- Property Watch

Transcription

- Property Watch

PROPERTY WATCH
propertywatch.ae
Q1 2016
Dubai Residential
Market 2015
Macroeconomic
Overview
Dubai Real estate
Predictions 2016
by Roots Land
by JLL
by Deloitte
To Buy or
Not to Buy
Dubai & Abu Dhabi
Property Prices
cancellation of
Unit Registration
by Holborn
by Reidin
by Al Zahmy
Contents
3
DIRECTOR’S Message
4
DUBAI RESIDENTIAL MARKET
DIRECTOR’S
Message
10 MACROECONOMIC OVERVIEW
20 DUBAI REAL ESTATE Predictions 2016
24 Making a Difference in Valuations
52 REAL ESTATE REGISTER Cancellation of Unit Registration
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DIRECTOR
'So, should I go ahead and buy a property? Or should I wait? Is it true that the
rent prices are going to drop?' I have been hearing these questions flying around
during the last few months.
RESEARCH ANALYST
If you still need more answers after finishing reading this edition, you can visit
our Property Watch website at www.propertywatch.ae, where you can get
access to news, press releases, reports, data and many more in-depth details of
the UAE market on a daily basis.
26 Office, Retail, Hotel SECTOR Q4 2015
5
It is a great pleasure to welcome everyone to our latest edition of Property
Watch magazine.
Our magazine presents the property market from different perspectives and
helps readers get an accurate and unbiased understanding of the UAE real
estate market. We aim to cover every sector, such as commercial, residential,
hospitality and retail, with the purpose to deliver all the answers for your
uncertainty along with other in-depth information specifically for the Dubai and
Abu Dhabi real estate market.
16 2016 AND BEYOND
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The Dubai real estate market became more mature in the last period. After
witnessing a price correction, the market is shifting from investors to end users.
With the Government’s continuous improvement of the infrastructure, Dubai’s
vision has become clearer as a big percentage of master plans and properties are
now ready. The numbers of supply had a big impact on the real estate market.
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UAE
Due to changes in the economic times around the world, many individuals have
decided to establish themselves in Dubai and therefore adopt a more sensible
lifestyle. Tenants are now preferring to buy a property rather than paying
expensive rent prices in the high end areas. Many tenants are now circulating
and changing areas to live in along with ways to reduce their outgoing expenses.
As a result, rent prices are now softly dropping in the high end areas and
stabilizing in the middle end area. Areas like Jumeirah Village and IMPZ faced a
soft increase and started to stabilize, as tenants have moved to more affordable
areas.
As always, I would like to show my appreciation for everyone’s contribution to
this edition of Property Watch magazine and to welcome new joiners. I hope
you have an enjoyable read and I look forward to the next issue with more great
topics and articles.
FADI BOUSH
ELENA BRATU
GRAPHIC DESIGNER
REHMAN ASHRAF
COVER PHOTO
NANDKISHORE
POB 215273 Dubai, UAE
T +971 4 329 8333
F +971 4 329 8997
E enquiry@propertywatch.ae
FOR EDITORIAL OPPORTUNITIES
E press@propertywatch.ae
FOR ADVERTISING OPPORTUNITIES
Fadi Boush
Director
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DISCLAIMER
This publication is the sole property of Roots Land Real Estate LLC and Property Watch and must not be copied or reproduced in any form or by any means, either in whole or in part without the prior
written approval of Roots Land Real Estate LLC and Property Watch.
The data and other information contained in this publication have been obtained from sources generally regarded to be reliable and every effort have been made to ensure maximum accuracy. However
we make no guarantee, warranty or representation in respect of the accuracy and completeness of the information contained herein. Roots Land Real Estate LLC and Property Watch does not accept any
liability whether in negligence or otherwise to any party for any loss or damage suffered as a result of negligence, errors, omissions, change of price or other on this publication.
The material presented in this publication does not necessarily represent Roots Land Real Estate LLC and Property Watch view and opinion.
The listings are correct at the time of printing, availability and prices are subject to change without notice. Photos are for illustration purpose only.
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www.propertywatch.ae
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Dubai Residential market
Prices, Demand and Supply — 2015
A
ccording to Dubai Government, Emirates Consumer
Price Index went up by 4.07%
in 2015. The overall Consumer
Price Index (CPI) reached 127.05
in December 2015 and the GDP
reached 4.6%. The GDP has been
calculated using the methodology
of production according to Dubai
statistics. The decrease of oil prices
has affected the government
spending and their budgets.
The economic growth, liquidity, the
stock market and asset prices have
also been affected by the difference
in oil prices. JLL report states that
this change has also impacted the
financing of real estate projects
as there is an increased focus on
critical infrastructure and affordable
housing projects. It seems like the
government has decreased their
spending on less urgent projects,
which causes delays or scaling back
of many projects.
The extension of the Red Line Metro
will bring more demand for the
surrounded areas and therefore we
will witness an increase of the price
rate per square foot of those areas.
Figure 2
Source: Reidin & Roots Land
Dubai Apartments — Demand and Prices
It seems like many long term
tenants are willing to switch to
owner occupation. Due to the
market needs, many developers are
starting to adopt market changes
such us lowering their prices and
give better payment plans.
Dubai Marina & JBR
Sales Transactions
Q4 2015 Top 3 Communities — Number of Transactions
Many areas showed a high number
of transactions, most likely linked
to the deadline for homeowners to
register their properties with Dubai
Land Department.
After the decline of sales
transactions in Q3 2014, the market
faced a soft increase in the first
quarter of 2015, however since
then it started to continually drop
until the Q3 of the year. In the last
quarter the transactions were
slowly increasing again and also the
average sales rate. The apartments
segment prices declined by almost
6% in the Q3, indicating further
price reductions during the summer
season. In the last quarter it seems
that the prices had started to slowly
increase by a very small percentage.
The average sale price per square
foot recorded at the end of Q4 2015
is similar to rates recorded in the Q4
2013. (see figure 1)
Dubai Marina
Downtown Dubai
Business Bay
Business Bay Apartments
The largest volume of transactions
in the last few years, was registered
in the first quarter of 2015 even
though the sale rate was just as
high. There was a downhill demand
Apartment Sales
Transactions
Figure 1
for the area in the last three quarters
of the year with a stable sale rate
in the last two quarters. One of
the reasons for the big number of
transactions in Q1 2015 was the
completion and handover of many
projects. As a result to this action, a
big number of title deeds had to be
registered around this period.
(see figure 3)
DUBAI MARINA & JBR Apartments
We had a continuous decrease in
price rates for Dubai Marina and JBR
from Q4 2014 to Q2 of 2015. Due
to the decrease in prices it seems
that a small increase happened in
sales transactions in the first two
quarters of the year, however the
demand has fallen until the third
quarter of 2015. The sales rate has
remained stable since Q2 until the
last quarter of the year, even though
the demand started to slowly rise in
the Q4 of 2015 (see figure 2). As a
result after the big price correction,
the volume of transactions has
started to slowly increase in the
last quarter of the year. This action
indicates that some end users have
seen the correction of the prices as a
good opportunity to buy, instead of
paying rent.
Business Bay
Sales Transactions
Figure 3
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5
Downtown Dubai Apartments
The demand in this area has been
steadily escalating from Q3 of 2014
up to the end of 2015. One of the
reasons was the constant decline
in prices. The average sales rate at
the end of the year indicated the
Dubai Expected Residential Supply
same rate as we had in Q3 2013. As
the prices decreased, the number
of transactions went up. Investors
from overseas had no problem
selling at a lower rate as they still
made more profit from the exchange
rate. Therefore this was a good
opportunity for others to buy at a
lower price and invest in Downtown
Dubai. (see figure 4)
Downtown Dubai
Sales Transactions
Figure 4
Many developers have postponed
the expected completion date
of their projects due to different
reasons that affected the market
and therefore delaying the deadline
for handovers. Even so, it seems that
the majority of the developments
expected in 2015 have been handed
over during the last 2 quarters and
more than 1000 units have been
handed over in Dubai Marina & JBR,
Business Bay and on the Palm in the
last quarter of the year.
The market is expected to receive
the highest residential supply in
2017 as projects are already under
construction. During 2016 we
expect new supplies from projects
such as ‘Meydan Heights South’
and ‘Millennium Estates’. JLT ‘Dubai
Star’, Business Bay ‘Volante’ and
Dubai Marina ‘Escan Marina’ Tower,
these are some of the forthcoming
residential supplies.
Dubai Villas — Demand and Prices
By the third quarter of 2015 prices
had significantly decreased which
started at the beginning of 2015.
Although demand rose in the
second quarter due to lower prices,
only in the last quarter did the sale
prices start to indicate a slight
enhancement. According to the
market study, the sale rate dropped
by 5% quarter-on-quarter and 12%
year-on-year. Also, the main areas
that received the highest number in
transactions were Arabian Ranches,
Palm Jumeirah and Emirates Living.
(see figure 6)
Villa Sales
Transactions
Palm Jumeirah Apartments
The drop of the demand in the Q2
to Q3 of 2015 is very similar to the
drop that this area faced in the Q2 to
Q3 of 2014. Even the slow increase
in the Q4 2014 reached similar
numbers as the last quarter of 2015.
The price rate has been up and down
in the last two years. Since Q3 to Q4
2015 we saw a slow increase in the
price rate. For the last few years, the
market for this area has been slowly
shifting its buyers from investors to
end users. (see figure 5)
Figure 6
Top 3 Communities — Villas Sales Transactions
Palm Jumeirah Sales
Transactions
Figure 5
6
Palm Jumeirah
Arabian Ranches
Emirates Hill
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Arabian Ranches villas
Arabian Ranches indicates a positive
increase in the average sales rate
but only in the third quarter of 2015,
after having a whole year of downhill
rates. Even in the last quarter the
prices are lowering again. The
volume of transactions on the
other hand declined in the last two
quarters of the year, although the
demand is still higher than what
was witnessed in 2014. Slowdowns
during the summer season are
common in the country as majority
of expats benefit from these hot
months to take their annual leave.
Arabian Ranches
(high end) Sales
Transactions
Figure 7
Jumeirah Islands villas
The first and third quarter of 2015
had a very low demand in this area,
with a steady decrease of the sale
prices. Second and last quarter
seemed to register a lot more
transactions than the rest of 2015.
The big gap in between the sale price
and sale transaction from Q4 2014
highlights the lack of supply at the
particular period and therefore an
increase in the sale price. Investors
and end users have taken advantage
of the decrease in the prices and
therefore the demand in this area
has gone up. (see figure 8)
Emirates Hills Sales
Transactions
Figure 9
Palm Jumeirah villas
In the third quarter we witnessed
a slowdown in the number of
transactions on Palm Jumeirah.
This was mainly due to a lower
demand for high-end properties,
in comparison to mid-end villas,
leading as well to lower average
sale rates. That being said, we
can see in the last quarter how
demand was steadily increasing as
well as the average sale rate. Palm
Jumeirah has always been a unique
project in terms of statistics and
numbers. Our graph indicates a
general study, however to be able
to provide more accurate statistics
and numbers, this area will require a
more in depth analysis. The reason
for this would be that two typical
villas with the same layout and size
could vary in the price range of up
to 50% difference, merely because
of the location distinction, view or
upgraded features that one might
have. (see figure 10)
Palm Jumeirah Sales
Transactions
Jumeirah Islands
Sales Transactions
Figure 10
Figure 8
Dubai Expected Villa Supply
Emirates Hills villas
A big number of transactions were
registered in the second quarter of
2015 and slowly declined in the last
quarter. Even though the demand
was lower in the last quarter, it still
indicates three times the volume of
transactions that have been made
in first quarter of 2014. The price
rate in Q1 2014 was very high as a
result of not having a large amount
of supply in the current area. Many
investors have waited for the rate
price to decrease as they anticipated
the drop. As a result we can see
in figure 9 that the transactions
volume matched or exceeded the
rate price by the end of the last
quarter of 2015. (see figure 9)
Studies have shown that over 3,750
new villas/townhouses should be
handed over in locations of Meydan,
Arabian Ranches, Mohammed Bin
Rashid City and Dubailand during
2016. Some of the projects are
Maple 2 and Arabella Phase 2,
developed by Emaar and Dubai
Properties Group.
Elena Bratu
Research Analyst, Roots Land Real Estate
www.rootsland.com
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9
Macroeconomic Overview
Adjusting to lower oil prices & slower economic growth
sustainability and avoid long-term
deficits. The two major components
to the fiscal restructuring we can
expect to see over the next 5 years
are reduced government spending
and increased government revenue
through taxation. Both of these
have implications for the real estate
sector.
While we remain positive on the long
term outlook for the UAE real estate
market there is little doubt that the
rebalancing of the fiscal position will
result in headwinds and challenges
over the next 12 months.
Although governments will continue
to spend on development and
infrastructure projects, the level
of this spending will inevitably be
curtailed over the medium term as
spending needs are realigned with
the reality of lower oil revenues.
Oil prices fell drastically over the
second half of 2014 and have
continued to drift downwards in
2015. While forecasts vary, the
consensus is that prices will recover
only modestly over the medium
term, while remaining short of
their 2011–2013 levels. The IMF is
currently suggesting average prices
will remain between USD 50 and
USD 60 per barrel until 2020.
Faced with both losses in oil revenues
and higher expenditure on defense
and security, the UAE Government is
adjusting its budget to ensure fiscal
Real GDP Growth
(2011–2016F)
T
he pace of economic growth
in the UAE has slowed
significantly in 2015, as the
positive impact of lower oil prices
on the global economy has been
insufficient to offset the loss of
revenue to both the government
and the private sector. As a result,
real GDP growth has fallen from
4.6% in 2014 to 2.7% for 2015, with
a similar level of growth forecast for
2016.
Strengthening US Dollar
T
he real estate market in the
UAE and particularly Dubai
cooled down in 2015 after
expanding significantly in 2013 and
the first half of 2014. Coupled with
lower oil prices, the appreciation
of the US dollar reduced demand
for real estate and weighed on the
performance of key sectors such as
retail and tourism, as they become
more expensive for visitors from
Europe and countries with non-USD
pegged currencies.
USD vs International
Currencies
The slowdown in tourist spending
has particularly weighed down on
the bottom lines of luxury retailers,
as the influx of high-spending
tourists mainly from Russia slowed
down on the back of a devaluing
Ruble.
Dubai Prime
Rental Clock
Q4 2014
Q4 2015
Q4 2014
Q4 2015
Crude Oil Price (2007 — Nov 2015)
Abu Dhabi Prime
Rental Clock
* Hotel clock reflects the movement of RevPAR
Note: The property clock is a graphical tool developed by JLL to illustrate where a market sits within its individual rental cycle. These positions are not necessarily representative
of investment or development market prospects. It is important to recognise that markets move at different speeds depending on their maturity, size and economic conditions.
Markets will not always move in a clockwise direction, they might move backwards or remain at the same point in their cycle for extended periods.
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Office Market Summary
Dubai Office Supply (2012–2017F)
PERFORMANCE
Both Dubai and Abu Dhabi remain
two tiered office markets, with
strong demand for single owned
Grade A office, but little interest
in secondary locations. In Dubai,
vacancies in selected Grade A
buildings are now minimal, pushing
rents up 4%. However, overall
commercial
activity
remained
subdued and corporate activity
focused on consolidation of
operations as opposed to expansion.
Meanwhile, rents in Grade B space
(typically strata owned and located
in less developed areas) continued
to face downward pressure as
supply outstrips demand in that
segment.
As more Grade A stock is delivered
to the Dubai market over the next
couple of years (e.g. Dubai Trade
Center District/ICD Brookfield),
rental rates across the Central
Business District (CBD) these are
expected to remain flat. Vacancy
rates across the CBD, currently at
19%, are expected to increase.
sUPPLY
Residential completions across
the UAE in 2015 remained lower
than in recent years, a trend likely
to continue into 2016. A total of
just 7,800 residential units were
delivered in Dubai throughout the
year, compared to the scheduled
delivery of 25,000 units forecast
by developers at the beginning of
2015. Materialization rates have
varied between 30%-50% in Dubai
in recent years. This means that
much of the proposed future supply
for 2016 (26,000 units) will not be
delivered on schedule.
A similar trend has been
witnessed in Abu Dhabi where the
materialization rate of projects
under construction was low in 2015,
with only 1,000 units delivered. The
Given the more limited supply of
quality stock, Grade A office rents
in Abu Dhabi increased 7% on an
annual basis. Given lower demand
from
international
corporates
and government entities, Grade
A rents are likely to remain stable
in 2016. While some progress is
seen on the legislation governing
the Abu Dhabi Global Marketplace
(ADGM), it is likely that corporates
with onshore activity will have to
relocate, increasing vacancy rates
on Sowwah Square and placing
downward pressure on prime rents.
PERFORMANCE
The residential market in both Abu
Dhabi and Dubai witnessed subdued
sales activity in 2015. While lower
oil prices coupled with geopolitical
unrest negatively impacted investor
sentiment, the strengthening of
the U.S. dollar made UAE property
more expensive for many overseas
investors.
In Dubai, data from the Land
Department reveals falls of 33%
and 28% in the volume and value of
transactions respectively in the YT
November 2015, compared with the
same period in 2014. This comes
majority of expected supply in both
emirates has now been pushed to
late 2016 and 2017. These delays in
project handover result from lower
sales levels, reduced government
spending and a realization amongst
developers of the need to phase out
supply in line with demand to avoid
an oversupplied market.
Abu Dhabi Residential Supply (2012–2017F)
Much less office space was completed in Abu Dhabi in 2015, with just
146,000 sq m added, increasing the
stock to around 3.3 million sq m
of GLA. Projects delivered in 2015
included Addax Tower on Reem
Island and IRENA HQ in Masdar City.
Approximately 340,000 sq m of
office GLA is expected to enter the
market in 2016, dominated by the
delivery of Bloom Central and ADIB
HQ on Airport Road, Al Hilal Bank HQ
on Al Maryah Island and ADNOC HQ
on the Corniche.
Abu Dhabi Office Supply (2012–2017F)
The Dubai office market saw the
delivery of 700,000 sq m of GLA in
2015, increasing the total stock to
8.3 million sq m. Of the new supply,
26% was delivered in Business Bay,
followed by the new Dubai Design
District (17%), TECOM and Logistics
City (13%). The year-end also saw
the delivery of the first building in
the new Dubai Trade Center District
(DTCD). Looking ahead, an additional
600,000 sq m of GLA is expected to
be delivered between 2016 & 2017,
with around 35% of this proposed
supply expected in Business Bay.
Dubai Residential Supply (2012–2017F)
SUPPLY
Residential Market Summary
as average rents and sales prices
dropped 2% and 11% respectively in
the YT November according to the
REIDIN General Index. Following a
rapid increase of residential rents
and prices between 2012 and
2014, the market has now clearly
stabilized, and we welcome this sign
of a more mature market catering
to end-user investors rather than
speculative investors. This softening
is expected to continue in 2016 as
the market adjusts to lower levels of
activity.
Rents have performed better
than sale prices in all sectors of
the residential market in 2015,
increasing rental yields and the
future attractiveness of the sector.
In Abu Dhabi, the average sale price
of 2 bedroom apartments remained
flat over the year at approximately
AED 16,000 per sq m, as weaker
investor
sentiment
reduced
transaction activity.
Meanwhile rental rates for 2
bedroom apartments increased 4%
in the first quarter of the year before
flattening out at AED 163,000.
With average rentals declining in
the Dubai market, 2015 has seen
a widening of the gap between
residential rents in Abu Dhabi and
Dubai.
CBD Rents (per sq m) / Annual Change
Source: JLL
Residential Property
Rent and Sale Indices
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Retail Market Summary
Dubai saw much higher levels of
new retail supply than Abu Dhabi in
2015. Abu Dhabi saw the delivery
of just 53,000 sq m of retail GLA,
comprised mainly of non-mall retail
space within mixed developments.
In contrast, Dubai added 193,000 sq
m of GLA dominated by the delivery
of the extensions to Mall of the
Looking ahead, the supply of retail
malls in Abu Dhabi is expected to
pick up in 2018 with the delivery
of Al Maryah Central and Reem
Mall. In Dubai, future supply will
continue to feature large extensions
to existing centers such as Dubai
Mall, Citywalk, Festival City and
Ibn Battuta. In Dubai, the supply
attractive deals to entice customers.
Activity in the retail market across
the UAE came under pressure in
2015 as the volume and value
of retail sales slowed down. This
comes as inflationary pressures and
the devaluation of the Rouble and
other non-USD pegged currencies
compressed both household and
tourist purchasing powers. In Dubai,
the saturation and competitiveness
of the retail market has pushed
retailers to offer discounts and other
Faced with slowing retail sales
over the year, some retailers are
struggling to meet the high rental
rates imposed, and landlords are
having to revise their contracts and
offer flexible deals in order to retain
tenants. Rents in 2015 remained
flat in both primary and secondary
super regional malls in Dubai and
are expected to decrease in 2016
as the market moves further in the
favor of tenants.
SUPPLY
Dubai’s hotel market saw the
addition of 2,700 hotel keys in
2015, increasing the total supply
to 67,100 keys. Major completions
include St. Regis and Steinberger in
Business Bay. Much higher levels
of new supply are forecasted for
the next 2 years with more than
18,000 additional rooms proposed
in projects including The Address
Boulevard, TRYP by Wyndham,
Paramount Hotel & Residences
and the Address Sky View, which
will increase total supply to 86,200
rooms by the end of 2017.
This is expected to add further
downward pressure on Average
Daily Rates (ADR’s). In Abu Dhabi, an
additional 1,000 keys were delivered
in 2015, increasing supply to 20,700
keys at year end. The decision by
Dubai Hotel Supply (2012–2017F)
Dubai Retail Supply (2012–2017F)
PERFORMANCE
Average Retail Rents (% change)
Source: JLL
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of retail mall space is expected to
increase 19% over the next two
years to reach 3.5 million sq m of
retail GLA, dominated by extensions
to existing super regional malls. As
developers continue to build retail
centers the market is likely to face
an oversupply of mall space, which,
coupled with lower demand, is
expected to reflect negatively on the
sector’s performance.
In Abu Dhabi, retail rents in the
prime malls are expected to remain
stable in the short term given the
more limited existing stock of good
quality malls, the high purchasing
power among residents and less
dependency on tourist spending.
The addition of a number of quality
new retail malls in 2017 / 2018
is however expected to exert
downward pressure on the lower
quality malls in the medium term.
PERFORMANCE
The UAE hotel market saw mixed
performance throughout 2015.
While ADR’s remained flat in Abu
Dhabi, room rates in Dubai saw a 9%
decline during the year to October.
Occupancy levels remained healthy
in both markets, at 74% and 77% in
Abu Dhabi and Dubai respectively.
The slowdown in tourist arrivals
coupled with the ongoing handover
of hotel rooms in Dubai saw
the Abu Dhabi Tourism and Culture
Authority (ADTCA) to limit the
number of new hotel licenses is
expected to control hotel supply in
Abu Dhabi over the next couple of
years.
An additional 4,900 keys are
however scheduled for delivery
between 2016 and 2017 in the
Emirate.
Abu Dhabi Hotel Supply (2012–2017F)
Emirates and Dragon Mart.
Abu Dhabi Retail Supply (2012–2017F)
SUPPLY
Hotel Market Summary
declining ADR’s throughout 2015.
With occupancy rates remaining
the highest in the region however,
the hotel market in Dubai is now at
more competitive levels than they
were in 2014.
Looking ahead, Dubai’s hotel
market is expected to record a
further softening in 2016, followed
by a pick-up in activity from 2017
onwards with the delivery of Dubai
Parks and in the run up to Expo,
where the government is expecting
20 million guests by 2020.
In Abu Dhabi, the improvement of
the Capital’s tourist offerings and
expansion of its national airlines
(Etihad), has steadily increased the
number of inbound tourists in 2015
and the city is expected to draw in
more tourists in the next couple of
years. With the future supply of
hotel rooms kept under control by
the ADTCA, the hotel sector in Abu
Dhabi is likely to see little change in
its current performance levels.
Hotel Performance
Source: STR Global
15
2016 and Beyond
Definitions & Methodology
POTENTIAL
RISKS
Future Supply
Iran
Geopolitical Unrest
Potential upside (especially for Dubai) given likely increase
in capital flowing out from Iran into UAE residential
and retail sectors and the possibility that commercial
operations serving Iran will base themselves in Dubai for
the time being.
Hightening geopolitical tensions within the Middle East will
continue to negatively impact sentiment and confidence.
Increased spending on security and defence (estimated to
be USD 15.7 billion in 2015 and USD 17 billion for 2016)
will reduce government spending on other areas including
construction and infrastructure.
JLL estimates of future supply are
updated quarterly, based on physical
inspections and data collected from
developers. We remain cautious
of the ability of some projects
to meet their stated completion
deadlines, with significant delays
in project delivery leading to a low
materialization rate.
Domestic Reform / Improved Legislations
New ‘Open Data’ law is likely to improve transparency of
Dubai market.
The new Abu Dhabi real estate law comes into effect in
January 2016. It is likely to improve the efficiency of the
residential sector, but fails to reintroduce a rental cap.
Further clarification of the legal position of the Abu Dhabi
Global Marketplace could provide a boost to the office
market.
Expansion of Cultural and Entertainment
Offerings
Completion of new theme parks in Dubai and the Cultural
District in Abu Dhabi are likely to further boost the tourism
market. Emirates and Dragon Mart.
Higher Interest Rates
Higher global interest rates will reduce liquidity and
increase the cost of new development. Financial
institutions likely to deposit their money with the Central
Bank rather than investing in real estate development
projects.
Cut back in Government Spending
Lower levels of government spending will inevitably result
in re-prioritisation and delays in some announced projects.
Uncertainty Surrounding China
Nervousness about the prospects for the Chinese
economy could exert downward pressure on global
economic growth.
Interpretation of
Market Positions in
Rental Clock
6 o’clock indicates a turning point
towards rental growth. At this
position, we believe the market has
reached its lowest point and the
next movement in rents is likely to
be upwards.
9 o’clock indicates the market has
reached the rental growth peak,
while rents may continue to increase
over coming quarters the market is
heading towards a period of rental
stabilization.
12 o’clock Indicates a turning point
towards a market consolidation
/ slowdown. At this position, the
market has no further rental growth
potential left in the current cycle,
with the next move likely to be
downward.
3 o’ clock Indicates the market has
reached its point of fastest decline.
While rents may continue to decline
for some time, the rate of decrease
is expected to slow as the market
moves towards a period of rental
stabilization.
Residential
© 2016 Jones Lang LaSalle IP, Inc. All rights reserved. The information contained in this document is proprietary to Jones Lang LaSalle and shall be used solely for the
purposes of evaluating this proposal. All such documentation and information remains the property of Jones Lang LaSalle and shall be kept confidential. Reproduction of any
part of this document is authorized only to the extent necessary for its evaluation. It is not to be shown to any third party without the prior written authorization of Jones Lang
LaSalle. All information contained herein is from sources deemed reliable; however, no representation or warranty is made as to the accuracy thereof.
16
The supply and stock data is based
on quarterly surveys of the entire
Dubai and Abu Dhabi metropolitan
areas. This data excludes labour
accommodation and local Emirati
housing supply.
Completed buildings refer to
those handed over for immediate
occupation. Future supply is based
on projects in the announced and
under construction phases.
Residential performance data is
based on asking prices from a
basket of selected developments
in Abu Dhabi where as in Dubai it is
based on the REIDIN monthly index.
REIDIN Dubai Residential Property
Price Indices (RPPIs) use monthly
sample of offered/ asked listing
price data as well as data on actual
transactions.
Office
Completed buildings refer to
those handed over for immediate
occupation. Future supply is based
on projects in the announced and
under construction phases. Our
supply figures exclude government
owned and wholly occupied
buildings. In Dubai, the Central
Business District (CBD) includes
DIFC, Downtown, DTCD and Sheikh
Zayed Road as far as Interchange 1,
but excludes Business Bay.
The rents recorded in this report are
Average Grade A rents, based on
JLL estimates of the open-market
net rent (excluding service charges)
for a new lease in basket of Grade
A quality buildings, as at the survey
date. Data relates to headline or
face rents (exclusive of incentives).
Vacancy rate is based on JLL
estimates of all office buildings in
Abu Dhabi, while in Dubai it relates
to a basket of buildings in the CBD
that make up around 80% of the CBD
supply and 15% of the total current
supply.
Retail
Classification of Retail Centers is
based upon the ULI definition and
based on their GLA:
• Super Regional Malls have a
GLA of above 90,000 sq m
• Regional Malls have a GLA of
30,000–90,000 sq m
• Community Malls have a GLA of
10,000–30,000 sq m
• Neighbourhood Malls have a
GLA of 3,000–10,000 sq m
• Convenience Malls have a GLA
of less than 3,000 sq m
Malls are categorized into primary
and secondary based on their
turnover levels. Primary malls are
the best performing malls with
highest levels of turnover. Secondary
malls are average performing malls
with lower levels of turnover.
Retail rents represents the open
market net rent that could be
expected for a notional line store on
the main trading level in a basket of
shopping centres, as at the survey
date. These base rents exclude any
additional turnover or sales related
rentals.
Vacancy rates are based on JLL
estimates of vacancies in line stores
in a basket of super regional malls
in Dubai and super regional and
regional malls in Abu Dhabi.
Hotels
Hotel room supply is based on
existing supply figures provided by
DTCM and ADTCA as well as future
hotel development data tracked by
JLL Hotels.
Room supply includes all graded
hotel rooms but excludes serviced
apartments.
Hotel performance data is based on
a monthly survey conducted by STR
Global on a sample of international
standard midscale and upscale
hotels.
17
Dubai property prices fall
11% in 2015
• Average villa sales prices down 11% apartments 8% year-on-year
• Average rental rates dipped just 1% across-the-board
• 22,000 apartments and 7,700 villas schedule for delivery this year,
keeping downward pressure on sales and rental rates through 2017
L
eading real estate consultancy
Asteco has released its latest
Dubai report, providing an
historic review of last year and
2016 outlook, with affordable
communities leading the way in
terms of rental demand and investor
opportunity against a scenario of
significant oversupply looming in
the high-end and luxury segments.
The report flags the impact of
delayed project delivery in 2015 and
a large pipeline for 2016, coupled
with the demand slowdown and
continued low oil prices, as an
indicator of market prospects this
year, with both rental rates and
sales prices coming under further
pressure.
A total of 13,500 apartments and
800 villas were added to Dubai’s
residential real estate supply
in 2015, and a further 22,000
apartments and 7,700 villas are
scheduled to be delivered in 2016,
with downward rental rate pressure
likely to continue through to 2017,
says the report.
”
Residential sales recorded acrossthe-board declines, with villa sales
prices down year-on-year by 11%
and apartments by 8%. Villas on Palm
Jumeirah recorded price declines of
13% over the year, dropping to AED
2,475 per square foot on average
and The Meadows was also down
15% to AED 1,150.
End-users, rather than investors,
were the predominant buyers of
villas and townhouses, with a clear
preference for smaller 2, 3 and 4
bedroom units, rather than large
villas. New communities such as
Mudon and Arabian Ranches Phase
2 saw improved levels of activity,
offering better-priced yet good
quality alternatives to some of the
more established areas.
At the high end of the apartment
market, Jumeirah Beach Residence
was down 16% to AED 1,370 per
square foot and apartments on the
Palm Jumeirah dropped 14% to AED
1,720 per square foot on average.
Villa rentals were down 9% on
"However, if we look to the medium and long-term, the outlook is more
positive with demand more than likely to grow in line with the progress
of key infrastructure projects currently underway, such as Dubai World
Central Airport and Expo 2020." said
18
”
John Stevens, Managing Director, Asteco
average year-on-year, but Al Barsha
recorded an increase for threebedroom villas, up 9.2% to AED
213,000 per annum while in Mirdiff
similar properties rose 4.2% to AED
138,000.
The biggest falls came in Jumeirah
and Umm Suqeim where threebed villas dropped more than AED
50,000 or 20% on average to hit AED
195,000, while larger four-bedroom
homes in Arabian Ranches and
Jumeirah Park were also down 19%
to AED 243,000 and 15.5% to AED
145,000 respectively.
“With fresh new supply entering
the market, this is forcing property
owners,
especially
of
older
independent villas, to become
increasingly competitive on pricing,”
remarked Stevens.
With supply handover slower than
anticipated in 2015, apartment
rental rates remained broadly stable
over the year, dipping just 1% on
average, although Asteco recorded
disparities between different areas.
Apartment rental rates were down
by 4% on average, with Sheikh Zayed
Road recording the highest drop of
over 12%.
Dubai Marina and Palm Jumeirah
both saw a year-on-year dip, with a
one-bedroom apartment dropping
13.3% to AED 98,000 and 10% to
AED 135,000, respectively.
The DIFC area was not immune
either in 2015, two-bedroom units
have dropped 8.7% to AED 158,000
per annum, as did JBR with the
highest average decline for a twobedroom apartment, dropping 9.2%
to AED 148,000.
“For property owners, adjustments
in terms of rental expectations
and payment flexibility will have
to be made. And, as usual in cases
of increased supply, better quality,
well managed or value-for- money
properties will be able to achieve
higher occupancy levels than
others,” noted Stevens.
The commercial office sector fared
slightly better despite significant
new space of 500,000 square
metres coming online in 2015 and
1.1 million square metres set to be
delivered in 2016. H1 2015 saw
improved levels of demand leading
to moderate increases in rental
rates in certain areas.
“The majority of new office supply
entering the market this year
will be strata-owned buildings in
popular office areas like Business
Bay and Jumeirah Lake Towers.
Sales demand is expected to come
primarily from SME level end-users,”
added Stevens.
John Stevens
Managing Director, Asteco
www.asteco.com
19
Dubai Real Estate
Predictions 2016
Following two years of significant capital and rental growth across much of Dubai’s real estate market, 2015 marked a slowdown.
Our outlook for the year ahead is that generally market fundamentals for Dubai will remain positive in 2016, supported by a
dynamic and growing economy, world-class transport and infrastructure and a stable investment climate. However, despite
these market fundamentals, we do expect certain headwinds in Dubai’s real estate market, largely influenced by external
factors, to continue to put downward pressure on the market.
Economy overview
The Economist Intelligence Unit
(EIU) forecasts real Gross Domestic
Product (GDP) growth in the United
Arab Emirates (UAE) to average
3.6 percent per annum between
2015 and 2019, a decline from the
4.6 percent growth experienced in
2014. This forecast is largely due to
the significant fall in global oil prices,
along with wider global economic
factors, such as a slowing Chinese
economy. It is likely that Dubai’s
GDP growth will outperform the
wider UAE economy in 2016, largely
Dubai’s residential
market predictions
for 2016
20
due to the fact that its economy is
considerably less dependent on
oil revenue compared to the other
Emirates. Nevertheless, lower oil
revenue is likely to drive lower
bank deposit levels and greater
withdrawals to support funding
gaps that are likely to result in
tighter liquidity and an increased
cost of borrowing.
Despite the UAE’s forecast budget
balance of 0.2 percent of GDP in
2016, significant scaling back of
key infrastructure projects should
be eased by Federal reserves and
Following a significant number of
project launches during 2015, the
focus in 2016 will be project delivery.
Whilst published pipeline forecasts
estimate that some 40,000 units will
get delivered in 2016, consultations
with key developers suggest that
a more realistic number will be
approximately 10,000 units.
growth experienced during 2013 and
2014; the ongoing decline in global
oil prices, which has negatively
influenced sentiment and demand
from the Middle East North Africa
(MENA) region; and the relative
strength of the U.S. Dollar (to which
the UAE Dirham is pegged), against
currencies from key international
source markets such as India,
the United Kingdom and Russia,
making Dubai a comparatively more
expensive market.
2015 saw average residential sales
prices across Dubai decline by
approximately 10 percent, which can
be attributed to a number of factors.
These factors include exceptional
We predict that average residential
prices will decrease further in 2016
reflecting a transition to a more
mature market. Further, an increase
in more affordable stock and
the new Law No. 22 regarding
Public Private Partnerships (PPP)
passed in November 2015, which
aims to boost private infrastructure
investment and drive development.
Meanwhile, the recent lifting of
sanctions on Iran present potential
opportunities for Dubai in 2016.
The release of capital currently in
Iran is likely to prompt an influx of
investment to safe haven markets
from which Dubai may benefit, as
well as the opportunity for Dubai to
act as a gateway for businesses and
investors considering Iran.
discounting in emerging locations
placing downward pressure on
citywide average sales prices, will
likely take place.
While there may be a softening in
residential rental prices in some
submarkets, it is not anticipated that
this will be to the degree of recent
declines in residential sales prices.
Rental price decline, however, could
be exacerbated further if speculative
investors, who are unable to sell
product at pre-determined levels,
decide to release units for rent
instead.
1
EIU Tourism —
2
Economics —
3
Dubai Airports
Percentage change
in hospitality source
markets, Dubai
2014 vs. 2015
21
Dubai Real Estate
Predictions 2016
Dubai’s hospitality
market predictions
for 2016
Key tourist retail mall
source markets
Dubai, 2015
Occupancy levels at around 70 to 75
percent are likely to represent the
“new norm” in Dubai’s hospitality
market in 2016 by investors and
developers, compared to 79 percent
in 2014, largely due to new supply
being delivered. This can potentially
be viewed as a positive as it will
make Dubai a more affordable
destination. As operators compete
for occupancy, Average Daily
Rates (ADRs) will soften, further
Dubai’s office market
predictions for 2016
Expectation on
disposable income
levels in 2015 and 2016
comparison to
previous year, Dubai
Serviced apartments are likely to
be considered more in 2016 by
investors and developers, driven by
key source market trends, growing
visitor demand for longer stays
and better value accommodation.
Notably in 2014, Saudi Arabia was
the largest hospitality source market
with 1.51 million visitors to Dubai,
whilst Iran and China experienced
projected to experience economic
growth in Dubai in 2016.
With a number of quality office
schemes in prime areas of
undersupply due for completion by
the end of 2015 and during 2016,
rental growth is likely to slow in
some submarkets and the power of
negotiation will shift from landlords
to tenants. We predict that Free
Zones will continue to perform well
and occupancies will be maintained
in the most prime office buildings
in Dubai, especially those located
in proximity to key transport
infrastructure (airports, ports and
logistics) as these industries are
Within the office sector, a
trend towards more mixed-use
developments and a greater
allocation of space to amenities
will be noticeable. This will enable
schemes to differentiate against
the competition and meet occupier
demand for retail and other uses
in proximity to the workplace, as
well as a strategy for developers to
diversify risk and generate a more
robust cash flow.
Dubai’s retail market
predictions for 2016
flat in 2016, with the exception
of super prime malls, which will
likely continue to experience strong
demand as they benefit from both
tourist and resident spending.
During the first nine months of
2015, Emaar Malls Group reported
90 million visitors, equating to 11
percent growth year-to-date and a
2 percent increase in tenant sales,
compared to 2014 (Q1 to Q3).
Despite a strong start to the year
with 56 million visitors to the Dubai
Shopping Festival spending around
AED145 billion, some retailers
reported a fall in sales in 2015. There
will likely be a further moderation in
retail sales in 2016 against a strong
Dollar and slowing demand from
international source markets such
as Russia, China and parts of Europe.
Retail rental growth will be relatively
22
encouraging growth in tourism
volumes required to support the
investment in tourism infrastructure
being developed over the coming
years.
Given the shortage of high-quality
office space in Dubai, expanding
Sector specific, we predict that Food
and Beverage (F&B) retail will go
year-on-year growth of 42 percent
and 24 percent respectively. With
plans to increase capacity at AlMaktoum International Airport
(DWC) and Dubai International
Airport (DXB) to reach a combined
capacity of approximately 97
million passengers in 2016, there
will be opportunities to capitalize
on hospitality demand from transit
and destination visitor growth
and by promoting extended stayovers in the Emirate, provided
appropriate infrastructure, policies
and incentives are implemented.
companies will be more amenable
to leasing additional space than
is required at present in order to
accommodate future expansion,
with a view to subletting surplus
space in the short term.
Linked to this, there will be more
opportunities for investors and
property managers to utilize data
analytics and real time information
to optimize lease management,
occupancy, revenue and costs
across their portfolio and better
match occupier requirements with
availability for improved financial
performance.
from strength to strength in 2016,
driven by greater brand penetration
and expansion. Good prospects are
also envisaged for fashion retail
following the completion of the initial
phase of D3 Design District, which
has attracted a number of highprofile brands and fashion houses
to Dubai. These key investments
should attract talent and business
to Dubai’s fashion industry and
contribute to trade.
23
The Different Methods & Mechanics
Making a Difference in Valuations
Q1 — When preparing valuations
for clients what are some of the
challenges faced within the UAE?
Perhaps one of the most important
starting points is an understanding
that cost does not necessarily equal
value. This is particularly evident
around development projects where
investors acquire the land for x, the
cost to complete is y and therefore
adopts a value of x+y. The valuer
when considering the market value
for the property would be required
to look at the price the asset can
be sold for in the open market
between two willing parties. An
investor would potentially look at
the revenue the asset can secure
in the market and the value they
would be prepared to pay would be
a reflection/multiplier of this. This
is not unique to the region and the
valuers find conversations with
clients on the differences between
cost and value as well as value and
worth are regular occurrences.
The various mechanics of the
valuation process often rely on
evidence of comparable activities
– for instance rents or sale prices
of similar assets, sale or lease
periods, market incentives as well
as both current and future demand
and supply characteristics. One of
the main challenges around this is
the availability of verified data. This
lack of transparency often results
in assumptions or adjustments
against a data-set which may in
itself be slightly ambiguous.
Q2 — We understand that,
particularly in the new and
emerging parts of the emirate that
studies are being commissioned to
provide recommendations from a
financial standpoint. This can lead
to similar projects being developed
and over-supply of certain
properties. Do you, as CBRE , take
24
into consideration reports prepared
by competitors or peers before
giving such recommendations to
clients?
Markets continue to be fluid and
demand drivers are also constantly
changing – for instance areas such as
downtown Jebel Ali were previously
considered industrial but with the
announcement of Dubai Parks &
Resorts the focus has started to
change to residential and mid-scale
hotel and hospitality to leverage off
this new demand driver. CBRE has
a strong research and consulting
team that is responsible not only for
providing advice to clients around
how to maximize the value (whilst
mitigating the risk) of any future
proposed development but also for
monitoring and tracking the market.
The reports and recommendations
provided to our clients, much the
same as our competitors are done
so on a confidential basis and as
such it is unusual to have access or
to wish to rely on these.
Market overviews, perceptions and
projections provided across the
industry range with many of the
components being a professional,
yet subjective view on the data
held and as such whilst from a
market information standpoint it
is always interesting to read these
reports, most of which are often
very informative but CBRE does
wherever possible rely on its primary
data as well as verified market
transactions to assist informing
any recommendations. Market
relationships
with
developers,
funders and investors are also
key to gauge market sentiment
and understand what the future
landscape could look like.
Q3 — We regularly hear comment
that valuers are pessimistic and
valuation numbers do not reflect
prices being offered in the market
– what are your views on this?
As highlighted earlier, the valuation
mechanics rely on the assessment
and adjustment of market variables
to reflect the characteristics of
the subject property being valued
to the comparable provided – ie,
is the location as good, is the
tenant covenant as strong, is the
lease term as long, is the building
as well maintained etc.… These
adjustments are subjective and
differing valuers may attribute
slightly different adjustments to
these. I do not agree that valuers are
all pessimistic – often the valuation
reports are requested to support a
purchase or a finance and when the
value provided does not accord with
the clients perception there is the
feeling the valuer is too negative.
Asking prices in the market should
not be confused with transaction
values and often the difference
between these results in a lower
than “hoped” valuation which does
affect the perception of the valuer
as being somewhat pessimistic.
Q4 — With more and more global
investors looking at the UAE and
in particular real estate, how does
CBRE change its methodology for
the UAE as opposed to say UK or
US?
This is an important question, CBRE
ensures through both professional
qualification
(and
ongoing
professional development) as well
as strict compliance measures
that the valuations undertaken
not only comply with market best
practice but also are undertaken in
accordance with global standards.
The RICS [The Royal Institution
of Chartered Surveyors] is the
most common industry standard
and valuers who are qualified
and passed the assessment of
competence undertake valuations
in accordance with their guidelines.
These guidelines not only set out
to ensure a uniform approach to
valuation assignments but also
that the interests of the client
(and valuer) are protected by
following the recommendations.
CBRE ensures that valuations that
would fall within the guidelines of
the recommendations of the RICS
are undertaken on the same basis
whether in the UAE , UK or any other
geography (adjusting where required
for local market requirements).
The Lands Department has recently
announced the plans to regulate
valuers, whilst the details of
qualification mechanics is expected
soon, we see this as a major step
in ensuring uniformity of valuation
standards which can only be a
positive in terms of improving the
trust and reputation of the valuation
industry in a market where there
has been some challenges.
Q5: What questions should a
potential client ask his valuer
before proceeding?
Experience in similar valuation
exercises and with the specific asset
classes (hotels or specialist assets
may require a different approach to
say offices or land)?
• Is the valuer / his firm
qualified?
• Is the firm on the panel of
the banks (if required for loan
security purposes)?
• Is the firm subject to any
conflict of interest (a valuer
needs to act on an independent
way and as such should not
provide valuation advice to
differing parties around the
same asset without consents
and disclosures)?
• Does the firm hold professional
indemnity insurance?
Additional comments:
It is worth commenting that
there has been a significant
improvement in valuation standards
in recent times, the RICS and Lands
Department have been working
together promoting standards in the
profession and with the increase in
International universities offering
post-graduate studies around the
real estate sphere within the region
the awareness and understanding of
the processes and potential pit-falls
around valuation amongst market
practitioners, lenders and potential
clients has greatly increased.
Simon Townsend
Director and Head of Valuation and Consultancy
www.cbre.com
25
HOTEL MARKET OVERVIEW
ABU DHABI
Market Characteristics
• While Abu Dhabi has historically
been driven by corporate and
MICE visitation, leisure tourism
has seen a boost over the past
few years supported by the
development of leisure demand
generators including Saadiyat
Island, Yas Waterworld, Yas
Mall, and the Du Arena. This
trend is expected to continue
as future demand generators
such as the upcoming Cultural
District are completed. As a
result, the more diversified
demand base should be less
susceptible to external forces.
• Passenger traffic at Abu
Dhabi Airport was up from
approximately 20 million in
2014 to over 23 million in 2015.
Also, the planned delivery of
the Midfield Terminal in 2017
is a sign that the necessary
infrastructure
to
support
further tourism growth will be
in place as the market develops.
• The declining oil price has
had an impact on visitation in
the capital, with many hotel
operators indicating that there
was a softening of corporate
demand particularly in terms
of oil and government related
visitation. With oil prices forecast
to fall further in 2016, this trend
is likely to continue— however
this is anticipated to be counter
balanced to some degree by
increasing leisure demand.
• There is a concerted effort
from the Abu Dhabi Convention
Bureau to increase Abu Dhabi’s
profile as a MICE destination
and ADNEC and the Al Ain
Convention Centre certainly lie
at the center of this strategy.
That said, the stringent
visa process in Abu Dhabi –
particularly when compared to
Dubai – is often challenging for
event organizers with delegates
of many different nationalities,
which
sometimes
means
that major events have to be
relocated away from the capital.
• Of the ten largest source
markets to Abu Dhabi, six
have experienced a weakening
currency in relation to the UAE
Dirham between January 2015
and January 2016, with relative
values
declining
between
four and nine percent. The
relative strength of the dollar
throughout 2016 will continue
to have an impact on Abu
Dhabi’s key source markets—
however conflicting dollar
forecasts over the next twelve
months mean that how this will
play out is as yet uncertain.
The Luxury Sector
• The luxury hotel sector in Abu
Dhabi has undergone rapid
transformation since 2011.
With a compound annual growth
rate of 16 percent in luxury
hotel rooms between 2011 and
2015, the market has seen the
introduction of several luxury
hotel developments including
two St. Regis properties, the
Sofitel, the Ritz Carlton, the
Anantara and the Rosewood,
which has made the luxury
sector a fiercely competitive
one. Luxury hotels which do
not have clear differentiators
are finding themselves in an
increasingly precarious position,
and the anticipated future
supply poses a further risk.
• The delivery of the Grand Hyatt,
Four Seasons, Edition, Fairmont,
Biltmore and Hard Rock Hotel
over the next 24 months, will
have direct implications for
the future performance of
Abu Dhabi’s luxury sector—
however this will only be
an issue if the projects are
delivered on schedule. The
hotel supply in Abu Dhabi is
often delayed, and as such, it is
unlikely that the pipeline in its
current state will materialise
in its entirety as anticipated.
• Unlike midscale hotels, which
have ‘room driven’ business
models, luxury hotels tend to
have more seasonal demand,
and rely heavily on ancillary
revenue which is primarily
driven by F&B spending. For this
reason, they are more severely
impacted during times of low
occupancy as owners lose out
not only on potential rooms
revenue, but also the associated
revenue. This is negated
however to some degree by the
fact that luxury hotels have the
ability to attract walk in demand
to their various F&B outlets in a
way that midscale hotels do not.
• Opportunities for further hotel
development still exist in the
capital—however they are
not necessarily in the luxury
segment but rather in the
development of midscale hotels
and internationally branded
serviced apartments. These
two asset classes are under
represented in the market to
date, and may be a safer bet
than further iconic flagship
developments in the years to
come.
FIGURE 3 — Typical luxury hotel revenue mix
Source: Knight Frank Research
FIGURE 1 — Key performance indicators, year-on-year change 2015
Source: STR Global
FIGURE 2 — Currency change against the dirham – Top
source markets Jan 2016 vs 2015
Source: Xe
FIGURE 4 — Occupancy seasonality – 2 year average
Source: STR Gllobal, Knight Frank Research
26
27
Offices Report
ABU DHABI
OIL PRICE INSTABILITY
CONTINUES INTO 2016
• The Economist Intelligence Unit
(EIU) estimates that overall
real GDP growth in the UAE
slowed to 4.6% in 2014 and is
expected to fall further in 2015
to 4.0%(f) and 2.7%(f) in 2016.
• With economic growth expected
to slow and UAE inflation
expected to fall in 2016 from
4.0%(f) in 2015 to 3.5%(f) in 2016
according to the EIU, the outlook
for the UAE remains positive.
• Current Brent Crude oil price at
the beginning of January was
c. USD$36 a barrel. There are
some analysts predicting that
average oil prices will stabilise
around US$60 between 2016
and 2020.
ABU DHABI GLOBAL
MARKET SQUARE AND AL
MARYAH ISLAND
• The ADGM has continued to
publish additional regulations
which effects the real estate
market on Al Maryah Island.
• The financial free zone and
investment zone for foreigners
will benefit from better
clarity and regulations for all
companies and individuals
wishing to invest in real estate
on the island. Occupiers
and potential occupiers are
benefiting from further updates
on the structure of the free
zone and how companies can
operate within the free zone.
Dual licensing has been a
concern and is to be addressed
to allow for Department
of Economic Development
(DED) and the ADGM licences.
28
• With c. 150,000 sq m of vacant
office space available within
the jurisdiction of the ADGM,
the law and structure will be
imperative for growth of the
financial free zone.
MARKET SENTIMENT
• With regional unrest and global
economic headwinds, we are
seeing a reduced interest
from international companies
looking to locate in Abu Dhabi.
MARKET COMMENT
• There was a slowdown in
enquiries in H2 2015 due
to companies reviewing the
impact in falling oil prices, the
consequential effect on federal
spending and the implications
on
the
wider
market.
FIGURE 1 — Abu Dhabi office stock, 2008 - 2016
• GDP growth in China fell to a 25year low of 6.9% in 2015, which
may impact on global markets
and oil demand, which will have
an impact on Abu Dhabi in 2016.
• The main demand for offices
was between 100 sq m and 500
sq m, with over 75% of enquiries
within this range, seen in fig. 2.
• Engineering & Construction
continued to be the most
active sector by the number
of enquires, which reflects the
recent growth in the number of
infrastructure and real estate
projects under progress. To date,
take up was led by Engineering &
Construction (21%) and General
Trading (20%), seen in fig. 3.
• Weaker market sentiment will
impact on the government and
the delivery of projects and
employment, which will reduce
occupier take up.
FIGURE 2 — Size requirements, H2 2015
ABU DHABI REAL ESTATE
LAW – MARKET UPDATE
Abu Dhabi recently published its
new property law aimed at better
regulating the real estate market,
which takes effect from January
2016. Part One of the law defines
the real estate register, the interim
real estate register, the real estate
development register, real estate
development projects, escrow
accounts, off-plan sales, service
charges and community charges.
The law, in summary:
• Grade A and prime supply
remains subdued, which will
be important for landlords to
maintain headline rents. There
are limited new developments
under
construction
and
those
under
construction
could see some further delay
in completion. The overall
changes in the market rents
over H2 2015 was minimal.
• Prime office rents remained
steady in H2 2015 at AED 1,850
per sq m, whilst rental values
for Grade A shell and core office
space remained steady at AED
1,250 per sq m, as seen in fig. 4.
• Buildings which do not meet
occupiers’ exact requirements
in terms of specification,
parking, and access will face
continued voids, as occupiers
that do relocate review
the market more carefully.
FIGURE 3 — Demand by sector, H2 2015
• Authorises
Abu
Dhabi’s
Department of Municipal Affairs
(“the DMA”) to organise and
develop the real estate sector
in Abu Dhabi, to supervise and
control all aspects related to the
sector and to coordinate with
municipalities in this regard.
Article extract from Al Tamimi & Co Law Firm, 2016 (modified)
• Oversees the types of entities
or persons that are allowed to
obtain a licence to engage in
development related activities
as master developers and
sub-developers, brokers and
their
employees,
owners’
association
managers,
appraisers
and
surveyors.
FIGURE 1Abu Dhabi office stock, 2008 - 2016
• Ensures developers will not be
allowed to engage in real estate
development unless they have
been registered in the real
estate development register.
• Requires that all disposals of offplan units which be registered in
the interim real estate register.
• Ensures a developer is not
allowed to sell units off-plan
unless it proves that it owns a
real estate right over the project
land and that it has opened an
escrow account for the project.
• Allows units sold off-plan to
be mortgaged provided that
the loan amount is paid into
the relevant escrow account
and the loan is allocated for
payment of the purchase price.
• Owners’ associations will be
independent legal entities that
hold title to the common parts
of developments and will be
responsible for the management
of those common parts.
FIGURE 1Abu Dhabi office stock, 2008 - 2016
• Outlines
punishments
for
anyone who violates its
provisions. This will benefit
occupiers long term as more
developers/landlords
will
provide
competition
for
occupiers.
29
Live life at your price
Nshama at Town Square
S
etting a new trend in the
property market, Nshama is a
private developer of integrated
lifestyle communities that are
differentiated by their focus on
offering distinct value propositions
for aspiring home-owners.
With its name inspired from a
traditional Arab Bedouin word used
to describe bravery, generosity
and virtue, Nshama has captivated
the market with the launch of its
flagship project, Town Square.
Dubai's first of its kind smartly
designed,
stylish,
green
neighbourhood by Nshama, the
750-acre (31 million sq ft) Town
Square is a vibrant development
anchored by a central square,
named Town Square Park, the size
of 16 football fields, and featuring
a range of lifestyle choices including
Vida Town Square Dubai hotel and a
Reel Cinemas cineplex and open-air
cinema.
In addition to a 2.5 million sq ft retail
precinct featuring over 600 stores
and F&B outlets, Town Square
also features day-care facilities,
playgrounds, play zones for all ages,
swimming pools, fitness centre,
athletic spa, interactive water
features, skate parks, playgrounds,
adventure zones, modern medical
facilities and splash parks.
Town Square is located in close
proximity to Arabian Ranches Golf
Course, Dubai Polo and Equestrian
Club and Al Maktoum International
Airport, near the site for the World
Expo 2020. It will feature over
3,000 townhouses and over 18,000
apartments as well as substantial
retail, hospitality and commercial
space.
With a high land-to-building ratio,
30
thus opening up more open spaces
for a greener community, Town
Square is distinguished by an
unmatched value proposition. It
offers a new model whereby middle
income professionals and families
who have traditionally been renting
out homes can become homeowners.
The ‘live at your price’ value
proposition of Town Square has
received overwhelming response
from investors that is highlighted by
the strong sales of its first residential
townhouses and apartments.
Nshama has launched several
residential projects including Zahra
Townhouses and Apartments, Hayat
Townhouses and Safi Apartments –
all of which have been well-received
by the market for the exceptional
price points.
For example, prices for Hayat
Townhouses started from a very
competitive AED 999,988 for three
bedroom homes. The prices for Safi
apartments started at AED 349,988
for a studio, AED 499,988 for a onebedroom, AED 699,988 for a twobedroom and AED 999,988 for a
three-bedroom apartment.
Recently, Nshama also unveiled
Jenna,
the
first
residential
apartments located right on the
Town Square Park. Jenna residents
will live next door to a new Vida
Town Square Dubai hotel, Reel
Cinemas cineplex and open-air
cinema, and over 2.5 million sq ft of
retail of which over 350 shops and
F&B outlets are located around the
Town Square Park itself.
Fred Durie, Chief Executive Officer
of Nshama, observes: “The strong
response to homes in Town Square
from end-users, particularly the
middle income professionals in
the salary range of AED 15,000 to
20,000 per month, highlights that
it perfectly addresses the market
need for homes that are within reach
of a growing number of aspiring
home-owners. We are meeting
the fundamental need for these
professionals and entrepreneurs
to shift from a rental model to own
homes, and live a lifestyle at their
price.”
He added: “Our value proposition
is clearly focused on singles,
coupes and families who wish to
build their future in one of Dubai’s
stylish, vibrant and youthful
neighbourhoods. All facilities and
amenities are designed to be within
walking distance, placing foremost
priority on the convenience of
families. Town Square homes also
offer a great opportunity for young
professionals to make a solid
investment in Dubai, a true global
destination for business and leisure.”
Several
other
development
contracts have been awarded to
various contractors and consultants,
all of them experts in the field,
underlining Nshama’s commitment
to project execution as per agreed
timelines.
Nshama has achieved significant
progress in the construction of its
first phase of homes. The grading
works for the entire 750-acre
(31 million sq ft) development is
ongoing with contract awarded to
Al Naboodah Contracting Co LLC.
The first phase deep services work
is being undertaken by Binladin
Contracting Group while UNEC is
constructing the first two apartment
blocks of Zahra and Safi.
Bringing the expertise of project
development professionals from
around the world, backed by strong
domain knowledge, Nshama is
creating elegantly master-planned
neighbourhoods that are smart,
interconnected, networked, techdriven and sustainable.
Investing in Nshama enables
customers to shift their lifestyle
and buy into a new development
approach to Dubai that draws on the
Dubai Plan 2021 and support the
key theme of establishing the city as
a ‘preferred place to live, work and
visit.’
Fred Durie
Chief Executive Officer
www.nshama.ae
31
OFFICE SECTOR
Q4 2015
DUBAI
OFFICE STOCK
Q4 2015
OFFICE SUPPLY
• Over 6.0 million sq.ft. of
new office space entered
the Dubai market in 2015,
taking the total office stock
to circa 90 million sq.ft.
• Approximately 60% of the new
supply delivered during 2015
is located in Business Bay,
Dubai Design District and Dubai
Investment Park areas which
OFFICE SALES
• Office sale rates across major
freehold
office
locations
registered a drop of 6% quarteron-quarter and 13% year-onyear. A combination of increased
supply, vacant stock and weak
demand has resulted in a sharp
drop in sale rates. Areas such as
Jumeirah Village, Arjan, Dubai
Motor City and Dubai Sports
City which are not primarily
established as commercial office
destinations have recorded the
highest drops in sales rates.
• Jumeirah Lakes Towers and
Business Bay, which are
relatively popular in terms of
small to medium size offices,
34
OFFICE
AVERAGE SALE
PRICES Q4 2015
together added 4.1 million
sq.ft. of new office space.
supply to shrink further over the
course of the next two years.
• A total of 1.49 million sq.ft. of
strata space entered the market
during 2015, representing a
considerable drop from previous
years. With the addition of
several office properties either
converted to residential or
hospitality use over the past
two years and weak demand
for strata space, we expect new
• New office space expected to
enter the market during 2016,
includes supply from Dubai
World Trade Centre district,
Onyx towers on Sheikh Zayed
Road and strata space from
delayed projects in the Business
Bay and Dubai Silicon Oasis
areas.
have witnessed a drop in sale
enquiries, as end users and
investors are adopting a wait and
watch strategy in anticipation
of further correction in sale
rates. The majority of enquiries
during the last quarter were
from investors seeking income
producing space rather than
shell and core or vacant space.
office space with a total value
of AED1.26 billion in Q4 2014.
• Office transactions in both
value and volume terms
dropped more than 50% yearon-year, according to data
sourced from the Dubai Land
Department. During Q4 2015,
over 445,000 sq.ft. of office
space was transacted at a total
value of circa AED0.59 billion as
compared to 900,000 sq.ft. of
• The majority of transactions
closed during the last quarter
were for office units measuring
less than 2,000 sq.ft. Of the 300
transactions recorded during the
quarter, circa 252 transactions
(84%) were for office sizes of
less than 2,000 sq.ft. with a
total value of AED264 million
for small unit sizes, which
strongly indicates the investor
profile is either for new startup companies or SME’s. A
limited mortgage offering for
commercial office space is also
impacting transaction volumes
despite a rise in new companies
in the Emirate.
OFFICE RENTS
• Office rents in the prime CBD
area remained stable for three
consecutive quarters. A lack
of new supply and relatively
high occupancy rates helped
maintain stable rents. Average
rents in Downtown Dubai and
office towers along Sheikh Zayed
road range between AED110265 per sq.ft. per annum.
• However, secondary locations
recorded a sharp drop in rental
rates, mainly across new
towers that have been delivered
to the market over the past six
months. Strata space owners
in the Business Bay area who
were previously quoting a rate
of AED120-130 per sq.ft. per
annum during Q2 and Q3 2015
are now offering the same
space at rents ranging between
AED85-95 per sq.ft. per
annum (a decline of 25-30%).
• An increase in supply combined
with weaker demand is leading
to a drop in rental rates across
strata owned developments,
whilst single held assets
continue
to
enjoy
high
occupancy and rental rates.
• With circa 4.5 million sq.ft. of
new office stock scheduled for
delivery in 2016, we expect
office rents to remain under
stress with secondary and
tertiary locations likely to see
a drop in rents along with
increased landlord incentives to
entice new tenants and achieve
lower void periods.
OFFICE
RENTS AED/Sq.ft
Q4 2015
35
• Over the past two years, the
retail market has witnessed a
rise in community retail concepts
• Retail sales for general goods
and services targeted towards
local population are likely to
outperform as compared to
luxury goods. Events such as
Dubai Shopping Festival, Dubai
Summer Surprises and Eid in
Dubai will continue to promote
sale activity.
PRIME SHOPPING MALL AVERAGE RENTS
Q4 2015
RETAIL SUPPLY
PRE-2010
• Dubai’s organised retail stock
grew by 8% year-on-year
reaching 34.8 million sq.ft.
GLA (gross leasable area). The
only new retail addition during
Q4 2015 was Dragon Mart 2
offering a total GLA of 1.7 million
sq.ft. located in the International
City master development. The
development which lacked
a major hypermarket also
saw the opening of Geant
Hypermarket,
an
anchor
tenant of Dragon Mart 2.
NEW SUPPLY DELIVERED
2010-Q4 2015
• Rents across prime retail centres
remained stable during the year
whilst a number of secondary
retail centers that are struggling
to maintain a healthy retail mix
witnessed a drop in rents in the
due to a rise in population
base across new residential
developments. During 2015,
several new community retail
centres opened in Majan, the
Villa, Al Waha community
and
Arabian
Ranches
developments adding circa
280,000 sq.ft. of retail space.
range of 7-10% year-on-year.
DUBAI RETAIL MALLS GLA
BY AREA - Q4 2015
• Despite a slowdown in sales,
the retail sector in the Emirate
continues to attract new
brands. Several regional and
international brands setup base
for the first time in Dubai during
2015 resulting in consistently
high occupancy rates. Prime
retail assets are currently
achieving over 95% occupancy
rates associated with a long
waiting list of retailers looking
to expand or set base in Dubai.
DUBAI RETAIL MALLS
CLASSIFICATION - Q4 2015
RETAIL SECTOR
Q4 2015
DUBAI
RETAIL MALL
STOCK - Q4 2015
Source: MPM Properties Research
Note: The rents quoted above are based rents excluding any turnover provisions and service charges
36
37
HOTEL SECTOR
Q4 2015
HOTEL SUMMARY
• Dubai’s hospitality stock rose by
1.7% from the previous quarter
with an addition of 1,709 new
hotel rooms and apartments
during Q4 2015, taking total
hotel room count to circa
97,000 rooms and apartments.
All new properties to enter
during the quarter are first
time entrants to Dubai’s ever
burgeoning hospitality market
with the inclusion of Versace,
St.Regis, Steigenberger and
Hilton Garden Inn brands.
• Around 43% of new supply falls
Elite Admiral Premium Residences
Alanya Turkey
under the four star rating with
the opening of three Garden
Inn brands from Hilton, with
properties located in Mina,
Muraqabat and Mall of the
Emirates accounting for a
total of 735 rooms. Five star
hotel rooms accounted for
the other 974 rooms, located
within Palazzo Versace. St.
Regis and Steigenberger hotels.
• The Dubai’s hospitality market
witnessed
rebranding
of
existing properties, including
the rebranding of a 212 room
Metropolitan Palace hotel
to Carlton Palace hotel and
471 room Radisson Royal
Tower to Nassima Royal hotel.
• With supply out stripping
demand, the hospitality sector
continues to record a decline
across all key performance
indicators. Although the number
of tourists into the Emirate
continues to rise by 8% yearon-year, the rise in room supply
is having a negative impact
on hotel trading performance.
Overall, occupancy levels for the
full year 2015 dropped by 3%
while ADR’s dropped by 10.2%
compared to the same period
last year.
PRIME HOTEL
ROOMS SUPPLY
2012 - 2017
DUBAI HOTELS
PERFORMANCE
YTD 2015
Book your
unit Now!
38
100% Freehold — 1, 2 and 3 Bedrooms Available for Sale
1000sqm Spa & Gym - Ready to Move in...
FOR SALES INQUIRIES / T +971 4 329 8333 / E inq@rootsland.com / W www.rootsland.com
Dubai Residential
Property Price Indices
Abu Dhabi Residential
Property Price Indices
Dubai
Residential
Price Change
Dubai
Residential
Price Change
Dubai
Residential
Price Index
Dubai
Residential
Price Index
UAE
Rental Yields
UAE Price
to Rent Ratios
Dubai
Residential
Price Index vs.
Gold Prices vs.
Oil Prices
40
41
Dubai Residential
CHANGE IN SUPPLY
A
t the end of 2014, the
consensus between analysts
predicting
supply
being
handed over in 2015 was between
22,000 to 26,000 units. However,
in 2015 a total number of 10,932
units were completed. We opine
that due to exogenous factors such
as the strengthening of the dollar
and crash of oil prices, the ambitious
completion dates of developers
has been stunted causing a deficit
in incremental supply versus
incremental demand in 2015.
This has been due to developers
slowing down the rate of handover
in response to declining prices, and
this trend is expected to continue
as markets adjust to lower demand;
this implies that concerns of
oversupply are exaggerated.
Expected vs.
Realized Supply
in 2015
Supply & Demand
Analysis
Given the low completion rate
of approximately 40% by the end
of 2015, we opine a deficit of
approximately 9,000 units had
occurred in 2015 compared to a
42
projected surplus of 6000 units.
If completion rates continue at
this pace, demand will continue to
outstrip supply causing prices to
move higher, especially on account
of a continuing expansionary fiscal
policy in the run up to world expo
2020.
I
To Buy or not to buy?
Investing in your Home
s that the question or do you need
more information? Mortgage rates
have generally stayed flat for the
past couple of years with most
countries keeping their national
lending rates at record lows, apart
from America who recently raised
theirs and then regretted the rise
with a possibility of reducing it again
very soon. Mortgages are currently
a cheap way to hedge an investment
in property whether it be as a home
or as a buy to let. In the UAE buyers
need a 25% deposit to take out a
mortgage, but this doesn't include
a few other charges that need
to be included in the overall cost
of purchase, that said, property
is often a good investment in an
by using mortgages. With different
reports on the property market
coming out regularly and varying
interpretations it can be almost
impossible for a potential buyer
who has been sitting on the fence to
make an informed decision, do you
need any more information?
individual or a couples diversified
investment portfolio with a longer
term objective. Lenders across the
UAE are now more willing to look at
cases on an individual basis when
they are presented correctly and
with underwriters having discretion
rather than a “computer says no”
response. It is advisable to get
a good, reputable and qualified
adviser to do this work for you as
there are a lot of mortgage options
and it is imperative your objectives
are met by your mortgage product.
as a separate entity. The mortgage
market has changed a lot over the
past few years, not just in the UAE
but also worldwide. Pre 2007 there
wouldn't have been much interest
in a movie about mortgage backed
securities, however, fast forward to
2016 and it's probably one of the
best films out at the moment, A-list
celebrities included.
The opportunity cost of what you
can do with this capital is what must
be considered rather than placing it
all in a property. And again keeping
in mind diversification, you could
probably buy two or more properties
Roots Land Real Estate’s accurate,
comprehensive
and
unbiased
quarterly report points to an end
to the spiral of property values, it
looks like we may have reached the
bottom and in some areas there
are actual rises. Property, both
as a home and as an investment,
should be an important segment
in your financial plan and not taken
Elsewhere, the UK has had its
mortgage market and regulations
redrawn from top to bottom with
its own regulator, the former FSA,
being scrapped and split into two
with the new FCA and the PRA. The
mortgage market itself has had the
new stricter rules and regulations of
the MMR implemented and likewise
financial advice with the RDR. This
has brought in higher minimum
qualifications for advisers meaning
most of the advisers in the UAE
would have a years studying to do
before they could even sit down
with a client and offer regulated
advice or to give mortgage advice in
the UK when not qualified to do so
is a criminal offence. However even
with all these changes there are
now mortgages available in the UK
with only a 5% deposit for the right
person, although I doubt very much
we will be watching a blockbuster
in 10 years time about the UK
mortgage market.
The good news here in the UAE is
checks are more stringent but also
underwriting is understanding to
specific circumstances. Cases that I
have had approved in the UAE for all
the right reasons would have been
non runners in the UK and this open
minded approach by underwriters
is a breath of fresh air. Loan to
values have not decreased although
this is one mechanism the central
bank has in its armoury to give
the housing market a boost. The
minimum deposit for first purchases
seems to be the main stumbling
block for most buyers, especially up
until now where there was a lack of
confidence. If you are still sitting on
the fence and wondering whether to
buy or not to buy, this could be your
opportunity to jump in and grab it
with both hands.
Darragh Gallagher
Senior Associate, Holborn Assets
www.holbornassets.com
43
Dubai Residential Market
Sale Performance Report — Q4 2015
Apartments
• Apartment prices declined, on
average, by 1% in Q4 2015,
where International City
declined slightly faster at 2%.
• During the last 12 months,
apartment price declines
varied significantly across
Dubai, dropping an average of
6% with peripheral locations
such as Discovery Gardens,
International City and Motor
City declining the most at 9%,
9% and 10% respectively.
Rent Performance Report
Apartments
• Apartment rents have slightly
declined by 1% in Q4 2015 and
approximately 3% during 2015
across Dubai.
Apartments Sale Performance
• The rate of decline varies from
one development to another
with International City rents
declining at a higher rate of 2%,
similar to the sale price trend in
Q4 2015.
• On average, studio rental rates
have increased while one and
two bed rents have during Q4
2015.
Apartments Rental Performance
Villas
• Villa prices have declined by
an average of 1% in Q4 2015,
slower than the 2% in Q3 2015.
Villas Sale Performance
• On average, villa prices have
declined by approximately
8% in the last 12 months.
Prices at more established
villa communities such as The
Meadows and Springs declined
by 12% and 18% respectively
as buyers opted to purchase
in the newer and upcoming
communities.
Villas
• Villa rents have followed a
similar trend as apartments
with an average drop of 1% in
Q4 2015 from Q3 2015 and a
3% decline during 2015.
• Rents in prime villa
communities such as Arabian
Ranches, Jumeirah Golf Estates
and Jumeirah Islands remained
relatively stable in Q4 2015 as
in Q3 2015.
• Rents of three and five bed
villas remained stable, whereas
four bed villa rents have
declined in Q4 2015.
Villas Rental Performance
44
45
Dubai Residential Market Report
Residential Supply — Q4 2015
2015 Completions
• Approximately 8,800 additional
residential units entered the
Dubai market in 2015.
• Over 70% of those are
apartments with the remainder
Pipeline
• Approximately 7,000 units have
been delayed from 2015 to
2016.
• Excluding those, 30,000 units
have been scheduled for
delivery in 2016, which may be
subject to potential delays.
being villas and townhouses
• Major completions in Dubai
Sports City, Dubai Silicon Oasis
and Dubailand.
Survey
Q1 2016 sales outlook
APARTMENTS
Percentage of agents who predicted apartment prices
would:
VILLAS
Percentage of agents who predicted villa prices would:
• The Dubai government budget
for 2016 was increased by 12%
to AED 46.1 billion, of which
14% allocated to infrastructure,
which shows continued
commitment toward the
growth of Dubai leading up to
2020.
Residential Market Survey
Q1 2016 Rents outlook
APARTMENTS
Percentage of agents who predicted apartment prices
would:
VILLAS
Percentage of agents who predicted villa prices would:
Looking back — Q4 2015 — sales and rents
46
47
Price Performance — Q4 2015
Apartments
Rent Performance — Q4 2015
Apartments
• The change in apartment rents
varied across different areas as
average rents in locations such
as Al Raha Beach and Al Reem
Island remained stable in Q4
2015.
• Al Ghadeer rents have slightly
increased by 1%, where rents
in Al Reef Downtown and
Saadiyat Beach Residences
have dropped by approximately
1% and 2% respectively in Q4
2015.
Villas
• Average villa rents have
remained stable in both Al Raha
Gardens and Al Reef, whilst
Saadiyat Beach Villa rents
slightly increased by 1% as
supply remains limited on the
island.
• Four and five bedroom villa
rents have increased whilst
three bedroom villas have
decreased.
• Apartment prices have
marginally declined by 1% in Q4
2015 across the investment
zones covered within our
report.
• In the last 12 months,
apartment prices have dropped
an average of 3%, a slower rate
than that in Dubai.
Apartments Price Performance
Villas Rent Performance
Villas
Apartments Rent Performance
• Villa prices have also slightly
declined at a rate of 1% during
Q4 2015.
Residential Market Survey
• During a 12 month period, villa
prices declined by an average
of 4%.
Villas Price Performance
48
2015 Completions
Pipeline
• Approximately 2,700 units delivered in investment
zones during 2015, mainly on Al Reem Island and
Saadiyat Island.
• 14,600 residential units scheduled to enter the Abu
Dhabi investment zones from 2016 - 2018.
• Over 60% of that supply is scheduled to be delivered
in 2017.
49
Affordable Housing
Addressing Challenges in Dubai
A
ffordable housing is a global
challenge set to magnify in
coming years – and Dubai is
not exempt from this challenge.
Indeed, over the past decade in
Dubai, it is only recently that the
market has started to address the
issue of affordable housing. To be
a truly world-class city, Dubai must
serve the real estate needs of all
economic sections.
Globally, an estimated 330 million
households “occupy unsafe and
inadequate housing or are financially
stretched by housing costs,”
according to an October 2014 report
by The McKinsey Global Institute, “A
Blueprint for Addressing the Global
Affordable Housing Challenge.” By
2025, the number of households
may reach 440 million—or 1.6
billion people.
As a response to the challenge in
Dubai, Sun and Sand Developers, a
real estate firm that was founded and
has operated in the UAE since 2005,
has launched SunBeam Homes, a
pilot project for affordable homes.
It has also developed a case study
“Affordable Housing, Addressing the
Challenges in Dubai” setting out the
difficulties and exploring possible
solutions. The firm is also uniquely
placed to draw on the experiences
of its sister company in India, which
for more than 30 years has built
affordable housing there.
“Our pilot project is really a way
for us to showcase our vision for
affordable homes and demonstrate
how they can be delivered at lower
costs than standard homes,” says
Sailesh Israni, Managing Director of
Sun and Sand Developers. “This is
also a way for us to test the market
appetite for a project at a much
bigger scale.”
50
A lack of affordable housing has
a detrimental impact on a city’s
residents. People may have to live
in housing far from their places of
work; expat workers may be unable
to bring their families to Dubai to live
with them; families may be forced to
share accommodation with others,
depriving them of privacy and
destabilising the atmosphere in the
home.
It’s important to define what is meant
by affordable housing. First, there
are a number of parameters relating
to quality.
Affordable housing
should be structurally stable and
use good quality materials; it must
have light and ventilation; offers
privacy despite being compact; has
adequate internal amenities (such
as sanitary fixtures, doors and
windows); sufficient car park space;
and has lower running costs than
standard housing.
There are also financial parameters,
which follow certain rules of thumb.
For buyers, the property value
must not be more than five times
the annual salary and the EMI – or
the Equated Monthly Instalment
to pay off a loan over time and
must not exceed 30 to 40 per cent
of a monthly salary. Similarly, for
those renting, monthly rent must
not exceed 30 to 40 per cent of a
monthly salary.
Under these criteria, an affordable
one-bedroom property with a hall
and kitchen should be available for
those earning AED 6,000 - 8000 per
month.
There are a certain number of
challenges associated with providing
affordable housing, and overall
success depends on the effective
contribution of four groups: the
government/master developer, the
developer, financial institutions and
customers themselves.
The first challenge is land. The land
for developing affordable housing
must have infrastructure – roads,
water, and power in place. It must
be accessible to the place of work
and schools, with a commuting
time of less than 30 minutes. Public
transport must be available nearby
and land should not exceed 25 per
cent of total construction costs.
The second challenge is final sale
price. The developer must use
value engineering and design to
control construction costs without
compromising on quality.
For the end user, special financing
must be available which may include
low-interest mortgages and no early
repayment fees or charges.
To keep prices low over the long
term, procedures should be put
in place to stop practices such as
flipping (reselling the property
immediately after buying for profit).
If the four groups support each other,
the cost of a standard apartment
can fall as much as 36 per cent. This
means families can save between
AED 2,000 to AED 2,500 per month
on housing.
Compared
with
a
standard
apartment, calculations made by
Sun and Sand Developers shows
there can be a saving of 50 per cent
in land costs, a saving of 38.5 per
cent in construction costs, a 31 per
cent saving in overheads and a 23
per cent saving in the developer’s
margin.
Despite
lower
margins
for
developers, building affordable
housing represents a sizeable
and much overlooked business
opportunity.
Because demand for such housing is
high, lower prices attract high sales.
Developers can increase production
and achieve economies of scale.
Work on the pilot project, which is
located in Dubai Industrial City (DIC),
is scheduled to start in early 2016.
The location was chosen because of
its proximity to the Expo 2020 site,
DWC airport and a new metro line
– and because of the demand for
affordable housing that evidently
exists in DIC. The site is home to
more than 150 companies and Sun
and Sand research shows that many
employees currently commute
across the city to reach their place
of work.
The complex will consist of four
buildings with 32 apartments in
total: 24 one bedroom flats and
eight two bedroom flats. In addition
to a hall and kitchen, every home
will have two toilets and a terrace
or balcony. There will be ample car
parking, landscaping and designed
lobbies. Rent for the one bedroom
flats will be AED 29,000 annually;
rent for the two bedroom flats will be
AED 39,000 annually. These homes
will not be for sale at the moment
because approvals are still pending,
once they have completed the
formalities the asking prices would
be AED 325,000 (one bedroom) and
AED 459,000 (two bedroom).
“I truly hope our pilot scheme is
a small step towards many such
projects flourishing in Dubai,” Mr
Israni says.
Mr. Sailesh Israni
Sun and Sand Developers
www.sasdgroup.com
51
I
RP Heights
Downtown Dubai
Real Estate Register
Cancellation of Unit Registration
n the light of the development
witnessed by the Emirate of Dubai,
and with the increasing activity of
purchasing and selling, I take this
opportunity to quickly comment on
one of the problems that has been
practiced and discussed frequently.
This problem cannot be ignored and
that is of course the cancellation of
unit Registries from the initial Land
Record which used to be registered
by the name of investor (purchaser)
in the initial record
As understood by all, the law of the
Emirate of Dubai has compelled the
developer to register the real estate
units in the initial record in the name
of its owner for insuring their rights
in case the sold property wasn’t
ready for hand over. It obliged the
developer to assure its handover
on the due time and agreed upon
time and the investor shall pay
the installments as per the mutual
agreed schedule between them.
These situations are when the
investor (purchaser) delays the
payment of the due installments
within the scheduled dates.
In these instances the legislative
authority of the Emirate of Dubai
has responded by addressing this
issue, in the light of which, the
Executive Board's decision No. 6,
2010 is issued, this approves the
adoption of the executive orders as
per the law No. 13, 2008 concerning
the initial property registry in the
Emirate of Dubai which stipulates
in its articles especially article 15,
the necessary procedures to be
followed by the developer with
Land registration authority before
attaining the order for canceling the
name of the investor from the initial
record.
The decision was made in response
of the real estate development
which is witnessed by the Emirate
of Dubai in order to meet the legal
requirements of the work in this
regard. The concerned authorities
in the Emirate of Dubai have issued
the real estate laws which must
be applied to all disputes and legal
real estate cases as established by
Dubai Courts of cassation.
Such laws fixed, organised and
described the obligation add the
rights of both the developer and
the investor. Such law fixed also
the procedures to be followed and
the penalties arising in case of any
breach from the side of either party.
Also the competent authorities
should apply the same as well as the
entities to issue decisions based on
such law.
In other words, lands and owners
department should notify the
investor to comply with the payment
and then issue its decision to cancel
the registration of the unit in his
name due to his failure to pay, its
decision should be applicable.
In accordance to the provision of
Article 15 of law No. 13 of 2008
(resolution of the executive council
No. 6 of 2010 to approve the
executive regulation thereof).
The said article explains the steps
to be followed in case of failure
by the investor starting from
the notification till the penalties
imposed on such failure.
Regarding article 17 of the same
law, it explained that for the
purpose of applying article 15 if such
decision the following 1-2 should be
observed:
Completion Date: 2018
Mix of 1, 2 and 3 Bedrooms
Booking 5% and Attractive Payment Plan
Heightened 10'-6" ceilings in All Apartments
Starting Price AED 1930 /sqft
In other words the above said
law fixed (1) the steps and 2)
the penalties and (3) application
techniques and 4) the competent
entities to issue the decisions.
Thus, the resolutions issued by the
Land and Property Department
to cancel the restriction of a real
estate unit due to the investor's
non compliance to pay are
resolutions issued by an authorised
and competent administrative
body, therefore, these resolutions
shall not be neglected nor
derogated by conferring a title of
(recommendation or proposal) on
them, while some provisions had
applied this trend and cancelled
some of the resolutions issued by
the Land and Property Department
which had already been issued to
cancel a unit restriction in a name of
an investor.
Show units ready — call for viewing
The importance of this problem
requires to rethink again of the legal
power that must be conferred on
these decisions in order to be final
decisions that grant the developer
the right of selling the unit again
after receiving the cancellation
decision, and compel the investor
to show no leniency in abiding by
installments or payments agreed
upon, leading to the ongoing stability
of the transactions in this regard.
Mohamed Raaed Ghafeer
Apartments for sale in donwtown dubai
Legal Advisor
www.alzahmyadvocates.com
52
Multi-Component Owners Associations
Key Challenges in Management of Shared Areas
W
ith the complexity and
interdependence of the
various
components
of mixed-use community, the
challenges and the potential risks
are increased over those associated
with the typical single-use project.
holders to achieve and maintain
predictability and control.
Mixed-use projects are characterized
by three or more different types of
uses – typically retail, office, and
residential, and sometimes including
hotel or entertainment – all integrated
by means of a master plan.
Governence of
Mixed-Use Projects
The challenge in creating a
successful,
smoothly
running
mixed-use community of divergent
residential and commercial interests
lies in how “sharing” is handled.
Preparing the legal documentation
for and administering a mixed-use
community is largely an exercise in
determining how to share and, more
importantly, how to avoid sharing.
What is shared in a mixed-use
community? Places such as
driveways, corridors, plant rooms;
things such as utilities, parking,
governance; and costs associated
with the shared areas, such as
insurance, maintenance, utility and
administration costs, are all shared
to some extent in a mixed-use
community.
In general the commercial owner,
investor or lender wants to be
able to see the edges of its asset.
It wants the asset discreet and
definable so that it can be readily
appraised, financed and controlled.
It can be confounding for the
commercial interest holder to share
with residential owners, especially
when all uses are placed within the
same owners association. Typically,
the more the components of the
commercial asset are shared with
residential owners, the greater the
challenge to commercial interest
54
The general thesis is, then, that the
benefits of a mixed-use community
can be maximized by minimizing
sharing.
The most critical governance issue in
a mixed- use project is the balancing
of control between the various unit
owners. Here the term “control”
has multiple meanings – decisionmaking over design elements and
fit-out; financial administration;
maintenance,
repair
and
replacement of the common area
components; actual control of the
property owners association(s); and
dispute resolution mechanisms. The
Jointly-Owned Property Declaration
(JOPD) and its related documents like
Building Management Statement
(BMS) must must define community
standards and control measures so
that the various parties can coexist
within the same structure, not
compete in the administration of the
project’s operation, and resolve their
disputes through a effective dispute
resolution process.
The JOPD and BMS provide the
vision and general framework for
the regulation of the mixed-use
community, together with standards
and procedures for the management,
operation and maintenance of the
project.
Shared Facilities
Cost Allocation
Mixed use projects present
challenges in the allocation of
maintenance costs for common
areas
and
shared
facilities.
Maintenance of improvements
owned and used exclusively by
one property owner should be the
sole responsibility for that owner,
even where the improvements are
actually located on other property.
For shared facilities, cost allocations
based upon usage or benefits is the
most common.
Problems arise when either a key
tenant or owner negotiates an
exemption or discount from the
normal cost allocation arrangement.
This forces the remaining owners
to bear an over-allocation of
maintenance costs for those
facilities. Proper cost allocation
depends on many factors, including
design, configuration, location,
ownership, infrastructure, utilities,
and specific characteristics of the
project such as the type of use,
intensity of use and potential
disproportionate impacts of one or
more segment of users over another.
Although allocation based on square
footages is convenient, oftentimes
in mixed-use developments this
type of cost allocation leads to unfair
results since usage infrequently
correlates well with floor areas. A
more equitable allocation is based
on the intensity of the anticipated
or known use by the different user
groups within the project.
Allocating the costs of operating
and maintaining the common areas
of a mixed-use project in a fair and
equitable manner can be challenging.
1. Costs of maintaining common
area that exclusively benefits
one user should be allocated
completely to that user even if
located on other property.
2. Costs of common area that
is shared but not equally are
more difficult to allocate – for
example, loading and trash
areas where a simple floor area
fraction often will not work.
Several methods of expense
allocation include the following:
(a) Allocation based on
common interest percentages
(the simplest formulation).
(b) Delegation to the Master
Owners Association of the
responsibility to allocate
expenses reasonably and fairly.
(c) Installation of submeters
or other check devices for the
utilities and other services
provided to the project
component, with expenses
then allocated based on meter
readings.
(d) Allocation of expenses
based on anticipated usage.
Management of
Shared Areas
In many cases OA managers use
‘cross easements’ approach to
manage mixed-use communities.
However, it may be possible to
avoid using cross easements if the
residences and commercial spaces
are located on separate legal parcels
or separate plots.
The benefit of using cross easements is
that they create stable and predictable
relationships that are not susceptible
to change.
On the other hand, cross easements
are less beneficial when the
residences and commercial spaces,
though on separate parcels,
share lots of things and areas;
Secondly, cross easements tend
to be inflexible, perhaps a little too
stable and predictable. They don't
evolve well as a community evolves;
they can't respond readily to new
and unanticipated issues that a
community encounters after the
easement was drafted and recorded.
owned by one owner. In this case the
retail component lacks the critical
mass to sustain its own association,
and therefore the usual approach is
to place everyone in a single owners
association, but create different
classes of membership for the
residential owners and the retail
owners. This approach also involves
delegating as much authority as
possible to each class to run its own
affairs, except as to elements that
must be shared.
In cases where the commercial and
residential components are in a
single building or otherwise cannot
be feasibly subdivided into separate
parcels, then the community
managers may need to look to the
option of establishing separate
owners associations for every
component, leaving the shared
areas within master association.
It's therefore important for the
mixed-use owners association with
help of community managers to
strategize how to manage sharing
within their communities.
This enables the residential and
commercial interest holders to
control their own respective affairs.
This Article is published for general
information, not to provide specific
legal advice. The application of any
matter discussed in this article
to anyone's particular situation
requires knowledge and analysis of
the specific facts involved.
The objective is to minimize the
master association's obligations
and interests while maximizing the
ability of each element of the mixeduse community to exist without
interference from the other.
In
some
simple
mixed-use
communities, multiple associations
may not be necessary. The classic
example is a large residential
building with a coffee shop or a
flower shop, and/or multiple shops
Alexander Karabet
Managing Director
Mansions Owners Association Management
www.mansions.ae
55
CityLife Mall
Al-Khor
Book Space for your
Brand Now!
Ajman
City Life Al-Khor, Ajman has been envisioned as the new dynamic retail area. It is
planned to be the ultimate destination for family outings with venues for Retail,
Entertainment and F&B Outlets. The City Life, a shopper’s paradise in the heart
of Ajman. Located next to the Ajman Free Zone, in Al Rashidiya, it overlooks the
Creek and the Marina.
The Mall will offer approximately 125,000 sq.ft. of retail space for rent. Our aim
is to provide value and diversity to the Mall for the people of Ajman to enjoy.
Thus we invite quality brands to contact us and book their shop in this promising
venue.
Ajman Emirate entered a strong development and prosperous phase with many
projects, including malls, which will offer services and various activities of high
standard and quality to families estate.
Roots Land Real Estate was appointed by Al Khaleejiah Holding as the exclusive
leasing company and is currently negotiating with many brands to create a good
mix of tenants for the Mall.
Phase 1
Features
• 125,000 sq.ft.
• Indoor/Outdoor parking
• 26 Retail shops in phase 1
• Own Marina
• Size range 410 — 5070 sq.ft.
• Exclusive finishing
• Outdoor sitting area along the
• Modern design
creek
• Strategically located in the
center of Ajman
Phase 3
Phase 2
• Mix of restaurants and retail
shops
• Entertainment area
Phase 1
For Leasing Inquiries
M +971 50 400 1066
T +971 4 329 8333
E inq@rootsland.com
www.rootsland.com
ORN 666
In Partnership with
Prime
Villas
Sports City
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Rukan villas, an enriching community and environment with Arabian
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• Expected Completion 1st
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• Completion DateApril 2018
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M +971 50 400 1066
T +971 4 329 8333
M +971 50 400 1066
E inq@rootsland.com
www.rootsland.com
ORN 666
No Commission — direct from Developer
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Marina Towers
Apartments
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SinpasIstanbul,
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Ankara, Turkey
Project under construction
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