OBSERVER Dubai Market Report Q3 / 2018 Services Report Highlights Valuations Mortgage and Secured Lending The performance of Dubai’s residential market potential tenants. The apartment market saw a Portfolio Valuations during the third quarter of 2018 has seen a 4% fall in rents from Q2 with a 3% drop in the villa further decline in both sales and rental values, market. We expect rental declines to continue over in keeping with the trend of previous quarters. the coming quarters as the pipeline increases. Advisory and Research The time of year, coupled with general market Financial Feasibilities uncertainty has had an adverse effect on the Transactions From Q2 to Q3 2018, the number of Highest and Best Use Studies number of transactions concluded. However, the completed unit transactions decreased by 11%, whilst Market Research key trend we have witnessed this quarter is that the number of transactions in the off-plan market Conceptual Advisory and Project Positioning Studies the market for completed units has been more decreased by 31% from the previous quarter. Project Redevelopment/Repositioning Advisory resilient to the decline in transactional volumes Investment Strategies – Acquisition and Disposal and values compared with the off-plan market. Market Outlook Over the last few months there have been a number of announcements from the Sales Prices The downward price corrections UAE Government, which are expected to impact Sales and Leasing witnessed in Q1 and Q2 of 2018 have continued the Dubai real estate market. Whilst it is too early Commercial throughout Q3, albeit at an increased pace. to tell how the newly announced retirement visa, Industrial Average apartment and villa sales prices are down company ownership and 10-year residency will Residential 6% from the previous quarter, which is one of the affect property owners and tenants, we expect the Retail biggest quarterly price declines seen since 2014. downward market correction to continue over the Furthermore, during Q3 there was a higher decline next few years. With circa 10,000 units expected to in off-plan sales as opposed to completed units. This be delivered to the market by year end and 70,000 Property/Facilities Management sentiment was echoed at Cityscape Global where, units expected to be delivered before Expo 2020, Commercial it was clear, there were less high profile launches this pipeline will exert further pressure on sales and Mixed-Use compared with previous years, with many developers rental levels. Unless there is a significant decline Residential launching new phases within existing schemes. in construction activity, a boost in population and further economic stimulus created in the short term, International Properties Rental Rates As in previous quarters, there has it is unlikely the Dubai residential market will reach London Off-Plan Residential been continued downward pressure on rents in Q3. a demand and supply equilibrium in the foreseeable International Homes and Investments This is a consequence of additional supply being future. International Relocations added to the market, thus offering more choice to Residential Market Q3 2018 Snapshot Price Movements QoQ Completed Units Transactions Apartments Villas Volumes Values -6% -6% -11% -13% Rental Movements QoQ Off-Plan Units Transactions Apartments Villas Volumes Values -4% -3% -31% -33% The Observer - Dubai Residential Q3 2018 1 Residential sales market will not Residential Sales Prices and Quarterly Change Villas2500 0% ‘bottom out’ in the near future -1% 05 98 2000 CHANGE PERCENTAGE 2 2500 2 -2%0% , , 2 2 The downward price corrections witnessed in Q1 plan units. In 2018, this figure dropped to 59 %, so 2,187 -3%-1% and Q2 of 2018 have continued throughout Q3, it is clear there has been a shift in buyers’ interests. 05 1500 98 2000 CHANGE PERCENTAGE 2 2 -2% , , -4% 2 but at an increased pace. Average apartment The lower number of off-plan launches, coupled 2 and villa sales prices were down 6% from the with the increased affordability of completed units 2,187 -5%-3% 10001500 48 1 previous quarter, which is one of the biggest has motivated some buyers to consider properties , -6%-4% 1,204 1,195 1 35 88 91 42 23 985 9 AED SALES PRICES AED SALES 960 9 9 quarterly price declines seen since 2014. that are available to move into immediately. 9 9 883 -7%-5% 500 846 1000 48 1 , -8%-6% 1,204 1,195 1 35 88 91 Apartments in areas such as Dubai Silicon Overall, however, off-plan sales are still dominating 42 23 985 9 AED SALES PRICES AED SALES 960 9 9 9 9 883 -7% Oasis and Dubailand remained resilient, with the market with buyers enticed by attractive 0500 846 -9% only a 2% decline since the previous quarter. incentives including 5-year post-handover Arabian Ranches Jumeirah Park Palm Jumeirah The Lakes The Meadows/ -8% The highest declines have been seen in Dubai payment plans, rebates of registration fees and The Springs 0 -9% Marina at 10% and Discovery Gardens at 13%. guaranteed rental returns amongst others. Figures in AED/Sq Ft Q1 2018 Q2 2018 Q3 2018 QoQ Movement Source: REIDIN & ChestertonsArabian Ranches Jumeirah Park Palm Jumeirah The Lakes The Meadows/ The Springs Market sentiment in the villa communities of The Given the pace of construction activity witnessed Figures in AED/Sq Ft Q1 2018 Q2 2018 Q3 2018 QoQ Movement Lakes and Palm Jumeirah have witnessed the over the last couple of years and the number of Source: REIDIN & Chestertons lowest price declines of all the areas at 4% and units still in the pipeline, it is unlikely prices will 5% respectively. The biggest declines of 8% were bottom out any time soon. It would take policy witnessed in Arabian Ranches and Jumeirah Park. reforms, a boost in economic activity and a decline HOT TOPIC in construction activity for supply and demand As well as offering attractive incentives, another key trend being witnessed in the Dubai residential sales During Q3, there was a higher decline in off-plan to reach market equilibrium. We consider this is market is off-plan developers decreasing the size of units and catering to a new market segment looking for sales as opposed to completed units. In 2017, 66% unlikely to occur within the next 3 to 5 years. more affordable housing. By lowering ticket prices, the aim appears to be to increase absorption rates. of all residential transactions were related to off- Residential Sales Prices and Quarterly Change Apartments 1800 0% 1600 -2% 1800 0% 1,683 1,680 1400 1,643 -4% 1600 -2% 1200 CHANGE PERCENTAGE 1,386 1,683 1,680 1400 1,643 -6% 1,342 1,320 1,320 -4% 1000 1,272 1,192 1,178 1,226 PERCENTAGE CHANGE PERCENTAGE 1200 1,166 1,386 -8% 1,110 1,095 1,077 -6% 1,072 1,342 957 800 1,027 1,320 1,320 1,033 941 1,272 1000 875 871 1,192 1,178 1,226 831 1,166 -10% 824 807 822 792 600 750 -8% 1,110 740 753 757 760 1,095 729 730 AED SALES PRICES AED SALES 1,077 1,072 716 957 800 1,027 652 1,033 941 631 875 -12% 871 589 400 566 831 -10% 824 807 822 792 600 750 740 753 757 760 729 730 AED SALES PRICES AED SALES 716 200 652 -14% 631 -12% 589 400 566 0 -16% 200 -14% 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 -16% Figures in AED/Sq Ft Business Bay Q1Discovery 2018 Q2Downtown 2018 Q3Dubailand 2018 DubaiQoQ Movement 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 Q3 2018 2 The Observer - Dubai Residential Q3 2018 3 Figures in AED/Sq Ft Q1 2018 Q2 2018 Q3 2018 QoQ Movement Source: REIDIN & Chestertons 450,000 0% 400,000 Residential Market Rent and Quarterly Change -1% 350,000 CHANGE PERCENTAGE Biggest rental adjustments -2% Villas 300,000 being seen in smaller units 250,000 -3% 240500,,000000 -0%4% 145000,,000000 -1% AED RENTAL PRICES AED RENTAL -5% 130500,,000000 CHANGE PERCENTAGE --2%6% 3 5000,,000000 250,00 0- --7%3% As in previous quarters, we have continued to In the villa market, the biggest rental declines Arabian The The The Lakes Victory Al Furjan JVT Jumeirah Jumeirah Palm 200,000 Ranches Springs Meadows Heights Islands Golf Estates Jumeirah -4% witness downward pressure on rents in Q3. This is have been seen in Al Furjan at 6% with Palm 150,000 Figures in AED/Sq Ft QoQ Movement a consequence of additional supply coming to the Jumeriah and Jumeirah Islands at 5%. PRICES AED RENTAL 2BR 3BR 4BR 5BR -5% Source: 100 Propertyfinder,000 & Chestertons market affording potential tenants more choice. In -6% 50,000 the apartment market average rents have seen a 4% We expect rental declines to continue over the - -7% drop from Q2 compared with 3% in the villa market. coming quarters as a consequence of additional Arabian The The The Lakes Victory Al Furjan JVT Jumeirah Jumeirah Palm supply being added to the market. Generally, Ranches Springs Meadows Heights Islands Golf Estates Jumeirah In the apartment market, the biggest declines tenants are seeing better value for money and Figures in AED/Sq Ft 2BR 3BR 4BR 5BR QoQ Movement have been seen in Discovery Gardens and greater levels of availability in the mid-market Source: Propertyfinder & Chestertons DIFC 450 ,at00 07% and 6% respectively.