 recorded a significant number of new project launches, particularly targeting the mid-income 2020. market, with a marked shift to smaller units offering lower price points, together with a greater choice of incentives such as guaranteed returns, reduced/no commissions, low down payments • Sales prices and rental rates are expected to continue to come under pressure with a more and post-completion payment plans. This resulted in a rise in End-users and first-time Buyers pronounced drop anticipated for the latter as a result of the sheer amount of supply projected for entering the market. delivery this year. • Consequently, off-plan sales far exceeded secondary property transactions, mainly due to the • Investors will continue to be more sensitive to the price point of properties as opposed to the ‘high’ loan-to-value ratios stipulated by the UAE Central Bank, which make real estate investment price per square foot, meaning units that were previously advertised below the AED 1,000 per difficult to Buyers with limited equity. sq.ft., mark will be marketed for instance at below AED 500,000 for studios or AED 1 million for one bedroom apartments to entice take-up. Residential • There has also been a steady rise in project completions, which has put the bargaining power firmly in the hands of Tenants who have taken advantage of the increased choice and competitive • In order to stimulate demand for completed properties and increase transaction activity in rates to relocate to new properties or renegotiate existing contracts. this sector, the UAE Central Bank would need to relax their LTV ratios to make home ownership more accessible to a large proportion of the local and overseas population. However, there is no • Proactive Landlords looking to secure new leases and/or retain Tenants increasingly offered indication of any such changes in the short-term. incentives including, but not limited to rent-free periods of up to two months, increased payment frequency (up to 12 cheques) and all/part of the utilities absorbed. • Although residential sales and leasing is generally exempt, the introduction of the VAT will indirectly affect Tenants and Investors as the tax is applicable to items such as maintenance, utility and agency fees. However, given current market conditions, some of these charges are expected to be initially absorbed by Owners/Landlords. • Despite recording only marginal quarterly drops in sales prices and rental rates, the office sector • Although the oversupply situation, particularly in regards to secondary strata stock, will continue has arguably proven the most challenging asset class in 2017 underpinned by a bearish market in 2018, we expect healthy appetite for quality Grade A commercial properties.