Property Review
Dubai Real Estate ReportQ2 2020
Elaine JonesFRICS
Executive Chairman and Founder
Asteco’s research reflects the latest market trends. Our data is obtained from an extensive range of sources, including transactional evidence, valuation evidence (internal and external), discussions with major UAE lenders, brokers (internal and external) and data from managed portfolios comprising assets situated across the UAE.
To date, the UAE real estate market has shown a surprising level of resilience in the face of serious challenges created by COVID-19. However, despite a number of positive reports suggesting that the economy is moving into a recovery phase, it is widely perceived that the full economic impact has yet to be felt. Rather, there is considerable risk that the economic unwinding from the pandemic has yet to begin in earnest.
The Calm before the Storm? Whilst it might be surprising to describe recent tumultuous months as calm, the current data indicates a lag in real estate market trends to events that have already unfolded, and continue to unfold.
This would appear evident from our Q2 2020 figures, which indicate no significant drop in values and rents over the past quarter. Rather, the declines were broadly in line with Q1 2020 results. On this point, it is worth noting that these drops were already anticipated based on significant levels of supply and weak demand. As such, it would appear that the ‘new’ headwinds created by COVID-19 have yet to bare teeth.
It is widely expected that this picture will become much clearer following the resumption of international travel and the repatriation of unemployed workers.
Nevertheless, measures have been made to offset the full economic impact of Covid, both at Federal and Municipal levels, through a series of stimulus packages. These packages will mitigate some of the short term effects and provide a platform for improvement in the overall economy in the medium to long term.
These stimulus packages are supported by existing commitments to infrastructure spending / delivery, such as the Expo 2020 metro line (Dubai Red Line extension) with 7 new stations, which will officially open to the public in September this year.
The opening of UAE airports to international tourists will also undoubtedly provide welcomed relief to the hospitality and retail sectors, two of the hardest hit segments of the economy. The recovery of these sectors is ultimately critical to returning the economy to full health. However, the pace of this recovery remains uncertain and will ultimately be influenced by a range of factors, many outside of the UAE’s borders.
Nevertheless, with an increased probability of business downsizing and potential job losses, there is a high risk that demand for real estate (rental and sales) will weaken further. This potentially sharp drop in decline is set to coincide with the continued delivery of pre-pandemic committed supply. As such, significant corrections in values (rents in particular) during the second half of the year and into 2021 are likely.
SPECIAL NOTE FROM MANAGEMENT
2
Dubai Real Estate Report -
DUBAI MARKET OVERVIEW
3 Q2 2020
SUPPLY* RENTAL RATES SALES PRICES
*It is important to note that whilst a number of projects may have received completion certificates, Asteco does not consider a project delivered until the handover process has been initiated and the units are available for Lease in the open market.
New Apartment supply slowed markedly in Q2 2020 with the handover of 4,200 units, compared to over 5,750 in the first quarter of the year. Similarly, new Office supply fell short of last quarter’s output, with the delivery of 0.3 million sq.ft. of Office space compared to 0.5 million sq.ft. in Q1. Interestingly, Villa stock increased marginally, from 2,150 units in Q1 to 2,300 dwellings in Q2 2020. Despite post-completion linked payment plans that previously encouraged Developers to complete projects in a timely manner, new supply is likely to fall short of earlier estimates. Recent research revealed that approximately 20% of previously tendered or under construction projects have been put on hold, temporarily or indefinitely, and our projections have been revised accordingly. Whilst these figures represent a notable decline on previous projections, it is still a significant volume, particularly given the current situation. Although Real Estate demand is likely to slow based on current uncertainties, it is reasonable to assume that the number of new project announcements will be very limited until economic conditions and market sentiment improve. This may aid in the absorption of pent-up demand in the medium to long term.
The rate of decline for Apartment, Villa and Office Rental rates over Q2 2020 was more or less similar to previous quarters, recording quarterly drops of 4%, 3% and 5%, respectively. Annual changes were also broadly aligned with preceding trends and amounted to 13%, 10% and 13%, respectively. Asteco anticipates that this pattern is likely to prevail, or even intensify due to the expected volume of additional supply combined with a potentially sharp drop in demand in the short to medium term due to the impact of COVID on employment. There has been a marked rise in the number of small (circa. 100 - 500 sq.ft.), fully furnished / fitted / serviced offices available for Lease, especially in areas with a large amount of strata title space, such as Business Bay and Jumeirah Lakes Towers. Incentives offered are extensive and include items such as free licenses, rent-free periods (up to 12 months), zero commission, free chiller, free parking, flexible payment options, etc. Despite discounts and incentives offered by Residential and Commercial Landlords, we expect a reduced number of new Leases and renewals in the short term as Tenants adopt a wait and see approach. Whilst prolonged economic challenges and the general level of employment uncertainty have and will result in Residents downsizing and seeking value-for-money accommodation, preliminary data suggests an increase in enquiries for larger (competitively priced) units with extensive facilities. This is predominantly due to the rise in ‘work from home’ policies implemented by companies, often on a permanent basis. In addition, there may well be a trend for more flexible Residential options in terms of Lease terms and more limited upfront capital requirements due to shorter term employment opportunities and in order to address concerns over job security. In any event, monthly payments by direct debit / credit cards will become the market norm and the Property Management structure will need to be able to address these requirements going forward in terms of enhanced level of Tenant management and responsive maintenance services to retain Tenants.
Whilst there is definite traction in the market, sales prices for Apartments, Villas and Offices contracted by 4%, 4% and 2% compared to the previous quarter, and recorded annual declines of 11%, 11% and 9%, respectively. The reduction of the LTV ratio by 5% and partial release of pent-up Buyer demand resulting from the lifting of movement restrictions resulted in an immediate bounce in sales activity towards the end of the second quarter. However, there has been a significant drop in off-plan Sales launches, a trend we expect will continue for the short term. Despite extensive Government initiatives on both Federal and Municipal level, oil price volatility and the threat of a breakdown in trade relations between China and the USA will continue to weaken global economic and therefore local recovery. Whilst we initially expected the fall out of Covid-19 to manifest in Q2, we do not believe this to be the case just yet. Until greater stability returns to the market, it is difficult to predict when conditions will normalise and how transactional volumes and values will be affected. Moreover, it is difficult to anticipate whether long term changes to purchaser habits and change in work-place, work-life habits will manifest.
APARTMENTSNO. OF UNITS
VILLASNO. OF UNITS
OFFICESMILLION SQ.FT.
DUBAI SUPPLY
Dubai Real Estate Report -
5,750 4,200
2,150
Q1 2020 Q2 2020 H2 2020
12,650
2,300 3,750
0.5 0.3 1.15
4 Q2 2020
COMPLETED IN COMPLETED IN PROJECTED
DUBAI APARTMENT RENTAL RATES
(All figures in AED 000’s p.a.)
STUDIO 1 BEDROOM 2 BEDROOMS 3 BEDROOMS % CHANGE
HIGH TO LUXURY ENDDIFCDOWNTOWN DUBAIPALM JUMEIRAHSHEIKH ZAYED ROADMID TO HIGH ENDBUSINESS BAYDUBAI MARINAGREENSJUMEIRAH BEACH RESIDENCEJUMEIRAH LAKES TOWERSAFFORDABLEDEIRADISCOVERY GARDENSDUBAI SPORTS CITYINTERNATIONAL CITYJUMEIRAH VILLAGE
Dubai Real Estate Report -
FROM TO FROM TO FROM TO FROM TO Q1 2020 - Q2 2020 Q2 2019 - Q2 2020
0%-41%
Since Q2 2019
-13%-4%
Since Q1 2020
5 Q2 2020
Since peak Since market lowQ2 2014 Q3 2011
Y-o-YQ-o-Q
45 6535 6550 7050 60
30 47.530 6035 47.545 6030 45
401522.5 32.520 3015 25
22.5 32.5
60 10050 8060 11050 85
40 6540 7545 7055 75
37.5 65
25 5535 5030 45
22.5 32.530 45
140 7070 120
15585120 60
60 9555 11565 10570 10045 85
37.5 7060 80
654035 5045 70
95 205100 180110 190 80 150
95 12516070
85 14090 13560 120
9555-
60 -
8065 80 65 90
-3%-6%-3%-2%
-6%-5%-6%-6%-6%
-4% -4%-6%-3%-3%
-11%-14%-8%-9%
-15%-12%-12%-13%-12%
-14%-10%-16%-9%
-15%
% Change
DUBAI APARTMENT SALES PRICES
% CHANGE
Dubai Real Estate Report -
(All figures in AED per sq.ft.)
HIGH TO LUXURY END
DIFC
DOWNTOWN DUBAI
PALM JUMEIRAH
MID TO HIGH END
BUSINESS BAY
DUBAI MARINA
THE GREENS AND THE VIEWS
JUMEIRAH BEACH RESIDENCE
JUMEIRAH LAKES TOWERS
AFFORDABLE
DISCOVERY GARDENS
DUBAI SPORTS CITY
INTERNATIONAL CITY
JUMEIRAH VILLAGE
0 500 1,000 1,500 2,5002,000 Q1 2020 - Q2 2020 Q2 2019 - Q2 2020
800 1,750
650 1,275
775 1,800
600 1,500
400 775
525 1,100
650 1,100
350 700
675 1,850
625 1,150
400 800
650450
9%
Since Q1 2020
-4%
Since Q2 2019
-11% -40%
6 Q2 2020
-2% -7%
-4% -9%
-4% -8%
-3% -8%
-3% -10%
-3% -11%
-3% -8%
-3% -11%
-5% -17%
-4% -15%
-6% -20%
-4% -15%
Q-o-Q Y-o-Y Since peakQ2 2014
Since market lowQ3 2011% Change
DUBAI VILLA RENTAL RATES
(All figures in AED 000’s p.a.)
2 BEDROOMS 3 BEDROOMS 4 BEDROOMS 5 BEDROOMS % CHANGE
ARABIAN RANCHESDUBAI SILICON OASIS (CEDRE VILLAS)DUBAI SPORTS CITY (VICTORY HEIGHTS)JUMEIRAHJUMEIRAH PARKJUMEIRAH VILLAGEMEADOWSMIRDIFPALM JUMEIRAHSPRINGSTHE LAKESUMM SUQEIM
Dubai Real Estate Report -
FROM TO FROM TO FROM TO FROM TO Q1 2020 - Q2 2020 Q2 2019 - Q2 2020
Since Q2 2019
-10% -41% -10%
Since Q1 2020
-3%
Q-o-Q Y-o-Y Since peakQ2 2014
Since market lowQ2 2012
Q2 20207
75 115 - -- -- -- -
70 105- -
55 85- -
70 110- -- -
85 155125 137.595 125
105 185130 16580 120
140 18065 105
160 25095 135
135 170110 190
130 230130 140125 165120 210150 20080 135
160 20075 125
220 380- -
170 240130 230
160 260150 160170 245130 240200 250110 150175 25080 130
275 650- -
240 275150 280
-3% -6%-2% -12%-5% -13%-4% -7%-2% -4%-3% -11%-2% -4%-1% -10%-1% -7%-5% -9%-2% -6%-2% -6%
% Change
DUBAI VILLA SALES PRICES
% CHANGE
Dubai Real Estate Report -
(All figures in AED per sq.ft.)
ARABIAN RANCHES
DUBAI SILICON OASIS (CEDRE VILLAS)
DUBAI SPORTS CITY (VICTORY HEIGHTS)
JUMEIRAH PARK
JUMEIRAH VILLAGE
MEADOWS
PALM JUMEIRAH
SPRINGS
0 1,000 2,000 3,000 4,000 Q1 2020 - Q2 2020 Q2 2019 - Q2 2020
550 1,050
525 650
725 900
575 850
300 700
700 1,000
700 3,500
525 825
-4% -11% -44% -5%
Since Q1 2020 Since Q2 2019
8 Q2 2020
-3% -11%
-4% -12%
-3% -9%
-4% -14%
-5% -13%
-3% -8%
-3% -5%
-4% -13%
Y-o-YQ-o-Q Since peakQ2 2014
Since market lowQ3 2011% Change
(All figures in AED per sq.ft. p.a.)
AVERAGE RENTAL RATES % CHANGE
FROM TO
BARSHA HEIGHTS (FORMER TECOM)BUR DUBAIBUSINESS BAYDIFCJUMEIRAH LAKES TOWERSSHEIKH ZAYED ROAD
DUBAI OFFICE RENTAL RATES
Dubai Real Estate Report -
Q1 2020 - Q2 2020 Q2 2019 - Q2 2020
-5% -14% -31% 0%
Since Q1 2020 Since Q2 2019
0%
9 Q2 2020
Q-o-Q Y-o-Y Since peak Since market lowQ4 2012Q3 2015
35 7540 9035 8060 27525 8550 120
-20%-8%-13%-7%-18%-8%
-8% -15%-21%-8%
-5% -14%
% Change
DUBAI OFFICE SALES PRICES
% CHANGE
Dubai Real Estate Report -
(All figures in AED per sq.ft.)
BARSHA HEIGHTS (FORMER TECOM)
BUSINESS BAY
DIFC
JUMEIRAH LAKES TOWERS
0 500 1,000 1,500 2,000 Q1 2020 - Q2 2020 Q2 2019 - Q2 2020
450 800
525 1,200
950 1,750
350 950
-2% -9% -36% -1%
Since Q1 2020 Since Q2 2019
-4% -12%
-3% -10%
-2% -10%
-4% -8%
Q-o-Q Y-o-Y Since peakQ1 2015 Q2 2012
Since market low
Q2 202010
% Change
DUBAI PROPERTY MAP
311
311
311
611
611
611
1111
44
44
21
2
4
3
5
27
2324
25
6 8
62
6459
57
5856
55
61
70
6665
67
6872
69
71
85
50
4748
51
49
73
4645
63
7876
77
87
86
81
84
83
7
31
29
30
22
28
26
3235
53
52
41
37 38
34
9
15 1817
1410
16
36
1113
1220
19
42
43
82
80
79
44
54
6075
74
39 40
33
1
To Sharjah
To Abu Dhabi
Arabian Gulf
1 Veneto2 Badrah3 Bluewater Island4 JBR5 Dubai Marina6 Dubai Internet City,
Dubai Media City & Knowledge Village
7 Palm Jumeirah8 Umm Suqeim9 Jumeirah10 Jumeirah Bay Island11 City Walk12 Al Satwa13 Sheikh Zayed Road14 La Mer15 Pearl Jumeirah16 Bur Dubai17 Dubai Maritime City18 Port Rashid19 Deira Island20 Deira21 Downtown Jebel Ali22 Wasl Gate23 Al Furjan24 Discovery Gardens25 Jumeirah Park26 Jumeirah Islands27 Jumeirah Lakes
Towers28 Springs / Meadows29 Emirates Hills30 The Lakes31 The Greens32 Barsha Heights
(Tecom C) 33 Al Barsha34 Business Bay35 Downtown Dubai36 DIFC37 Dubai Design District38 Dubai Healthcare
City Phase 2 39 Al Jadaf40 Jaddaf Waterfront
(Culture Village)41 Dubai Festival City42 Al Nahda43 Al Qusais44 Muhaisnah
45 Jumeirah Village Triangle
46 Jumeirah Village Circle47 Dubai Science Park48 Arjan49 Dubai Hills Estate50 Living Legends51 Al Barari52 MBR City53 Meydan54 Dubai Creek Harbour55 Commercial District 56 Golf District57 Logistic District58 Aviation District59 Expo 202060 Residential District61 Dubai Investment
Park62 Green Community63 Dubai Production
City (IMPZ)64 Jumeirah Golf Estates65 Victory Heights66 Dubai Sports City67 MotorCity68 Dubai Studio City69 Damac Hills70 Remraam71 Mudon72 Arabian Ranches73 Dubailand74 Falcon City of
Wonders75 The Villa76 Liwan77 Dubai Residence
Complex78 Dubai Silicon Oasis79 Dubai Academic
International City80 International
City Phase 2 & 381 International City82 Al Warqaa83 Mirdif84 UptownMirdiff85 Town Square86 Mira87 Akoya Oxygen
Dubai Real Estate Report -11 Q2 2020
DISCLAIMER: The information contained in this report has been obtained from and is based upon sources that Asteco Property Management believes to be reliable; however, no warranty or representation, expressed or implied, is made to the accuracy or completeness of the information contained herein, and same is submitted subject to errors, omissions, change of price, rental or other conditions, withdrawal without notice, and to any special listing conditions imposed by our principals. Asteco Property Management will not be held responsible for any third-party contributions. All opinions and estimates included in this report constitute Asteco Property Management’s judgment, as of the date of this report and are subject to change without notice. Figures contained in this report are derived from a basket of locations highlighted in this report and therefore represent a snapshot of the UAE market. Averages, however, represent a wider range of areas. Particularly exclusive or unique projects have been excluded from the data to avoid distorting averages. Due care and attention has been used in the preparation of forecast information. However, actual results may vary from forecasts and any variation may be materially positive or negative. Forecasts, by their very nature, involve risk and uncertainty because they relate to future events and circumstances which are beyond Asteco Property Management’s control. For a full in-depth study of the market, please contact Asteco Property Management’s Research team. Asteco Property Management LLC. Commercial License No. 218551. Paid-up Capital AED 4,000,000. | ORN 180
About Asteco
The Middle East’s largest full service Real Estate Services Company, Asteco was formed in Dubai in 1985. Over the years, Asteco has gained enormous respect for consistently delivering high quality, professional, value-added services in a transparent manner. It is also widely recognised for its involvement with many of the projects that have defined the landscape and physical infrastructure of the Emirates.
Asteco has an essential combination of local knowledge and international expertise. A deeply established brand, renowned for its application of the latest technological advances, its commitment to transparency, winning strategies and human expertise. Undisputed Real Estate experts, Asteco represents a significant number of the region’s top property Owners, Developers and Investors.
VALUATION & ADVISORY Our professional advisory services are conducted by suitably qualified personnel all of whom have had extensive Real Estate experience within the Middle East and internationally.
Our valuations are carried out in accordance with the Royal Institution of Chartered Surveyors (RICS) and International Valuation Standards (IVS) and are undertaken by appropriately qualified valuers with extensive local experience.
The Professional Services Asteco conducts throughout the region include:
• Consultancy & Advisory services
• Market research
• Valuation services
SALESAsteco has established a large regional property Sales division with representatives based in the UAE, Qatar and Jordan. Our Sales teams have extensive experience in the negotiation and sale of a variety of assets.
LEASINGAsteco has been instrumental in the Leasing of many high-profile developments across the GCC.
ASSET MANAGEMENT Asteco provides comprehensive Asset Management services to all property Owners, whether a single unit (IPM) or a regional mixed-use portfolio. Our focus is on maximising value for our Clients.
OWNERS ASSOCIATION Asteco has the experience, systems, procedures and manuals in place to provide streamlined comprehensive Association Management and Consultancy services to Residential, Commercial and mixed-usecommunities throughout the GCC Region.
BUILDING CONSULTANCY The Building Consultancy Team at Asteco have a wealth of experience supporting their Clients throughout all stages of the built asset lifecycle. Each of the team’s highly trained surveyors have an in-depth knowledge of construction technology, building pathology and effective project management methods which enable us to provide our clients with a comprehensive building consultancy service.
FRANCHISEOur brand, network, system and procedures are now available in territories across the MENA region. Our Licensing services currently include Real Estate Brokerage Franchising and associated support services with many of the key elements designed specifically around the Franchisee, making it a truly unique and bespoke franchise opportunity.
Elaine JonesFRICS
Executive Chairman and Founder / Director - Transactional Services+971 4 403 [email protected]
John Stevens MSc, BSc (Hons), MRICS
Managing Director/ Director - Asset Management+971 4 403 [email protected]
John Allen BSc, MRICS
Executive Director - Valuation & Advisory+971 4 403 [email protected]
James Joughin BSc (Hons), MRICS
Senior Associate Director - Head of Valuations +971 4 403 [email protected]
Jenny Weidling BA (Hons)
Manager - Research and Advisory, Dubai+971 4 403 [email protected]
Ghada Amhaz MSc
Manager - Research and Advisory, Abu Dhabi+971 2 626 [email protected]
Tamer Ibrahim Chaaban BE
Associate Director / General Manager - Al Ain+971 3 766 [email protected]
20200609/astrep885