Real Estate Market 2nd Quarter | 2019 Review
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Real Estate Market 2nd Quarter | 2019 Review
Real VPI Residential VPI Residential VPI Office Estate Capital Values Rental Values Capital Values Performance -11.5% Q2 Y-o-Y -10.6% Q2 Y-o-Y -16.1% Q2 Y-o-Y VPI ValuStrat Price Index Market Intelligence. Simplified. Source: ValuStrat Key Indicators Source: REIDIN, DTCM, ValuStrat Residential Off-Plan Residential Off-Plan Residential Ready Residential Ready Residential Sales Ticket Size Sales Volume Sales Ticket Size Sales Volume Rents 1.48m 4,662 1.81m 2,687 91,759 AED Transactions AED Transactions AED p.a. -7.1% 5.5% 10.2% 0.4% -3.3% Q-o-Q Q-o-Q Q-o-Q Q-o-Q Q-o-Q Hotel Average Hotel Office Sales Office Sales Office Daily Rate Occupancy Ticket Size Volume Rents 469 77% 0.92m 374 945 AED Jan-May 2019 Jan-May 2019 AED Transactions AED/sq m p.a. -10.7% -5.0% -12.6% -3.4% -2.3% Y-o-Y Y-o-Y Q-o-Q Q-o-Q Q-o-Q Increase Stable Decline 1 | Dubai Real Estate Market 2nd Quarter 2019 Review
VPI ValuStrat Price Index Residential The ValuStrat Price Index (VPI), which is a valuation-based price index for Dubai’s VPI - Dubai Residential Capital Values 16 Apartment and 10 Villa Locations residential values, displayed an overall 11.5% [Base: Jan 2014=100] annual fall in capital values, with quarterly declines slowing to 2.9%. This downward 110 trend resulted in 29.3% citywide capital value 98.0 97.9 97.5 97.5 97.0 100 96.7 96.2 95.4 loss since the peaks of mid-2014. All 92.7 89.5 established freehold locations monitored by 90 87.0 84.0 the VPI witnessed price drops since the last 81.5 79.2 80 quarter, ranging from 1.2% to 4.2%. On an annual basis, 3 out of 26 locations measured 70 saw single-digit declines, villas in Palm Mar Jun Sep Dec Mar Jun Sep Dec Mar Jun Sep Dec Mar Jun Jumeirah and Al Furjan, as well as 2016 2017 2018 2019 apartments in Dubai Sports City. Capital values dropped more than 15% annually for Source: ValuStrat apartments in Palm Jumeirah, Discovery Gardens, and The Greens. VPI - Dubai Residential Rental Values 16 Apartment and 10 Villa Locations The Dubai VPI also analyses residential [Base: Q1 2014=100] rentals. The rental VPI is a 100 index with a 110 base set for Q1 2014, it monitors 16 apartment 98.8 97.6 98.7 and 10 villa locations within Dubai’s freehold 100 97.4 market and compares similar units within 90.1 90.4 87.7 those locations on a quarterly basis. The Q2 90 85.6 84.0 82.7 2019 residential rental VPI in Dubai stood at 78.8 78.0 80 76.5 73.9 points, declining 26.1% since 2014, 73.9 dropping 3.4% quarterly and 10.7% annually. 70 Dubai’s net yields averaged 5.7%, with Mar Jun Sep Dec Mar Jun Sep Dec Mar Jun Sep Dec Mar Jun apartments at 5.9% and villas at 4.7%. The 2016 2017 2018 2019 average residential occupancy rate stood at Source: ValuStrat 84%. Office VPI - Dubai Office Capital Values 5 Office Locations The second quarter ValuStrat Price Index for [Base: Q1 2015=100] Dubai’s office capital values declined to 69.3 100 points, suggesting that average capital values 91.8 91.4 88.7 90.0 92.0 91.5 91.3 89.3 are 30.7% lower than the same period during 90 86.5 82.7 80.7 the base year 2015, 16.1% lower than the same 80 77.7 74.0 period last year and 6.3% below the previous 69.3 quarter. Office space in Business Bay 70 witnessed the highest annual drop of 18.2% 60 and 7.7% QoQ, Jumeirah Lake Towers was Mar Jun Sep Dec Mar Jun Sep Dec Mar Jun Sep Dec Mar Jun second in line with losses of 17% year on year 2016 2017 2018 2019 and 7.2% QoQ. Downtown Dubai and Dubai International Financial Centre (DIFC) saw the Source: ValuStrat least annual declines of 10.5% and 5.3%, respectively. DIFC was the only location with For more details, please visit www.valustrat.com/vpi stable capital values since last quarter. www.valustrat.com | 2
Macro-Economic Snapshot • Dubai Investment Development Agency Dubai Population recorded 41% YoY increase in foreign direct investments amounting to AED 38.5 billion in 2018 3,279,000 • Dubai Economy forecasted 2019 GDP to grow 2019-Q2 2.1% with real estate, transport, logistics and 3,186,000 tourism sectors as major growth drivers 2018 • During January to April 2019, the Business Registration and Licensing sector at the 2,976,000 Department of Economic Development (DED) 2017 Dubai issued 9,514 new licenses, up 38.3% YoY • Non-oil foreign trade grew 7% YoY to AED 339 2,699,000 billion during the first quarter of this year, as 2016 per latest data from Dubai Customs • Foreign trade indicators rose 30% YoY in 2,447,000 exports, 7% YoY growth in re -exports and 2015 imports up 4% YoY • Moody’s Investor Service estimated Dubai 2,327,000 received largest share of Value Added Tax 2014 (VAT) receipts in 2018 at 42% of total UAE VAT revenues • Dubai International Airport (DXB) recorded 2.2% less traffic in Q1 2019 compared to the same period last year, at 22.2 million passengers • Free zone trade totalled AED 146 billion, up 20% YoY. Direct trade at AED 189 billion Source: Dubai Statistics Centre accounted for much of the total trade but fell 0.5% YoY • Total population stood at 3.28 million with average five-year growth rate of 7.6% Consumer Price Index vs. Housing Index • Sheikh Mohammed bin January 2016 – YTD Rashid Al Maktoum unveiled the “gold card” system, a 125 new scheme which could 120 grant permanent residency to certain investors, 115 entrepreneurs and 110 professionals • As of April 2019, annual 105 inflation rate dropped 2.9% 100 and witnessed less than 1% MoM uptick 95 • Housing and Other Utilities Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Jan Feb Mar Apr expenses index plunged 6.3% YoY and dipped 0.5% MoM 2016 2017 2018 2019 General Index (2014=100) Housing, Water, Electricity, Gas and Other Fuels Source: Dubai Statistics Centre 3 | Dubai Real Estate Market 2nd Quarter 2019 Review
Residential Supply • 8,487 residential units, 25% of the total Residential Supply estimated supply for 2019, have been 2016-2020 completed YTD (’000 UNITS) • More than half of these completions were concentrated in three areas: Dubailand, Jumeirah Village Circle and Al Furjan • For the rest of the year, projected supply mix is composed of 80% apartments (20,897 units) and 20% villas (5,133 units), all expected to 2020E finish construction before year-end 15.8 67.8 631 2019E • Approximately 10,000 apartments currently 5.6 29.0 597 under construction are in Business Bay, Dubai 597 2018 Silicon Oasis, Jumeirah Village Circle, 529 2017 Dubailand and Al Furjan. For villas, 73% of the new build units will be in Mohammed Bin 499 2016 Rashid City and Dubailand • Available data for new off-plan projects announced is estimated at 3,700 units from Existing Urban Villas/Apartments twelve projects expected to handover in a New Apartments* matter of three years New Villas* • Notable projects launched during the quarter *May be subject to significant downward adjustment Source: Dubai Statistics Centre, REIDIN, MEED Projects, ValuStrat include Arabian Ranches 3 (988 units), Creek Edge Dubai Creek Harbour (554 units), Grand Blue by Elie Saab Dubai Marina (631 units), Sur La Mer (147 units) and Wilton Park MBR City (320 units) Residential Sales • Off plan sales transaction volume continued Ready Sales Volumes to rally upwards during the last nine months, as the first quarter saw off-plan sales increase 7.6% YoY, however, ready property -1.2% 0.4% Last Year Last Quarter sales fell 1.2% YoY, but stabilised since Q1 • Q2 saw the highest share (28%) of ready villa purchases priced between AED 1M - AED 2M since 2016, and a significant share of 9.6% of villas priced above AED 10 million • Ready homes ticket size grew 10.2% QoQ and off-plan declined 7.1% QoQ • The average transacted ticket size for off plan Off-plan Sales Volumes was AED 1.48 million and for ready properties AED 1.8 million 7.6% 5.5% • The median transacted price for ready Last Year Last Quarter apartments stood at AED 9,257 per sq m (AED 860 per sq ft), down 14.9% YoY and 1.1% QoQ • For ready villas, the median transacted price was AED 8,966 per sq m (833 per sq ft), down 15.8% YoY and 6.8% QoQ Source: REIDIN, ValuStrat www.valustrat.com | 4
Residential Rents • Overall residential asking rents fell 10.6% YoY Residential Asking Rents • However, on a quarterly basis asking rents dropped 3.3% -18.2% -10.6% Last 2 Years Last Year • Compared to the same period last year, listed rents were down 10.9% for apartments and 8.1% for villas • Average annual rents for 2-bed villas stood at AED 137,000, 3-beds at AED 161,000, and 4-bedroom villas remained at AED 212,000 -5.2% -3.3% Last 6 Months Last Quarter • The citywide average rents per annum for studio apartments were AED 49,000, 1-bed at AED 68,000, 2-bed was AED 99,000, and 3-bedroom apartments were AED 131,000 • Residential occupancy in Dubai is estimated Source: REIDIN, ValuStrat at 84% Office Supply • ICD Brookfield Place secured three Office Supply pre-let agreements during Q2 with a 2016-2020 combined space of 5,110 sq m (55,000 (Million sq m GLA) sq ft) GLA ahead of its official opening • Approximately 74,467 sq m (801,555 sq ft) GLA finished construction during 0.37 the quarter which includes offices in 0.50 National Industries Park, Dubai South and Dubai Wholesale City 9.20 8.81 8.81 8.70 • Available data on remaining office space under construction is estimated at 8.47 497,670 sq m (5.4 million sq ft) GLA expected for delivery in 2019 • These include Mashreq Bank HQ Downtown with 35,000 sq m (376,737 sq ft) GLA, Dubai Islamic Bank office tower Al Nahda 1 at 23,339 sq m (251,213 sq ft) GLA and flydubai HQ 2016 2017 2018 2019E 2020E Warsan 3 with 35,025 sq m (377,006 sq ft) GLA Existing Stock Expected Supply Source: REIDIN, MEED Projects, ValuStrat 5 | Dubai Real Estate Market 2nd Quarter 2019 Review
Office Sales • There were 374 office sales transactions Office Median Transacted Prices during the second quarter, 3.4% lower than the previous quarter -29.8% -10.9% Last 2 Years Last Year • Overall transacted office prices were 10.9% lower than last year, and down 2.1% QoQ • The median transacted price stood at AED 7,373 per sq m (AED 685 per sq ft) • Business Bay was the most popular choice for office sales with a share of 52%, followed by -22.0% -2.1% Jumeirah Lake Towers (JLT) with 27% of Last 6 Months Last Quarter overall transactions this quarter • The median size of offices sold in Business Bay was 84 sq m (906 sq ft) and 104 sq m (1,118 sq ft) in JLT. 42,359 sq m (455,952 sq ft) of total Gross Leasable Area was sold during Source: REIDIN, ValuStrat Q2, amounting to a total investment value of more than AED 344 million Office Rents • Median office asking rents declined by 7.5% Office Median Asking Rents YoY and fell 2.3% QoQ • Asking rents for this quarter were 15.9% -15.9% -7.5% Last 2 Years Last Year lower than two years ago • The citywide median asking rent for a typical office size stood at AED 945 per sq m (AED 88 per sq ft) • Median asking rents commanded by Dubai International Financial Centre (DIFC) were at -3.3% -2.3% AED 2,088 per sq m (AED 194 per sq ft) for Last 6 Months Last Quarter typically sized units between 93 – 186 sq m (1,000 – 2,000 sq ft) • In Business Bay, median asking rents stood at AED 818 per sq m (AED 76 per sq ft) for a typical office area of less than 93 sq m (1,000 Source: REIDIN, ValuStrat sq ft) • Office occupancy in Dubai is estimated at 82% www.valustrat.com | 6
Retail Supply • Carrefour hypermarket occupying a total area Malls and Shopping Centres of 117,327 sq m (109,000 sq ft) at Cityland Mall (‘000 sq m GLA) in Dubailand was opened 762 • A new 1,301 sq m (14,000 sq ft) GLA mall dedicated to motorcycles, named as Motorcycle Mall was opened along Umm Suqeim Road 135 • Meraas and Samanea Group agreed to build a 52,955 sq m (570,000 sq ft) mall project near International City • Al Ghurair Centre announced the completion 22 of phase one for its 6,968 sq m (75,000 sq ft) 13 Reel Cinema megaplex • Data available for upcoming retail projects to be completed this year was adjusted upwards to 1.4 million sq m (15.1 million sq ft) GLA 32 263 498 1,026 1,696 • According to a Dubai Economic Department Convenience (< 3k sq m) Neighbourhood (3k-10k sq m) Community (10k-30k sq m) Regional (30k-90k sq m) Super Regional (> 90k sq m) report, the first four months of 2019, 258 restaurants and 169 coffee shops were Retail Completed opened, growing 25% annually Retail Under Construction Source: REIDIN, ValuStrat Retail Performance • Emaar Malls announced footfall in its asset Number of Malls and Shopping Centres portfolio grew 3% YoY to 36 million visitors during Q1 2019 2 • The Dubai Mall welcomed 22 million visitors during the first three months of 2019 1 • Occupancy for Emaar’s collection of malls 3 4 and community centres was kept at a healthy rate of 92%, down 3% YoY • Souq.com have transitioned and relaunched as Amazon.ae, marking the official take-over by the US e-commerce giant 16 46 28 19 11 Convenience Neighbourhood Community Regional Super Regional (< 3k sq m) (3k-10k sq m) (10k-30k sq m) (30k-90k sq m) (> 90k sq m) Retail Completed Retail Under Construction Source: REIDIN, ValuStrat 7 | Dubai Real Estate Market 2nd Quarter 2019 Review
Hotel Supply • As of May, total hotel room and hotel Hotel Room Supply apartment stock stood at 93,734 and 24,648 2016-2020 keys respectively (’000 KEYS) • An estimated 2,222 rooms were added from 10.7 the opening of seven hotels • Notable openings include Vida Hotel Emirates 17.7 Hills (160 keys), Hyatt Place Wasl District (202 rooms), The Grayton Hotel Al Mankhool (96 keys), Millennium Place Dubai Marina (453 rooms) and Rove at the Park (579 keys) • An estimated seven new hospitality project announcements were made during Q2 to add 134 an approximately 1,572 keys during the next 116 three years 116 103 107 • These include Diamond Central -Business Bay (220 rooms), Island Central - Deira Islands (267 keys), Central House - City Walk (60 rooms) and Jaz in the City - Deira (234 2016 2017 2018 2019E 2020E keys) • Dubai’s total room stock is projected to Hotel & Serviced Apt Rooms New Supply exceed 130,000 by end of this year Source: DTCM, MEED Projects, ValuStrat Hotel Performance • Total international guests Jan-May 2019 Source of Dubai Visitors by Region reached 7.16 million, no change when Jan-May 2019 compared to the same period last year • Citywide occupancy rate for the same period stood at 77%, down 5% YoY 5% 2% • Revenue per Available Room (RevPAR) and 6% 22% Average Daily Rate (ADR) witnessed double-digit declines on annual basis, 10% plunging 15.6% and 10.7%, respectively • The top three source markets were from Western Europe (22%), GCC (17%), South Asia 10% (16%) • Russian tourist numbers declined 8% YoY 17% • During Q1 2019, visitor count at Dubai Parks and Resorts weakened 11% YoY to 760,000 12% guests • Shortly before its official opening, the 16% 17,000-seater Dubai Arena located in City Walk, was renamed to Coca Cola Arena, after the same company acquired naming rights Western Europe Russia, CIS & Eastern Europe from Meraas. The new entertainment venue is GCC Americas expected to host local, regional and South Asia Africa international concerts and events which could North Asia & South East Asia Australia MENA positively impact tourism sector Source: DTCM www.valustrat.com | 8
Industrial Investment/Supply • China announced a plan to invest AED 12.5 Industrial Prices billion in Dubai logistics facilities involved in (AED/sq m) storage and production • A Dubai-based logistics services company opened a 60,000 sq m (645,834 sq ft) 5,000 semi-automated warehouse fulfilment centre in Dubai Logistics City 4,000 3,584 3,289 3,224 • Dubai South welcomed the opening of a 3,200 3,000 sq m (34,445 sq ft) B2C exports facility owned 2,211 by DHL 2,000 1,399 956 • Komatsu Middle East opened a 46,298 sq m 1,000 (498,347 sq ft) modern training and demonstration facility in Jebel Ali Al Quoz Dubai Jebel Ali • Completed industrial developments net Investment Free Zone project value totalled AED 3.06 billion during Park the first half of 2019 • Available data on upcoming warehouses and Rent - Upper Range Rent - Lower Range industrial facilities slated for completion until Source: ValuStrat next year stood at 252,569 sq m (2.7 million sq ft) BUA Industrial Performance • Industrial property prices experienced • Higher rates were recorded for properties quarterly declines, most notably with with specialised provisions including cold older-aged properties having lower eaves storage facilities headroom height in Jebel Ali Free Zone • Rental rates have also dropped QoQ in the • Asking rates quoted were generally in the city's industrial areas apart from Dubai South range between AED 2,152 per sq m to AED which has remained relatively stable with 5,290 per sq m (AED 200 per sq ft to AED 550 annual lease rates ranging from AED 377 per per sq ft) depending on various factors such sq m to AED 549 per sq m (AED 35 per sq ft to as location, size, condition and age of the AED 51 per sq ft) building Industrial Rental Rates (AED/sq m) 538 549 484 377 377 361 377 301 269 240 251 122 Rent High Rent Low Al Quoz Al Qusais Dubai Investment Jebel Ali Jebel Ali Dubai South Park Free Zone Industrial Area Source: ValuStrat 9 | Dubai Real Estate Market 2nd Quarter 2019 Review
Valustrat In Media 27th June, 2019 3rd May, 2019 Dubai and Abu Dhabi cheaper for Dubai said to mull plan to freeze rents residents on strong dollar despite rise in for 3 years cost of living ranking According to a recent report by real estate consultancy One of the main drivers of cheaper costs for existing ValuStrat, rents in Dubai in the first quarter of 2019 residents are falling property prices with the UAE have declined by 23.5 percent since 2014 and softened market slowing in recent years on the back of a by 1.9 percent quarterly and 9 percent annually three-year oil slump that has dampened demand and contracted sales and rental prices. Residential rents in Abu Dhabi in the first quarter of this year, for example, fell 6.9 per cent year-on-year and 2.1 per cent quarter-on-quarter, according to data from leading real estate firm ValuStrat. 30th April, 2019 Declan King talks about ValuStrat’s recent acquisition in the UK 13th May, 2019 ValuStrat's Declan King explained the rationale behind investment into a London-based firm of Chartered Dubai office rents become more Surveyors affordable ValuStrat had said that median office asking rents declined by 4.4 per cent year-on-year in the first quarter. The citywide median asking rent for a typical office size stood at Dh90 per square foot. Commercial office occupancy in Dubai was estimated at 84 per cent. 17th April, 2019 Property buyers are returning to Dubai as prices continue to drop “As capital values softened by an average of one per cent per month for the last 16 months, a six-month 10th May, 2019 streak in buying activity has been observed for both off-plan and ready homes,” said Haider Tuaima, Head “Star” wars cuts hotel prices of Real Estate Research at ValuStrat. The Head of the Real Estate Research Department at Valustrat, Haider Tuaima, attributed the large number of rooms to the feasibility studies conducted by the hotel owners. He pointed out that the high occupancy rates achieved by Dubai hotels are the highest in the region and among the highest in the world, while the rates of decline in prices between five to six percent per year. www.valustrat.com | 10
About ValuStrat is a leading consulting firm headquartered in Dubai providing Advisory, Valuations, Research, Industrial Consulting and Due Diligence services across a diverse range of industry sectors since 1977. Offices in Strategic the UAE, UK, Saudi Arabia, Pakistan and Qatar serve over 1,000 corporate Partners of clients in the Middle East. Client base includes financial institutions, local corporates, multinationals, governments, SMEs, family businesses and startups. Some of the key sectors serviced by ValuStrat’s consulting team include real estate, hospitality, healthcare, education, manufacturing, retail, Financial Institutions entertainment, transport and FMCG. ValuStrat is a Royal Institution of Chartered Surveyors (RICS) Regulated Firm and the first company head quartered in all of MENA and Asia to be accepted into the prestigious RICS Tech Affiliate program. VPI ValuStrat Price Index VPI Online www.valustrat.com/vpi The ValuStrat Price Index for Dubai’s office capital values is a valuation-based index constructed to represent the quarterly price change experienced by typical office space within Dubai. The ValuStrat Price Index for Dubai’s residential capital values is a valuation-based index constructed to represent the monthly price change experienced by typical residential units within Dubai. The ValuStrat Price Index for Dubai’s residential rental values is constructed to represent the quarterly rental change experienced by typical residential units within Dubai. The VPI applies weighted averages using Director - Commercial Valuations data samples representing more than 90% of all property types across the city’s freehold locations and is built by our expert RICS Registered Valuers. Research Methodology Every effort has been made to ensure the accuracy of this document. New supply data covers 38 defined areas in Dubai including non-freehold areas. Only completed and under construction projects are included. The new supply data does not include announced projects, and projects in design phase. The new supply database does not take into account most private building projects. Prices are calculated from actual transactions that have been carefully cleansed to exclude duplicates, bulk sales and outdated transactions. Rental data Associate Director & Head of Industrial Consulting is derived from a carefully cleansed database of listings that don’t include duplicates, potential errors and outliers. Copyright © ValuStrat Consulting FZCo. 2019 This document is the property of ValuStrat Consulting FZCo and must not be reproduced or transmitted in any form or by Clare Frances McCarron, MRICS any means, without the prior written consent of ValuStrat Manager - Commercial Valuation Consulting FZCo. We welcome your constructive feedback and any corrections that may need to be made to this document. ValuStrat Consulting FZCo does not accept any liability in negligence or otherwise for any damage suffered by any party resulting from reliance on this document.
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