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Transcript of Cavendish Maxwell_Dubai Residential Market Report_Q1 2016
32 © Cavendish Maxwell 2016 | www.cavendishmaxwell.com © Cavendish Maxwell 2016 | www.cavendishmaxwell.com
Dubai Residential Market Report - Q1 2016
• Dubai residential market highlights
• Macro-economic factors
• Sale price performance
• Rent performance
• Residential supply
• Cavendish Maxwell Residential Market Survey Q1 2016
Content
© Cavendish Maxwell 2016 | www.cavendishmaxwell.com © Cavendish Maxwell 2016 | www.cavendishmaxwell.com 54
Dubai Residential Market Report - Q1 2016
2016 Pipel ine
36,000 scheduled units
Q1 2016 Complet ions
4,600 units
Strengths
• Hydrocarbon reserves • Low government borrowing • Regional ‘safe haven’ • Tourism • Cosmopolitan cities• Transparency (regionally)
Opportunities
• Improving legislation• Iranian sanctions easing • Theme parks in Dubai and museums in Abu Dhabi• Improving transportation network • Expo 2020• Real estate PPP law
Weaknesses
• Oil price declines• Water availability • Dollar strength • Ruble decline • High household debt • Transparency (globally)
Threats
• Regional political instability • Increasing interest rates • Introduction of VAT• Affordability • Global economy/Chinese slowdown • Liquidity/credit availability
Dubai residential market highlights
UAE real estate market SWOT
Q4 2015 - Q1 2016
-3% -3%
Q1 2015 - Q1 2016
-7% -8%
“Annual inflation rate declined to 4% at the end of 2015 after it had reached its highest level in August 2015 of 4.41%.”
“Announced petrol and diesel prices for April 2016 have increased by an average of 11% from the previous month.”
• The Dubai Consumer Price Index (CPI) and annual inflation rate have gradually decreased partially due to lower petrol prices which reduced the transport price index by 10% in December 2015.
• From January to December 2015, the highest price increase was in food and non-alcoholic beverages by 5%, followed by an increase of 4% during the same period in the housing, water, electricity, gas and other fuels category.
• The UAE and GCC nations are strategically preparing for a post-oil future, with the most recent announcement of introducing a value added tax (VAT) by up to 5% in 2018.
• Whilst, OPEC crude oil prices continued to decline reaching the lowest price of 22.48 USD/barrel in mid January 2016, prices began to rebound towards the end of January and continued on this upward trend reaching an average of 34.33 USD/barrel at the end of March 2016.
• On April 17, 2016 representatives from OPEC and non-OPEC producing nations are set to meet in Qatar to discuss the possibility of a production freeze agreement. Whilst news of this forthcoming meeting may have had a stabilising effect on recent crude oil prices, it is thought this may be short lived unless an agreement is reached and implemented to alter production.
Macro-economic factors
126
124
122
120
118
116
114
112
110
108
2.4
2.2
2
1.8
1.6
1.4
1.2
1
5%
4%
3%
2%
1%
0%
-1%
-2%
Annual inflation rateUnleaded petrol 98 Unleaded petrol 95
Unleaded petrol 91 DieselCPI
2014Jan162015
Feb16
Mar16
Apr162011
Oct152010
Sep152009
Aug152012
Nov152013
Dec15
CPI
AED
/ li
tre
Ann
ual i
nflat
ion
rate
Source: Dubai Statistics Centre Source: UAE Ministry of Energy
Figure 1 Figure 2
Average price movement Residential supply
Dubai CPI and annual inflation rate UAE petrol prices
(may be subject to delays)
© Cavendish Maxwell 2016 | www.cavendishmaxwell.com © Cavendish Maxwell 2016 | www.cavendishmaxwell.com 76
Dubai Residential Market Report - Q1 2016
• Prices continued to decline during the first quarter of 2016 as market sentiment heavily impacted market movement as both buyers and sellers remained in a waiting period.
• Whilst the Dubai Land Department (DLD) reported a monthly increase of approximately 20% in January 2016 from December 2015 in the number of unit sale transactions registered, this represents a 32% decrease year on year from January 2015.
• Apartment prices declined between 2% and 5% in Q1 2016 from Q4 2015 across locations and communities currently tracked by the Property Monitor Index (PMI). During a 12 month period, apartment prices have declined between 5% and 11%.
• In addition to the general macro-economic factors affecting the real estate market in Dubai, new supply has kept downward pressure on prices.
• The current price levels may represent a strong opportunity for end-users, as some of the more established communities become more financially accessible, leading to more diverse options for buyers.
• Investors have remained on the sideline waiting for the prices in the secondary market to decline further or have bought select off-plan units launched at lower than average market price.
Apartments“Apartment prices declined between 2% and 5%, with an overall average decrease of 3% during Q1 2016.”
Figure 3
Sale price performance
• Prices in established and prime villa communities such as Arabian Ranches, The Springs, Lakes and Meadows have continued to decline, making them viable options for end-user buyers who may have previously been renters within these communities.
• Whilst better quality villas in more established communities have been more resilient to market price declines, closing the gap between the buyer and seller price expectations remains a challenge.
• With the current price declines, gross rental yields range between 4% in Jumeirah Islands and Jumeirah Golf Estates, up to 7% in the Springs.
• Villa size, location, age, and the availability of facilities and amenities within the villa community remain to be the major deciding factors for many buyers.
Villas“Villa prices decreased between 2% and 5%, with an overall average drop of 3% during Q1 2016.”
Figure 4
Source: Property Monitor Index
Apartment pr ice performance
Business Bay
Emirates Living (Views and Greens)
Discovery Gardens
International City (Clusters)
Downtown Burj Khalifa(excluding
Burj Khalifa)
Jumeirah Beach
Residences
Dubai Marina
Uptown Motor City
Dubai Sports City
Palm Jumeirah (Shoreline
Apartments)
2,500
2,000
1,500
1,000
500
0
0%
-2%
-4%
-6%
-8%
-10%
-12%
Ave
rag
e p
rice
(AED
/ s
q. f
t.)
% c
hang
e
Q4 2015 Q1 2016 QoQ % change Q4 2015 - Q1 2016 12 Month % change Q1 2015 - Q1 2016
-5%
-9%
-8%
-7%
-6% -6% -6%
-11%
-5%
-8%
-6%
-2%
-3%
-2% -2% -2%
-5%
-2% -2%
-3%
Source: Property Monitor Index
Vi l la pr ice performance
Al Furjan Villas
Jumeirah Village
Triangle
Arabian Ranches
The LakesJumeirahGolf Estates
The MeadowsJumeirah Islands
The SpringsJumeirah Park
Victory Heights
1,800
1,600
1,400
1,200
1,000
800
600
400
200
0
0%
-2%
-4%
-6%
-8%
-10%
-12%
-14%
-16%
Ave
rag
e p
rice
(AED
/ s
q. f
t.)
% c
hang
e
Q4 2015 Q1 2016 QoQ % change Q4 2015 - Q1 2016 12 Month % change Q1 2015 - Q1 2016
-4%
-9% -9%
-6% -6%
-8%
-7%
-6%
-12%
-14%
-6%
-5%
-2% -2%
-3%
-2% -2%
-5%
-3%
-2%
© Cavendish Maxwell 2016 | www.cavendishmaxwell.com © Cavendish Maxwell 2016 | www.cavendishmaxwell.com 98
Dubai Residential Market Report - Q1 2016
100,000
90,000
80,000
70,000
60,000
50,000
40,000
30,000
20,000
10,000
-
1%
0%
-1%
-2%
-3%
-4%
-5%
QoQ % change Q4 2015 - Q1 2016Min Max
Jumeira
h Beac
h Resid
ences
Jumeira
h Lake
s Towers
Busine
ss Bay
Downto
wn Burj
Khalifa* DIFC
Dubai Sp
orts C
ity
Motor C
ity
Interna
tional C
ity (Clust
ers)
Dubailan
d
The Gree
ns
The Vie
ws
Dubai M
arina
AED
per
ann
um
% c
hang
e
Studio rents - Q1 2016
-1% -1%
-2%
-3% -3%
-1%
-2%
-1%
0% 0% 0%
-2%
180,000
160,000
140,000
120,000
100,000
80,000
60,000
40,000
20,000
-
1%
0%
-1%
-2%
-3%
-4%
-5%
QoQ % change Q4 2015 - Q1 2016Min Max
Jumeira
h Beac
h Resid
ences
Jumeira
h Lake
s Towers
Busine
ss Bay
Downto
wn Burj
Khalifa* DIFC
Dubai Sp
orts C
ity
Motor C
ity
Interna
tional C
ity (Clust
ers)
Dubailan
d
The Gree
ns
The Vie
ws
Dubai M
arina
AED
per
ann
um
% c
hang
e
One bedroom apartment rents - Q1 2016
-2%
-1%
-3%
-4%
-1% -1%
-2%
-3%
-1%
0%
-4%
-2%
250,000
200,000
150,000
100,000
50,000
-
1%
0%
-1%
-2%
-3%
-4%
-5%
QoQ % change Q4 2015 - Q1 2016Min Max
Jumeira
h Beac
h Resid
ences
Jumeira
h Lake
s Towers
Busine
ss Bay
Downto
wn Burj
Khalifa* DIFC
Dubai Sp
orts C
ity
Motor C
ity
Interna
tional C
ity (Clust
ers)
Dubailan
d
The Gree
ns
The Vie
ws
Dubai M
arina
AED
per
ann
um
% c
hang
e
Two bedroom apartment rents - Q1 2016
-1%
-2%
-1%
-3%
-1%
-2% -2%
-1%-1% -1%
0%
-2%
• The delivery of new developments has increased the options for tenants as they shift from established locations to emerging areas such as Dubai Sports City and Dubailand.
• Prices have declined at a faster rate than rents, leading to more attractive gross rental yields in the market.
• As sale prices continue to decline, some homeowners who may have previously been looking to sell have turned to renting their property instead as they have not been able to achieve their expected sale prices.
• Buyers, however, especially those residing in Dubai for the long-term are starting to consider buying over renting.
• In most recent years as the city border continues to expand inland to less developed areas, developers are designing and delivering villa communities which are self sufficient providing a full scale of facilities and amenities, including retail, food and beverage outlets as well as schools.
• This shift in design trend, alongside the sale market conditions and additional villa supply, has placed pressure on established villa communities.
Apartments: “Apartment rents have declined up to 4% in Q1 2016.”
Rent performanceFigure 5 Figure 8
Figure 6 Figure 9Figure 7 Figure 10
Source: Property Monitor Index Source: Property Monitor IndexSource: Property Monitor Index Source: Property Monitor Index
Source: Property Monitor Index*Excluding Burj Khalifa
*Excluding Burj Khalifa*Excluding Burj Khalifa
Source: Property Monitor Index
300,000
250,000
200,000
150,000
100,000
50,000
-
3%
2%
1%
0%
-1%
-2%
-3%
-4%
-5%
-6%
QoQ % change Q4 2015 - Q1 2016Average rent
The Mead
ows
The Sp
rings
Arabian
Ranch
es
Al Furja
n Villas
The La
kes
Jumeira
h Park
Jumeira
h Golf
Estate
s
AED
per
ann
um
% c
hang
e
Three bedroom villa rents - Q1 2016
-1%
-3% -3% -3%
-5%
0%
2%
350,000
300,000
250,000
200,000
150,000
100,000
50,000
-
3%
2%
1%
0%
-1%
-2%
-3%
-4%
-5%
-6%
QoQ % change Q4 2015 - Q1 2016Average rent
The Mead
ows
The La
kes
The Sp
rings
Arabian
Ranch
es
Victor
ia Heig
hts
Jumeira
h Park
Jumeira
h Islan
ds
Jumeira
h Golf
Estate
s
AED
per
ann
um
% c
hang
e
Four bedroom villa rents - Q1 2016
-3%
0% 0%
-4%
-5%
0% 0%
-1%
500,000
450,000
400,000
350,000
300,000
250,000
200,000
150,000
100,000
50,000
-
3%
2%
1%
0%
-1%
-2%
-3%
-4%
-5%
-6%
QoQ % change Q4 2015 - Q1 2016Average rent
The Mead
ows
The La
kes
Arabian
Ranch
es
Victor
ia Heig
hts
Al Furja
n Villas
Jumeira
h Park
Jumeira
h Islan
ds
Jumeira
h Golf
Estate
s
AED
per
ann
um
% c
hang
e
Five bedroom villa rents - Q1 2016
0%
-2%
-3%
-1%
-2%
-1%
-4%
2%
Villas: “The delivery of additional villas into the market has created a downward pressure on rents.”
© Cavendish Maxwell 2016 | www.cavendishmaxwell.com © Cavendish Maxwell 2016 | www.cavendishmaxwell.com 1110
Dubai Residential Market Report - Q1 2016
• 43% of the total number of units initially scheduled for 2015 were postponed to a completion date in 2016, whilst 4% were placed on hold with no definitive completion date.
• 10% of the units delivered in the first quarter of 2016 were projects delayed from 2015 and mainly located in JVC, Dubailand and Meydan.
• Approximately 44% of the completed developments in Q1 2016 have been apartment units, 38% townhouses and the remaining 18% villas.
• The completion of Phases 1 - 4 of Reem Mira villas in Q1 2016 brought an additional 1,582 units into the community with Phase 5 of the project expected to be completed at a later date in 2016, with an additional 316 villas.
Q1 2016 Completions:“Approximately 4,600 residential units have been completed in the first quarter of 2016.”
Figure 11
Residential supply
21
1
3
2
7
108
4
7
6
5
4
3
2
1
9
5
6
1 Al Jaddaf2 Business Bay3 DIFC4 Dubai Investment Park5 Dubai Silicon Oasis
6 Dubai Sports City7 Dubailand8 IMPZ9 Jumeirah Park10 Jumeirah Village Circle
400 - 500
501 - 600
601 - 700
701 - 800
801 - 900
901 - 1,000
1,001 - 2,000
Range
21
1
3
2
7
10
8
4
9
6
9
8
7
6
5
4
3
2
1
5
1 Al Furjan2 Business Bay3 Dubai Marina4 Dubai Silicon Oasis5 Dubai Sports City
6 Dubailand7 International City8 Jumeirah Village Circle9 Mohammed Bin Rashid City10 Reem
1,001 - 1,500
1,501 - 2,000
2,001 - 2,500
2,501 - 3,000
3,001 - 3,500
3,501 - 4,000
4,001 - 4,500
4,501 - 5,000
> - 5,001
Range
• At the end of 2015, there were approximately 38,000 units initially scheduled for delivery in 2016. This figure, in addition to the 7,734 units delayed from 2015, had brought the total of additional units expected for delivery to 46,000.
• As Q1 2016 came to an end, many developers delayed the delivery of their projects from 2016 to 2017.
• Of the total number of projects initially scheduled for delivery in 2016 (excluding those delayed from 2015), 20% have been further delayed to 2017 and 6% have been placed on hold.
• As the map below highlights, the majority of additional residential units are set to be delivered in Dubailand followed by Dubai Silicon Oasis and Meydan in Mohammed Bin Rashid City.
• Approximately 80% of the market wide 2016 pipeline supply are apartments and 20% are villas and townhouses.
Pipeline Supply 2016:“As of Q1 2016, there are 31,600 additional units scheduled to enter the market during the remaining three quarters in 2016, subject to any delays.”
Figure 12
2015 Completions - Top 10 locations 2016 Pipeline - Top 10 locations
Source: Cavendish Maxwell research Source: Cavendish Maxwell research
1312 © Cavendish Maxwell 2016 | www.cavendishmaxwell.com © Cavendish Maxwell 2016 | www.cavendishmaxwell.com
Dubai Residential Market Report - Q1 2016
© Cavendish Maxwell 2016 | www.cavendishmaxwell.com © Cavendish Maxwell 2016 | www.cavendishmaxwell.com 1514
Dubai Residential Market Report - Q1 2016
Q2 2016 sales out lookApartmentsPercentage of agents who predicted apartment prices would:
VillasPercentage of agents who predicted villa prices would:
Q2 2016 rents out lookApartmentsPercentage of agents who predicted apartment rents would:
VillasPercentage of agents who predicted villa rents would:
increase by more than 5% increase by up to 5% not change decrease by up to 5% decrease by more than 5%
increase by more than 5% increase by up to 5% not change decrease by up to 5% decrease by more than 5%
Figure 13
Figure 14Source: Cavendish Maxwell Residential Market Survey
Source: Cavendish Maxwell Residential Market Survey
35%37%
2%
0%
1%
0%
46%43%
9% 13%8% 6%
34%41%
46%41%
14% 15%6% 3%
Looking back - Q1 2016
Cavendish Maxwell Residential Market Survey
Looking forward - Q2 2016
The majority of agents surveyed had predicted apartment and villa prices to decline further by up to 5%.
Agents had predicted that rents would remain the same during Q1 2016.
predictions vs reality
Apartment and villa prices fell by 3% during Q1 2016.
Rents have declined across most unit types and areas.
Miles Phillips BSc (Hons) MRICS ACIArbPartnerHead of Operations - UAE
M: +971 56 604 2750 E: [email protected]
Amit Shukla Senior AssociateDevelopment Advisory and Real Estate ResearchM: +971 56 360 3540E: [email protected]
Sofia Underabi BPropEc AAPI PartnerHead of Residential Valuation M: +971 50 435 6527 E: [email protected]
Dima Isshak BScResearch Manager
M: +971 50 482 7938 E: [email protected]
PROPERTY SERVICESMIDDLE EAST & AFRICA
Jay Grant MSc IRRV (Hons) Managing Partner
M: +971 50 192 1658 E: [email protected]
T: +971 (0) 4 453 9525 E: [email protected]
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