Property Review Dubai Real Estate Report Q4 2018 In the Middle East for over 30 Years DUBAI | HISTORIC REVIEW RECESSION RECOVERY AND GROWTH STABILISATION DOWNTURN 2009 - 2011 2012 - 2014 2015 2016 - 2018 • The Dubai Real Estate market has gone through significant fluctuations • The market began to show signs of • The market peaked in Q2 2014 and • 2016 and 2017 recorded a significant amount of new project over the years. Following the introduction of a decree allowing recovery in 2012 when the Euro Crisis corrected thereafter due to a launches and deliveries resulting in steady declines in sales International Freehold Ownership in 2002, the market recorded and Arab Spring conflict led to Dubai combination of factors such as the prices and rental rates. Whilst new project announcements substantial growth up until Q1 2009. being an attractive alternative and reduction in LTV ratios, low oil prices eased off in 2018, additional supply continued to have a ’safe’ haven to invest and live in. and a strong US dollar. downward effect on rates. • This period was marked by large scale developments and project launches. The Real Estate market was fuelled by both strong demand • In November 2013, Dubai was • Rental rates remained broadly stable • The number and range of incentives increased as Landlords from a rapidly expanding economy and workforce (leading to double awarded to host Expo 2020, which led as the handover of new supply was tried to retain Tenants and increase take-up, whilst digit rental growth and Investor returns) and, more problematically, to growth in market confidence, a rise slower than anticipated. Developers tried to motivate Buyers. Investor speculation. in new project launches and increased sales and rental rates. • Due to the substantial number of • A market driven by Tenants and Investors and an increased • With the onset of the global financial crisis, loss of confidence, erosion of launches witnessed in the previous number of people looking for value-for-money options capital and drying-up of liquidity, speculators were driven from the • Established communities and quality years, concerns of an oversupply and resulted in affordable developments outperforming luxury market. This resulted in significant value contractions and ultimately the buildings experienced increased lack of demand particularly for accommodation in terms of transaction activity. collapse of fundamentals underpinning the Real Estate market. demand and newer developments high-end properties motivated saw improved take-up in line with Developers to focus on the mid and • Developers increasingly offered smaller, off-plan units at • Asteco also recorded noticeable Tenant migration from neighbouring enhancements in infrastructure. affordable housing sector, and to lower price points with flexible post-completion payment Emirates due to decreased rental rates in Dubai. offer incentives such as extended plans, which resulted in an increase in first-time Buyers and • Whilst increased job security and payment plans during the End-users as home ownership became more accessible to • Sales activity remained subdued although transaction levels picked up market confidence prompted Tenants post-completion stage. people who were previously unable to jump on the property slightly by the end of 2011. to upgrade, rapid rental growth also ladder due to high down payments. restricted Residents to move within • Lower deposits stipulated by • Many projects were delayed, put on hold or cancelled. Dubai and thus resulted in an Developers also made off-plan sales a • Initially, this resulted in a drop in demand for completed 240 upsurge in relocations to the more attractive option compared to properties, but the slowdown in new project launches and Northern Emirates. the minimum 25% down payment the increased affordability lead to a rise in transaction 220 required by the Central Bank for a volumes in the secondary market. 200 • In anticipation of the growing Investor mortgaged property. 180 demand, the Dubai Government doubled the land registration fee to 160 4%, and introduced new loan-to-value 140 rules to limit property speculation. 120 100 Index Base 100 = March 2010 80 60 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 SepDec Mar Jun Sep Dec 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 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. 2 Dubai Real Estate Report - Q2 2018 DUBAI SUPPLY COMPLETED IN COMPLETED IN EXPECTED IN Q1 - Q3 2018 Q4 2018 2019 9,250 2,835 24,300 APARTMENTS NO. OF UNITS 2,195 550 8,500 VILLAS NO. OF UNITS 1.36 1.5 3.6 OFFICES MILLION SQ.FT. 3 Dubai Real Estate Report - Q4 2018 DUBAI HIGHLIGHTS AND OUTLOOK 2018 HIGHLIGHT 2019 OUTLOOK • Asteco recorded the delivery of nearly 15,000 residential units over the course of • Construction activity during 2019 (for committed projects) is expected to continue SUPPLY 2018, comprising 12,000 apartments and 2,750 villas. unabated, despite a slowdown in new project launches. This is largely due to • Office supply volumes picked up towards the end of the year adding 2.86 million sq.ft. construction-linked and post-completion payment plans, which ensure payments are in total. only received when milestones are met. • As forecasted at the end of 2017, the pace of new project launches eased over 2018 • This supply, in addition to many project handovers previously scheduled for 2018 as Developers adopted a more cautious approach in response to lower demand and spilling over into 2019, will contribute to the total delivery of over 30,000 residential growing supply. units. • Commercial supply is earmarked to account for 3.6 million sq.ft. of office space. • Despite lower than anticipated handover volumes, the additional supply was still • Dubai’s Real Estate market will continue to mature throughout 2019 in line with RENTAL RATES significant and resulted in steady rental rate declines across all asset classes increased transparency and improved regulatory conditions. throughout the year. • Whilst the additional supply earmarked for 2019 will put further pressure on rental • Average declines of 10% for apartments, 10% for villas and 5% for offices were rates, the rate of decline is expected to slow towards the end of the year. recorded for 2018, although some areas significantly under/outperformed. • Lower rental rates will enable more Tenants to upgrade in term of size/quality and/or • Landlords continued to offer incentives such as rent-free periods and multiple cheque location. payments. • Similar to the leasing market, apartment, villa and office sales prices continued their • Further sale price declines are expected in 2019 and although the focus will remain SALES PRICES downward trajectory during 2018, declining by an average of 13%. on affordable developments, transaction volumes are anticipated to rise as Residents • Emphasis continued to be unit price points, as opposed to the rate per sq.ft. take a longer-term view on living in Dubai. • A number of off-plan projects received a positive response from Investors. • Whilst market conditions mean that it is unlikely LTV ratios will change, we believe that • The steady decline in sales prices for completed projects has improved affordability Developers, banks and other financial institutions will become more creative and and hence opened the market to a wider Investor pool and facilitated a rise in introduce solutions to bypass the high down payment required to avail a mortgage. End-users and first-time Buyers. TRENDS SALES PRICES RENTAL RATES PROJECT LAUNCHES INCENTIVES SUPPLY DEMAND - OFF PLAN DEMAND - COMPLETED 2018 2019 4 Dubai Real Estate Report - Q4 2018 DUBAI APARTMENT RENTAL RATES (All figures in AED 000’s p.a.) TYPE 1 BEDROOM 2 BEDROOMS 3 BEDROOMS 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 HIGH TO LUXURY END DIFC - - - 73 80 103 113 113 105 100 90 - - - 115 130 158 173 158 160 145 120 - - - 145 170 198 235 230 190 190 175 DOWNTOWN DUBAI 133 85 70 68 80 98 118 115 115 95 83 185 120 100 100 125 160 170 175 160 130 115 275 165 150 150 180 228 245 240 225 190 170 PALM JUMEIRAH 200 113 90 90 95 135 150 135 130 110 98 228 145 120 120 140 175 208 198 175 155 138 300 200 170 170 190 223 243 255 235 200 180 SHEIKH ZAYED ROAD 160 83 70 68 83 98 113 100 95 90 80 203 130 105 100 110 148 148 130 125 115 110 290 175 120 120 135 195 200 175 165 150 125 MID TO HIGH END BUSINESS BAY - - 55 45 60 90 93 93 85 70 65 - - 85 70 85 130 135 135 125 105 90 - - 115 100 125 178 180 185 170 150 140 DUBAI MARINA 130 78 63 63 75 105 113 98 90 70 68 180 110 90 80 100 140 158 143 125 105 98 245 160 125 115 135 178 210 205 190 155 145 GREENS 120 65 58 55 65 85 83 95 95 75 68 160 88 78 75 100 135 148 143 130 115 100 180 130 115 105 130 155 173 175 175 145 135 JUMEIRAH BEACH RESIDENCE 115 85 73 70 80 108 118 115 105 95 80 168 118 95 90 100 135 163 148 140 115 103 203 148 115 110 140 175 200 193 185 160 140 JUMEIRAH LAKES TOWERS 110 65 50 45 55 83 90 90 75 65 58 160 85 65 65 75 110 133 125 115 95 83 210 118 85 85 100 148 168 153 150 130 110 AFFORDABLE DEIRA 88 48 40 37 35 68 65 65 60 50 48 103 55 55 53 53 85 90 90 85 70 63 138 83 75 70 75 135 133 113 115 95 88 DISCOVERY GARDENS 100 58 45 38 45 70 70 72 65 55 48 135 85 70 53 70