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QUARTERREVIEW

2018Dubai Real Estate Market

Real EstatePerformance

Market Intelligence.Simplified.VPI

ValuStrat Price Index

Key Indicators

ValuStrat Price IndexResidential

-9.0%Q3 Y-o-Y

Source: ValuStrat

ValuStrat Price IndexOffice

-11.6%Q3 Y-o-Y

Source: ValuStrat

-5.4%Jan-Jul YoY

Hotel ADR

-3.8%Q-o-Q

ResidentialOff-Plan Sales

Ticket Size

-1%Jan-Jul YoY

Hotel Occupancy

-34.2%Q-o-Q

ResidentialOff-Plan Sales

Volume

-12.8%Q-o-Q

Office SalesTicket Size

9.5%Q-o-Q

ResidentialReady SalesTicket Size

-10.1%Q-o-Q

Office SalesVolume

-20.4%Q-o-Q

ResidentialReady Sales

Volume

-7.2%Q-o-Q

OfficeRents

-5.1%Q-o-Q

ResidentialRents

Sources: REIDIN, DTCM, ValuStrat

1 | Dubai Real Estate Market 3rd Quarter 2018 Review

VPIValuStrat Price Index

ResidentialThe third quarter 2018 VPI – Residential, displayed an overall 9% annual fall in capital values, with the quarterly decline decelerating to 2.9% when compared to the previous quarter. This downward trend resulted in 22.3% citywide capital value loss since the peaks of mid-2014. All established freehold locations monitored by the VPI witnessed price drops since the last quarter, ranging from 0.2% to 5%. Quarterly declines of more than 4% were registered in Jumeirah Islands, Business Bay, Palm Jumeirah (apartments), and Discovery Gardens. Capital values for villas in Palm Jumeirah and Al Furjan remained mostly flat as compared to Q2.

Source: ValuStrat

ValuStrat Price Index16 Apartment and 10 VillaLocations in Dubai[Base: Jan 2014=100]

70

90

110

2015 2016 2017 2018

Mar

Jun

Sep

Dec

Mar

Jun

Mar

Jun

Sep

Dec

Mar

Jun

Sep

Dec

97.5

Sep

87.0

Sep

97.597.998.097.998.1

98.5100.1

97.0 96.7 96.295.4

92.7

89.5

The VPI Office for Q3, which analyses the freehold office market in the most transacted locations in Dubai, stood at 80.7 points. This suggests that average capital values are 11.6% lower than last year. However, declines slowed to 2.3% when compared to previous quarter. Barsha Heights witnessed the highest annual drop of 15% and 4.2% QoQ, Jumeirah Lake Towers was second in line with losses of 13.3% year on year and 1% QoQ. Dubai International Financial Centre (DIFC) fell 2.1% YoY and 1.1% QoQ. Downtown Dubai also saw annual declines but was the only location monitored by the VPI where there was no change on a quarterly basis.

Office

70

90

110

2015 2016 2017 2018

Mar

Jun

Sep

Dec

Mar

Jun

Sep

Dec

Mar

Jun

Mar

Jun

Sep

Dec

88.7 90.091.491.8

97.097.797.9100.0

92.0 91.5 91.389.3

86.5

82.7

For more details, please visit www.valustrat.com/vpi

ValuStrat Price Index5 Office Locations in Dubai[Base: Jan 2015=100]

Source: ValuStrat

80.7

www.valustrat.com | 2

MacroEconomicSnapshot

• Dubai’s population stood at 3.13 million with a five-year average growth rate of 7.2%

• With the imminent possibility of two more interest rate hikes this year as per the US Federal Reserve, borrowing costs in the UAE are expected to increase

• As of August, Dubai’s annual inflation rate was 2.2% with a marginal monthly change

• Housing and Utilities Expenses retreated 3.6% YoY and 0.6% MoM

20122,105,000

20132,210,300

20142,320,800

20152,450,000

20162,695,000

20172,978,000

2018-Q33,126,000

• With the aim of boosting the economy, UAE government announced 10-year visa for investors and certain professionals as well as 100% foreign ownership of non-free zone establishments• 5-year renewable residency visa announced for expat retirees. Subject to either AED 2m property, AED 1m savings or AED 20,000 income. Initiative may benefit overall economy, particularly the real estate sector• Latest Dubai Department of Economic Development (DED) report notes AED 80 billion worth of foreign direct investment and 54,000 jobs in the city’s technology sector over last 3 years• DED permitted 163 free zone companies to operate in mainland Dubai due to an MOU signed with the Dubai Free Zones Council. Over 34,000 free zone companies are expected to benefit from this agreement

• Dubai International Financial Centre reported 14% YoY increase on the number of active registered companies • Dubai International Airport (DXB) recorded a 1.6% increase in passenger traffic, reached almost 52 million as of July 2018

Consumer Price Index vs. Housing IndexJanuary 2016 – YTD

General Index (2014=100)

Housing, Water, Electricity, Gas and Other Fuels

Source: Dubai Statistics Centre

989694

114

112110108106104102100

2016 2017 2018

Jan

Feb

Mar

Apr

May

Jun

Jul

Aug

Sep

Oct

Nov

Dec

Jan

Feb

Mar

Apr

May

Jun

Jul

Aug

Jun

Jul

Aug

Sep

Oct

Nov

Dec Jan

Feb

Mar

Apr

May

3 | Dubai Real Estate Market 3rd Quarter 2018 Review

• 12,332 apartments and villas, 27% of the total supply as expected at the start of 2018, have been completed YTD

• 70% of these completions, amounting to 8,614 units, were located mainly in five areas: Dubailand, Jumeirah Village Circle (JVC), Dubai Silicon Oasis, International City phase 2/3, as well as Dubai Marina

• The upcoming supply mix is composed of 18,420 apartments and 2,729 villas, which are expected to finish construction before year end

• 2019 is expected to add just under 70,000 residential units, which includes projects that were previously delayed during the last 18 months

• The summer holidays and Eid break seemed to have influenced residential property sales this quarter as transaction volumes saw considerable declines

• Established areas that witnessed substantial off-plan sale transactions during the last three months included Downtown Dubai at 85% of sales being off-plan, Business Bay at 84% and Remraam 75%

• As investor focus shifts towards prime ready properties, average ticket prices for ready properties have risen 9.5% QoQ, however, off-plan sales prices fell 3.8%

• The median transacted price for ready apartments stood at AED 10,021 per sq m (AED 931 per sq ft), down 11% YoY and 7.9% QoQ

• For ready villas, the median transacted price was AED 10,333 per sq m (960 per sq ft), down 8.8% YoY and 3% QoQ

Dubai Residential Supply2015-2019(‘000 UNITS)

Source: Dubai Statistics Centre, REIDIN, MEED Projects, ValuStrat *May be subject to significant downward adjustment

ExistingNew Apartments*New Villas*

467

ResidentialSupply

ResidentialSales

2019

E

400

450

500

2018E

2017

2016

2015

550

600

650

400

450

500

550

600

650

485

497

519

51929

4.7

55356

13.5

Source: REIDIN, ValuStrat

Ready Sales Volumes

-20.4%Last Quarter

0.8%Last Year

Off-plan Sales Volumes

-34.2%Last Quarter

-50.5%Last Year

www.valustrat.com | 4

• Overall residential asking rents fell 11% YoY

• However, on a quarterly basis asking rents declined 5.1%

• Compared to the same period last year, listed rents were down 11.1% for apartments and 10.2% for villas

• Average annual rents for 2-bed villas AED 126,000, 3-bed at AED 177,000, and 4-bedroom villas were AED 255,000

• Average annual rents for studio apartments were AED 51,000, 1-bed at AED 74,000, 2-bed was AED 105,000, and 3-bedroom apartments were AED 149,000

ResidentialRents

Source: REIDIN, ValuStrat

Residential Asking Rents

-20.3%Last 2 Years

-11.0%Last Year

-7.0%Last 6 Months

• Office space under construction is estimated at 929,000 sq m (10.1 million sq ft) for delivery by 2021

• Most upcoming office space will be concentrated in Jumeirah Lake Towers (32%), TECOM Business Park (20%), Business Bay (15%), DIFC (11%) and Dubai Silicon Oasis (7%)

• No major completions were reported for this quarter

Dubai Office Supply2015-2019(Million sq m GLA)

Source: REIDIN, MEED Projects, ValuStrat

Existing Stock Expected Supply

OfficeSupply

2015 2016 2017 2018E 2019E

8.39

8.47

8.70

0.37

8.70

0.50

9.07

-5.1%Last Quarter

5 | Dubai Real Estate Market 3rd Quarter 2018 Review

• Office transaction volumes during the summer holiday period declined 10.1% when compared to the previous quarter

• Overall transacted office prices were 24.7% lower than last year, however, saw an increase of 2.9% QoQ

• The median transacted price stood at AED 8,514 per sq m (AED 791 per sq ft)

• Business Bay was the most popular choice for office sales with a share of 43% followed by Jumeirah Lake Towers (JLT) with 32.5% of overall transactions

• The median size of offices sold in Business Bay was 110 sq m (1,184 sq ft) and 111 sq m (1,194 sq ft) in JLT

• 32,468 sq m (349,477 sq ft) of total GLA was sold during Q3 amounting to a total investment value of more than AED 382 million

Source: REIDIN, ValuStrat

Office Median Transacted Prices

OfficeSales

-24.7%Last Year

-21.1%Last 2 Years

2.9%Last Quarter

-10.6%Last 6 Months

• Median office asking rents declined by 11.8% YoY, and 7.2% QoQ

• Asking rents for this quarter was 11.7% lower than two years ago

• The citywide median asking rent for a typical office space stood at AED 948 per sq m (AED 88 per sq ft)

• Median asking rents commanded by Dubai International Financial Centre (DIFC) were at AED 1,862 per sq m (AED 173 per sq ft) for typically sized units between 93 – 186 sq m (1,000 – 2,000 sq ft)

• In Business Bay, median asking rents stood at AED 915 per sq m (AED 85 per sq ft) for the typical office area of 93 sq m (1,000 sq ft)

OfficeRents

Source: REIDIN, ValuStrat

Office Median Asking Rents

-11.8%Last Year

-11.7%Last 2 Years

-7.2%Last Quarter

-6.3%Last 6 Months

www.valustrat.com | 6

• Nakheel opened Pavilion at Badrah in Jebel Ali with a total retail space of 6,689 sq m (72,000 sq ft), set to have 26 outlets in addition to its own Carrefour supermarket

• Dubai Holding and Emaar Properties announced a partnership to develop Dubai Square at Dubai Creek Harbour, a next generation retail hub expected to have a 750,000 sq m (8.07 million sq ft) GLA (about twice the size of Dubai Mall) and featuring the Middle East’s largest Chinatown

• Union Coop to build a 5,260 sq m (56,618 sq ft) hypermarket in Dubai Silicon Oasis as part of a 30-year investment contract with Dubai Silicon Oasis Authority

Retail Malls & Shopping Centres(‘000 sq m GLA)

RetailSupply

Source: REIDIN, ValuStrat

Convenience< 3k sq m

Neighbourhood3k-10k sq m

Community10k-30k sq m

Super Regional> 90k sq m

Regional30k-90k sq m

1,933

852

187

46

439

• Majid Al Futtaim’s foray into Saudi Arabia, Egypt, Pakistan and East Africa markets with Carrefour is expected to boost revenue by 10% YoY

• Dubai Duty Free announced 10% YoY increase in sales during the first half of 2018, with average daily sales reaching AED 20 million

• Two of Dubai’s premier retail mall operators have proven resilient amidst a challenging retail environment. Emaar Malls announced an 8% YoY growth in net profit while MAF overall revenues up 13% YoY during H1 2018

• Emaar’s retail assets maintained a high occupancy of 93% during the first half of 2018

Number of Malls and Shopping Centresin Dubai

Source: REIDIN, ValuStrat

RetailPerformance

Super Regional> 90k sq m

12

Convenience< 3k sq m

23

Neighbourhood3k-10k sq m

32

Regional30k-90k sq m

15

Community10k-30k sq m

24

7 | Dubai Real Estate Market 3rd Quarter 2018 Review

• As of July 2018, Dubai has a total of 86,506 hotel rooms and 24,826 hotel apartments

• An estimated total of 1,704 rooms were added during Q3 from the opening of six hotels

• Notable openings during the quarter were Hamptons by Hilton Dubai Airport (420 rooms), Occidental IMPZ (239 keys), Royal Central Palm Jumeirah (207 rooms) and Al Seef by Jumeriah (200 keys)

• Approximately 2,583 rooms are to be added to the city’s hotel room stock by 2020 from the most recent hospitality project announcements

• This includes a collection of hotels as part of Dubai Creek Harbour (1,500 rooms), Radisson Hotel DAMAC Hills (481 keys) and a Centara operated hotel (601 rooms) in Deira Islands

HotelSupply

• Total international guests ending July 2018 grew to 9.25 million

• Citywide occupancy rate was 76%, 1% lower when compared to the same period last year

• For January-July period, Revenue per Available Room (RevPAR) declined 6.7% while Average Daily Rate (ADR) fell 5.4% YoY

• The top source markets for Dubai visitors which accounted for more than 50% share came from three regions: Western Europe (21%), South Asia (17%) and GCC (18%)

• Russian tourists count continued to rally upwards with highest growth rate of 70% YoY. Tourists from China ranked within the top 5 source markets

HotelPerformance

Source: DTCM

GCC

Western Europe

South Asia

MENA

North Asia & South East Asia

Americas

Russia, CIS & Eastern Europe

Africa

Australia

Source of Dubai Visitors by RegionJan-Jul 2018

2%

18%

21%

17%9%

10%

11%

7%5%

Hotel Room Supply2015-2019(‘000 KEYS)

Source: DTCM, MEED Projects, ValuStrat

Hotel & Service Apt Rooms New Supply

2015

98107

2017

103

2016

2017E

107

13.5

2018E

121

17.3

2019E

www.valustrat.com | 8

322

538

Al Quoz

484

296

Al Qusais

355

538

Dubai InvestmentPark

300

538

Jebel Ali FreeZone

300

484

Jebel Ali IndustrialArea

322

484

Dubai South

• Dubai Airport Free Zone Industrial Park, the first expansion project by the free zone achieved 82% occupancy during the first half of the year

• DP World announced 14.4% YoY revenue growth stemming from increases in volume as well as an agreement with Chinese investors to build a 3 million sq m (32.3 million sq ft) BUA, Traders Market in Jebel Ali Port and Free Zone

• Indian pharmaceutical and bio-technology firm Wockhardt opened a 10,000 sq m (107,639 sq ft) manufacturing, research and development facility in Jebel Ali Free Zone (JAFZA) worth AED 146.8 million

• 70 pre-built storage and light industrial units with sizes ranging from 465 sq m (5,000 sq ft) to 929 sq m (10,000 sq ft) were launched by Dubai Industrial Park

Industrial Rental Rates(AED/sq m)

Source: ValuStratRent - Upper Range Rent - Lower Range

IndustrialInvestment/Supply

IndustrialPerformance• Industrial property prices remained broadly stable during Q3. Prices were generally ranging between AED 1,938 per sq m to AED 4,306 per sq m (AED 180 per sq ft to AED 400 per sq ft) with high specification / quality built and modern cold storage facilities priced at the upper end

• Falling sales prices in nearby Emirates such as Sharjah (Sajaa and New Emirates Industrial Parks near to E611), and offerings in Al Jurf Ajman, New Emirates Modern Industrial area in Umm Al Quwain and free zones in Ras Al Khaimah, may exert further pressure on prices in Dubai

• Industrial rents remained mostly flat in all locations, with rates ranging between AED 296 to AED 538 per sq m (AED 27 to AED 50 per sq ft) with the exception of marginal quarterly decline of 1% seen in Al Qusais industrial area

DubaiInvestmentPark

Jebel AliFree Zone

Al Quoz

1,000

2,000

3,000

4,000

5,0004,306

2,690

4,306

2,153

3,900

1,938

9 | Dubai Real Estate Market 3rd Quarter 2018 Review

20.11.17

03.09.18

Holding back the waves: Asia’s land grabAlongside hotels, there will be 4,000 residential units

available as second homes — priced between Dh1.5m ($408,000) and Dh100m. Each of the 10 palaces on

“Sweden” comes with a beach and a roof shaped like the hull of a Viking ship. The highest price achieved per

square foot off-plan in the development is Dh4,000, says Kleindienst — more than four times the Dh979 median

sales price per sq ft for villas in Dubai in the 12 months to March, according to ValuStrat.

28.08.18Understanding UAE Mortgage Redemption Fees and Loan to Value (LTV) Ratios

Declan King – Managing Director and Group Head – Real Estate at ValuStrat discusses mortgage redemption fees and loan to value (LTV) ratios in the UAE on the Business Breakfast Show with Malcolm and Brandy on 103.8

04.09.18

Architecturally diverse homes find buyer favour in Dubai

“An investor, driven by rental returns and capital growth, may elect to purchase in an architecturally diverse freestanding project by a private developer, with not such a high build specification as opposed to a master-planned gated community as it is not so much the lifestyle factor motivating his decision but the return on investment," adds Cheryl McAdam, Director – Residential Valuations at ValuStrat

15.08.18

Haider Tuaima, Head of Real Estate Research at ValuStrat, observes: “It is normal to expect some

developments to suffer from poor project and cash-flow management as well as promising unachievable

completion dates.”

Developers take a cautious approach to unit launches

16.07.18

Demand to soon outstrip supply for Dubai home

“We expect a longer term ‘legacy benefit’ of Expo, part of which would market Dubai’s various offerings such as

business, trade, hospitality and tourism on a much wider global scale, resulting in a sustained growth in demand for commercial and residential properties,” pointed out

by Haider Tuaima, Head of Real Estate Research at ValuStrat.

31.08.18

Average Dubai property prices are 20 percent below their mid-2014 peak values, according to ValuStrat data. And although the IMF estimates that Dubai’s GDP will rise over three percent this year, the business environment is tough in many sectors, with more competition from around the region.

Home truths: The long and short of Dubai real estate

www.valustrat.com | 10

ValuStrat is a leading consulting firmheadquartered in Dubai providing Advisory, Valuations, Research, Due Diligence andDivestment services across a diverse rangeof industry sectors since 1977. Offices in the UAE, UK, Saudi Arabia, Pakistan and Qatar serve over 800 corporate clients in the Middle East. Client base includes financial institutions, local corporates, multinationals, governments, SMEs, family businesses and start-ups. Some of the key sectors serviced by ValuStrat’s consulting team include real estate, hospitality, healthcare, education, manufacturing, retail, 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.

Research MethodologyEvery 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 is derived from a carefully cleansed database of listings that don’t include duplicates, potential errors and outliers.

The ValuStrat Price Index for Dubai’s freehold office sector is constructed to represent the quarterly price change experienced by typical office space within Dubai. The ValuStrat Price Index for Dubai’s freehold residential sector is constructed to represent the monthly price change experienced by typical residential units within Dubai. The VPI uses a comprehensive weighted sample representing more than 90% of all property types across the city and is built by our expert RICS Registered Valuers.

Copyright © ValuStrat Consulting FZCo. 2018This document is the property of ValuStrat Consulting FZCo and must not be reproduced or transmitted in any form or by any means, without the prior written consent of ValuStrat 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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