observer dubai market report q2 / 2018

OBSERVERDubai Market ReportQ2 / 2018

Price Movements QoQ

Apartments

Apartments

Volumes

Volumes

Villas

Villas

Values

Values

Rental Movements QoQ

Ready Units Transactions

Off-Plan Units Transactions

Report HighlightsServices

Affordability is one of the key real estate trends being realised in 2018 and hence is a core theme in this report. With a large amount of supply set to enter the market, developers need to focus on catering to the largest and most active sectors, namely the mid-income segment. To keep ticket prices of residential property affordable to this audience, developers have been offering competitive payment plans, as well as reducing unit sizes. This trend is already being seen in locations such as Dubailand, Dubai South, Al Furjan and Jumeriah Village Circle.

Sales Prices The downward price corrections witnessed in Q1, continued throughout Q2. Average apartment sales prices are down 1% from the last quarter, whilst average villa sales prices have remained unchanged. Off-plan sales, particularly in the mid-market segment, continue to dominate the market due to flexible and affordable payment plans turning many renters into buyers.

Rental Prices Downward rental adjustments continue to take place in the Dubai market, due to several factors; additional stock being delivered thus providing more choices, some tenants purchasing their own properties due to the current affordability and conservative market sentiment. Average apartment rents are down 4% from the last quarter and average villa rents are down 2%.

Transactions The number of completed (ready to move in) unit transactions decreased by 3% from the previous quarter, with a 21% increase in transaction value, indicating a lower volume of sales but for a higher ticket size. For off-plan units, transactions increased by 5% from the previous quarter, with a 10% uplift in values.

Market Outlook The watchword for 2018 is ‘supply’. Whilst the UAE is still experiencing population growth, property supply, however, is growing at a higher percentage than the population. This means the real estate market will most likely continue to soften throughout the rest of 2018.

ValuationsMortgage and Secured LendingPortfolio Valuations

Advisory and ResearchFinancial FeasibilitiesHighest and Best Use StudiesMarket ResearchConceptual Advisory and Project Positioning Studies Project Redevelopment/Repositioning Advisory Investment Strategies – Acquisition and Disposal

Sales and LeasingCommercialIndustrialResidentialRetail

Property/Facilities Management CommercialMixed-UseResidential

International Properties London Off-Plan ResidentialInternational Homes and Investments International Relocations

Residential Market Q2 2018 Snapshot

-1%

-4%

-3%

+5%

0%

-2%

+21%

+10%

The Observer - Dubai Residential Q2 2018 1

ApartmentsResidential Sales Prices and Quarterly Change

Off-plan residential sales continue to dominate the market.

Residential Sales Prices and Quarterly Change

Villas

HOT TOPIC After the surge in off-plan sales last year, Dubai regulators have proposed a policy whereby property developers will need a project to reach 50 per cent completion before they can commence off-plan sales; 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 in the short term.

The downward price corrections witnessed in Q1, continued throughout Q2. Average apartment sales prices are down 1% from the last quarter, whilst average villa sales prices have remained unchanged.

The continued decrease in apartment prices over the last few years has made the bigger units more affordable, hence there has been a lower number of transactions but a higher value of transactions.

Larger villas with high price points have generated limited interest from buyers, mainly due to the lower investment yields attached to this type of property and currently the main focus is on affordable units.

Business Bay residential prices picked up, owing to its good location and the fact investors are seeking alternatives to the higher priced Downtown and DIFC areas. Off-plan sales, particularly in the mid-market segment, continue to dominate the market due to flexible and affordable payment plans turning many renters into buyers.

1,17

8

792

1,68

3

757

1,32

0

807

729

957

631

1,11

0

824

1,09

5

1,38

6

1,22

6

753

1,68

0

760

1,32

0

822

730

941

589

1,07

2

871 1,

077

1,34

2

-8%

-6%

-4%

-2%

0%

2%

4%

6%

8%

Business Bay DiscoveryGardens

Downtown DubaiLand Dubai Marina Dubai MotorCity

Dubai SiliconOasis

Dubai SportsCity

InternationalCity

JLT JVC The Greens The Views

PERCEN

TAGE C

HA

NG

EAED

SA

LES

PRIC

ES

Figures in AED/Sq FtSource: REIDIN & Chestertons

Q1 2018 Q2 2018 QoQ Movement

942

985

2,20

5

1,20

4

988

923

960

2,29

8

1,19

5

991

-3%0

500

1000

1500

2000

2500

0

200

400

600

800

1000

1200

1400

1600

1800

-2%

-1%

0%

1%

2%

3%

4%

5%

Arabian Ranches Jumeirah Park Palm Jumeirah The Lakes The Meadows/The Springs


PERCEN

TAGE C

HA

NG

EAED

SA

LES

PRIC

ES


1,17

8

792

1,68

3

757

1,32

0

807

729

957

631

1,11

0

824

1,09

5

1,38

6

1,22

6

753

1,68

0

760

1,32

0

822

730

941

589

1,07

2

871 1,

077

1,34

2

-8%

-6%

-4%

-2%

0%

2%

4%

6%

8%

Business Bay DiscoveryGardens

Downtown DubaiLand Dubai Marina Dubai MotorCity

Dubai SiliconOasis

Dubai SportsCity

InternationalCity

JLT JVC The Greens The Views

PERCEN

TAGE C

HA

NG

EAED

SA

LES

PRIC

ES



942

985

2,20

5

1,20

4

988

923

960

2,29

8

1,19

5

991

-3%0

500

1000

1500

2000

2500

0

200

400

600

800

1000

1200

1400

1600

1800

-2%

-1%

0%

1%

2%

3%

4%

5%

Arabian Ranches Jumeirah Park Palm Jumeirah The Lakes The Meadows/The Springs


PERCEN

TAGE C

HA

NG

EAED

SA

LES

PRIC

ES


The Observer - Dubai Residential Q2 2018 2 The Observer - Dubai Residential Q2 2018 3

ApartmentsResidential Market Rent and Quarterly Change

Supply is outpacing demand which is creating a tenant-led market.

Residential Market Rent and Quarterly Change

Villas

Downward rental adjustments continue due to several factors; additional stock being delivered providing more choices, some tenants purchasing their own properties due to the current affordability and conservative market sentiment.

Average apartment rents are down 4% from the last quarter and average villa rents are down 2%.

As opposed to previous quarters, smaller units are also affected. Studio rentals dropped by an average of 5% and 1BR units by 4%.

Prime established locations such as Jumeirah Golf Estates, DIFC and Dubai Marina exhibit more resilience when it comes to both apartment and villa rental rates.

The focus for developers and landlords going forward should be on quality as tenants will proactively seek out cheaper options or move to better quality units for the same price as their existing units.

HOT TOPIC With the burgeoning volume of off-plan investment stock entering the market that is destined to be made 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 offer decent facilities will command attention over older more expensive properties, essentially creating a two-tier market.

-8%

-7%

-6%

-5%

-4%

-3%

-2%

-1%

0%

-

50,000

100,000

150,000

200,000

250,000

Studio 1BR 2BR 3BR QoQ Change

Business Bay DIFC DiscoveryGardens

DowntownDubai

Dubai Marina DubaiSilicon Oasis

Dubai Sports City

Dubailand InternationalCity

JLT JVC The Greens The Views DubaiMotor City

PERCEN

TAGE C

HA

NG

EAED

REN

TAL

PRIC

ES

Figures in AED/Sq FtSource: Propertyfinder & Chestertons

-5%

-4%

-3%

-2%

-1%

0%

1%

2%

-

50,000

100,000

150,000

200,000

250,000

300,000

350,000

400,000

450,000

ArabianRanches

TheSprings

TheMeadows

The Lakes VictoryHeights

Al Furjan JVT JumeirahIslands

JumeirahGolf Estates

PalmJumeirah

2BR 3BR 4BR 5BR AVGFigures in AED/Sq FtSource: Propertyfinder & Chestertons

AED

REN

TAL

PRIC

ES

PERCEN

TAGE C

HA

NG

E

-8%

-7%

-6%

-5%

-4%

-3%

-2%

-1%

0%

-

50,000

100,000

150,000

200,000

250,000



DowntownDubai


Dubai Sports City



PERCEN

TAGE C

HA

NG

EAED

REN

TAL

PRIC

ES


-5%

-4%

-3%

-2%

-1%

0%

1%

2%

-

50,000

100,000

150,000

200,000

250,000

300,000

350,000

400,000

450,000

ArabianRanches

TheSprings

TheMeadows




PalmJumeirah


AED

REN

TAL

PRIC

ES

PERCEN

TAGE C

HA

NG

E

-8%

-7%

-6%

-5%

-4%

-3%

-2%

-1%

0%

-

50,000

100,000

150,000

200,000

250,000



DowntownDubai


Dubai Sports City



PERCEN

TAGE C

HA

NG

EAED

REN

TAL

PRIC

ES


-5%

-4%

-3%

-2%

-1%

0%

1%

2%

-

50,000

100,000

150,000

200,000

250,000

300,000

350,000

400,000

450,000

ArabianRanches

TheSprings

TheMeadows




PalmJumeirah


AED

REN

TAL

PRIC

ES

PERCEN

TAGE C

HA

NG

E


Developers are offering affordable, off-plan units to appeal to the growing mid-income sector.

HOT TOPIC Developers are increasingly offering competitive pricing and flexible payment plans as well as building smaller sized units at lower costs to cater to the mid-income sector. In 2018, 72% of the property transactions accounted for units under 1,000 sq ft, predominantly studio and one bedroom apartments.

The number of completed (ready to move in) unit transactions decreased by 3% from the previous quarter, with a 21% increase in transaction value, indicating a lower volume of sales but for a higher ticket size.

For off-plan units, transactions increased by 5% from the previous quarter, with a 10% uplift in values.

Dubai Marina continued to be the most popular community in terms of completed unit transaction volumes and values while Dubailand dominated the off-plan sales market.

5.696.66

1,000

0

2,000

3,000

4,000

5,000

6,000

Q1 2018 Q2 2018

Ready Properties Off-planFigures in AED/Sq FtSource: REIDIN & Chestertons

5.696.66

1,000

0

2,000

3,000

4,000

5,000

6,000

Q1 2018 Q2 2018


5.696.66

1,000

0

2,000

3,000

4,000

5,000

6,000

Q1 2018 Q2 2018


Volume of Residential Transactions Q2 2018

Value of Residential Transactions Q2 2018


Sales TransactionsCompleted Units

Top 10 Areas Based on Transaction Volumes Top 10 Areas Based on Transaction Volumes

Sales TransactionsOff-plan Units

Top 10 Areas Based on Ttransaction Values (in million AED) Top 10 Areas Based on Ttransaction Values (in million AED)

100 200 300 400 500

Jumeirah Lake Towers

Al Furjan

Jumeirah Village Circle

Palm Jumeirah

Downtown Dubai

Emirates Living

International City

Dubai Sports City

DubaiLand

Dubai Marina

200 400 600 800 1,000


Dubai Sports City

Arabian Ranches

DubaiLand

Al Furjan

Downtown Dubai

Emirates Living

Palm Jumeirah

Dubai Marina

Business Bay

0 100 200 300 400 500 600 700 800 900

Al Quoz

Dubai Marina

Dubai South

The Lagoons

MBR City

Downtown Dubai


Meydan City

Business Bay

DubaiLand

0 100 200 300 400 500 600 700 800 900 1000

Jumeirah Bay Island

Al Quoz


Meydan City

MBR City

The Lagoons

Dubai Marina

Downtown Dubai

Business Bay

DubaiLand

Source: REIDIN & Chestertons Source: REIDIN & Chestertons


100 200 300 400 500


Al Furjan


Palm Jumeirah

Downtown Dubai

Emirates Living

International City

Dubai Sports City

DubaiLand

Dubai Marina

200 400 600 800 1,000


Dubai Sports City

Arabian Ranches

DubaiLand

Al Furjan

Downtown Dubai

Emirates Living

Palm Jumeirah

Dubai Marina

Business Bay

0 100 200 300 400 500 600 700 800 900

Al Quoz

Dubai Marina

Dubai South

The Lagoons

MBR City

Downtown Dubai


Meydan City

Business Bay

DubaiLand

0 100 200 300 400 500 600 700 800 900 1000

Jumeirah Bay Island

Al Quoz


Meydan City

MBR City

The Lagoons

Dubai Marina

Downtown Dubai

Business Bay

DubaiLand



100 200 300 400 500


Al Furjan


Palm Jumeirah

Downtown Dubai

Emirates Living

International City

Dubai Sports City

DubaiLand

Dubai Marina

200 400 600 800 1,000


Dubai Sports City

Arabian Ranches

DubaiLand

Al Furjan

Downtown Dubai

Emirates Living

Palm Jumeirah

Dubai Marina

Business Bay

0 100 200 300 400 500 600 700 800 900

Al Quoz

Dubai Marina

Dubai South

The Lagoons

MBR City

Downtown Dubai


Meydan City

Business Bay

DubaiLand

0 100 200 300 400 500 600 700 800 900 1000

Jumeirah Bay Island

Al Quoz


Meydan City

MBR City

The Lagoons

Dubai Marina

Downtown Dubai

Business Bay

DubaiLand



100 200 300 400 500


Al Furjan


Palm Jumeirah

Downtown Dubai

Emirates Living

International City

Dubai Sports City

DubaiLand

Dubai Marina

200 400 600 800 1,000


Dubai Sports City

Arabian Ranches

DubaiLand

Al Furjan

Downtown Dubai

Emirates Living

Palm Jumeirah

Dubai Marina

Business Bay

0 100 200 300 400 500 600 700 800 900

Al Quoz

Dubai Marina

Dubai South

The Lagoons

MBR City

Downtown Dubai


Meydan City

Business Bay

DubaiLand

0 100 200 300 400 500 600 700 800 900 1000

Jumeirah Bay Island

Al Quoz


Meydan City

MBR City

The Lagoons

Dubai Marina

Downtown Dubai

Business Bay

DubaiLand




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Nick Witty, BSc (Hons) MRICSManaging [email protected]

Adam Wilson BSc (Hons) MRICS ACIArbDirector, Head of International [email protected]

Vladimir Cvetinovic, MRICSAssociate Director, Valuations & Advisory-AUH [email protected]

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Ellen SleutjesHead of Property [email protected]

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Disclaimer:All articles and data presented herein is intended for information purposes and has been compiled from sources deemed reliable including the Valu-ations and Research Department of Chestertons, sales and leasing staff, published data, and secondary sources. Though information is believed to be correct, materials presented is subject to errors, omissions, changes, or withdrawal without notice.

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observer dubai market report q2 / 2018

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