OBSERVER Dubai Market Report Q2 / 2018 Services Report Highlights Valuations Affordability is one of the key real estate Rental Prices Downward rental adjustments Mortgage and Secured Lending trends being realised in 2018 and hence continue to take place in the Dubai market, Portfolio Valuations is a core theme in this report. With a large due to several factors; additional stock being amount of supply set to enter the market, delivered thus providing more choices, some Advisory and Research developers need to focus on catering to the tenants purchasing their own properties due Financial Feasibilities largest and most active sectors, namely the to the current affordability and conservative Highest and Best Use Studies mid-income segment. To keep ticket prices market sentiment. Average apartment Market Research of residential property affordable to this rents are down 4% from the last quarter Conceptual Advisory and Project Positioning Studies audience, developers have been offering and average villa rents are down 2%. Project Redevelopment/Repositioning Advisory competitive payment plans, as well as reducing Investment Strategies – Acquisition and Disposal unit sizes. This trend is already being seen in Transactions The number of completed (ready locations such as Dubailand, Dubai South, to move in) unit transactions decreased by 3% Sales and Leasing Al Furjan and Jumeriah Village Circle. from the previous quarter, with a 21% increase Commercial in transaction value, indicating a lower volume of Industrial Sales Prices The downward price corrections sales but for a higher ticket size. For off-plan units, Residential witnessed in Q1, continued throughout Q2. transactions increased by 5% from the previous Retail Average apartment sales prices are down quarter, with a 10% uplift in values. 1% from the last quarter, whilst average Property/Facilities Management villa sales prices have remained unchanged. Market Outlook The watchword for 2018 Commercial Off-plan sales, particularly in the mid-market is ‘supply’. Whilst the UAE is still experiencing Mixed-Use segment, continue to dominate the market population growth, property supply, however, Residential due to flexible and affordable payment is growing at a higher percentage than the plans turning many renters into buyers. population. This means the real estate market International Properties will most likely continue to soften throughout London Off-Plan Residential the rest of 2018. International Homes and Investments International Relocations Residential Market Q2 2018 Snapshot Price Movements QoQ Ready Units Transactions Apartments Villas Volumes Values -1% 0% -3% +21% Rental Movements QoQ Off-Plan Units Transactions Apartments Villas Volumes Values -4% -2% +5% +10% The Observer - Dubai Residential Q2 2018 1 Off-plan residential sales continue Residential Sales Prices and Quarterly Change Villas2500 5% to dominate the market. 4% 2000 8 5% CHANGE PERCENTAGE 2500 5 9 3% 0 2 , 2 , 2 2 4% 2% 15002000 8 PERCENTAGE CHANGE PERCENTAGE 5 9 3% 0 2 , 1% 2 , 2 2 4 5 2% 0 10001500 9 0% 2 1 , , 5 0 1 8 1 2 3 1 8 6 9 8 4 2 1% The downward price corrections witnessed in Q1, Business Bay residential prices picked up, owing to 9 9 9 9 AED SALES PRICES 9 9 -1% 4 5 0 continued throughout Q2. Average apartment sales its good location and the fact investors are seeking 5001000 9 0% 2 1 , , -2% 5 0 1 8 1 2 3 1 8 6 9 8 4 prices are down 1% from the last quarter, whilst alternatives to the higher priced Downtown and 2 9 9 9 9 AED SALES PRICES 9 9 -1% average villa sales prices have remained unchanged. DIFC areas. 0500 -3% Arabian Ranches Jumeirah Park Palm Jumeirah The Lakes The Meadows/ -2% The Springs 0 -3% The continued decrease in apartment prices over Off-plan sales, particularly in the mid-market Figures in AED/Sq Ft Q1 2018 Q2 2018 QoQ Movement the last few years has made the bigger units more segment, continue to dominate the market due to Source: REIDIN & AChestertonsrabian Ranches Jumeirah Park Palm Jumeirah The Lakes The Meadows/ The Springs affordable, hence there has been a lower number flexible and affordable payment plans turning many Figures in AED/Sq Ft Q1 2018 Q2 2018 QoQ Movement of transactions but a higher value of transactions. renters into buyers. Source: REIDIN & Chestertons Larger villas with high price points have generated limited interest from buyers, mainly due to the lower HOT TOPIC After the surge in off-plan sales last year, Dubai regulators have proposed a policy whereby property investment yields attached to this type of property developers will need a project to reach 50 per cent completion before they can commence off-plan sales; and currently the main focus is on affordable units. currently the law stipulates only 20 per cent completion is required. This has been proposed due to concerns that the attractive payment plans on offer for some projects were leading to a rise in speculative buying. This proposal, if approved, is likely to slow down the pace of off-plan launches which could help stem supply Residential Sales Prices and Quarterly Change in the short term. Apartments 1800 8% 1600 6% 1800 8% 1,683 1400 1,680 4% 1600 6% 1200 CHANGE PERCENTAGE 1,683 1,680 1400 1,386 2% 1,342 1,320 1,320 4% 1000 1,226 PERCENTAGE CHANGE PERCENTAGE 1200 1,178 0% 1,110 1,386 1,095 1,077 2% 1,072 1,342 800 1,320 1,320 957 1000 941 871 1,226 -2% 824 822 1,178 807 600 792 0% 760 757 1,110 753 1,095 730 729 AED SALES PRICES 1,077 800 1,072 957 941 631 -4% 871 400 589 -2% 824 822 807 600 792 760 757 753 730 729 AED SALES PRICES 200 -6% 631 -4% 400 589 0 -8% 200 -6% Business Bay Discovery Downtown DubaiLand Dubai Marina Dubai Motor Dubai Silicon Dubai Sports International JLT JVC The Greens The Views Gardens City Oasis City City 0 -8% Figures in AED/Sq Ft Business Bay Q1Discovery 2018 Q2Downtown 2018 QoQDubaiLand Movement Dubai Marina Dubai Motor Dubai Silicon Dubai Sports International JLT JVC The Greens The Views Source: REIDIN & Chestertons Gardens City Oasis City City The Observer - Dubai Residential Q2 2018 2 The Observer - Dubai Residential Q2 2018 3 Figures in AED/Sq Ft Q1 2018 Q2 2018 QoQ Movement Source: REIDIN & Chestertons 450,000 2% 400,000 Residential Market Rent and Quarterly Change 1% 350,000 CHANGE PERCENTAGE Supply is outpacing demand which 0% Villas 300,000 is creating a tenant-led market. 250,000 -1% 240500,,000000 -2% 145000,,000000 1% AED RENTAL PRICES AED RENTAL -3% 130500,,000000 CHANGE PERCENTAGE -04% 3 5000,0,00000 250,00 0- --51%% Downward rental adjustments continue due Prime established locations such as Jumeirah Arabian The The The Lakes Victory Al Furjan JVT Jumeirah Jumeirah Palm 200,000 Ranches Springs Meadows Heights Islands Golf Estates Jumeirah -2% to several factors; additional stock being Golf Estates, DIFC and Dubai Marina 150,000 delivered providing more choices, some tenants exhibit more resilience when it comes to Figures PRICES AED RENTAL in AED/Sq Ft 2BR 3BR 4BR 5BR AVG -3% Source: 10 0Propertyfinder,000 & Chestertons purchasing their own properties due to the current both apartment and villa rental rates. -4% 50,000 affordability and conservative market sentiment. - -5% The focus for developers and landlords going forward Arabian The The The Lakes Victory Al Furjan JVT Jumeirah Jumeirah Palm Average apartment rents are down 4% from the should be on quality as tenants will proactively Ranches Springs Meadows Heights Islands Golf Estates Jumeirah last quarter and average villa rents are down 2%. seek out cheaper options or move to better quality Figures in AED/Sq Ft 2BR 3BR 4BR 5BR AVG units for the same price as their existing units. Source: Propertyfinder & Chestertons As 4opposed50,000 to previous quarters, smaller units 2% 400,000 are also affected. Studio rentals dropped by 1% an 3 average50,000 of 5% and 1BR units by 4%. CHANGE PERCENTAGE HOT TOPIC 0% 300,000 With the burgeoning volume of off-plan investment stock entering the market that is destined to be made 250,000 -1% available for rent after handover - the ability of the rental market to absorb a high volume of new stock will be tested over the next few years. Newly completed properties that are affordable, in good locations and 200,000 -2% offer decent facilities will command attention over older more expensive properties, essentially creating a 150,000 AED RENTAL PRICES AED RENTAL -3% two-tier market. Residential 100,000 Market Rent and Quarterly Change -4% 50,000 Figures in AED/Sq Ft Studio 1BR 2BR 3BR QoQ Change Source: Propertyfinder & Chestertons Apartments - -5% Arabian The The The Lakes Victory Al Furjan JVT Jumeirah Jumeirah Palm Ranches Springs Meadows Heights Islands Golf Estates Jumeirah 250,000 0% Figures in AED/Sq Ft 2BR 3BR 4BR 5BR AVG Source: Propertyfinder & Chestertons -1% Figures in AED/Sq Ft 200,000 Studio 1BR 2BR 3BR QoQ Change Source: Propertyfinder & Chestertons -2% CHANGE PERCENTAGE -3% 150,000 250,000 0% -4% -1% 100,000 -5% 200,000 AED RENTAL PRICES AED RENTAL -2% CHANGE PERCENTAGE -6% 50,000 -3% 150,000 -7% -4% -8% 1-00,000 Business Bay DIFC Discovery Downtown Dubai Marina Dubai Dubai Dubailand International JLT JVC The Greens The Views Dubai -5% AED RENTAL PRICES AED RENTAL Gardens Dubai Silicon Oasis Sports City City Motor City -6% 50,000 Figures in AED/Sq Ft Studio 1BR 2BR 3BR QoQ Change Source: Propertyfinder & Chestertons -7% The Observer - - Dubai Residential Q2 2018 4 The Observer - Dubai Residential Q2 2018 -8% 5 Business Bay DIFC Discovery Downtown Dubai Marina Dubai Dubai Dubailand International JLT JVC The Greens The Views Dubai 250,000 Gardens Dubai Silicon Oasis0% Sports City City Motor City -1% 200,000 -2% CHANGE PERCENTAGE -3% 150,000 -4% 100,000 -5% AED RENTAL PRICES AED RENTAL -6% 50,000 -7% - -8% 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 Developers are offering affordable, off-plan units to appeal to the growing mid-income sector.