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Q1 2017
Dubai / Abu Dhabi: Game of Thrones
UNITAS CONSULTANCY
Executive Summary
A city-wide price analysis of the second real estate cycle of Dubai and Abu Dhabi reveals that the former has had higher peaks
compared to the latter. In the second bull cycle prices climbed by 86% in Dubai, whereas in Abu Dhabi prices rose less than half
of that. Currently, prices in Dubai are down by 13%, whereas Abu Dhabi has fallen by 9%. However, a month-on-month price
change signals a bottoming out of the Dubai price curve, whereas Abu Dhabi price continue to decline. A similar pattern can be
witnessed in the rental space of both emirates.
The supply structure of both emirates are vastly different. Freehold development in Dubai accounts for 57% of the entire housing
supply, whereas in Abu Dhabi it accounts for 20%. Given the ambitious development that Abu Dhabi has in the pipeline, we opine
that the new supply pipeline will tilt the overall dynamics towards freehold in the years ahead. In addition, Dubai’s freehold
housing stock is better suited to cater to the mid-income segment as 50% of the supply is below the 1000 psf rate, where as in
Abu Dhabi it is only 18%. However, we expect to see this paradigm shift as Aldar has announced its intention towards supplying
units in the mid income market area.
Emaar and Aldar are the largest listed developers of their respected emirates, together contributing more than 45,000 units to the
UAE skyline. In Dubai Emaar units account for 7% of the entire housing stock, whereas in Abu Dhabi, Aldar developments
account for 10% of the total housing stock. Both developers have historically concentrated on the upper-end of the market.
However, in 2016 Emaar entered the mid-income segment by launching Urbana South which was in the range of 700-800
AED/psf. This move highlights the pent up demand in the mid-income segment, which developers are trying to capitalize. Aldar
also recently followed suit, as it stated its revised strategy of moving to mid-market in the last quarters earnings call.
Structurally speaking, the evolution of the freehold market in Abu Dhabi thus far has broadly mirrored to that of Dubai. However,
with the imminent entry of Aldar into the mid market segment, there is likely to be a proliferation of communities that will increase
the volume and breadth of product on offer, heightening investor activity as a result. Activity by private sector developers is likely
to increase as a result, similar to the experience in Dubai. For the latter, the key catalyst for development remains the World Expo
2020 event; thematically, however, it is clear that both cities are moving towards the paradigm of mid income housing.
Content
01
03
02
04
Supply Analysis of Abu
Dhabi and Dubai
Abu Dhabi and Dubai:
Prices and Rents
Emaar and Aldar Conclusions
Abu Dhabi and Dubai: Prices and Rents
“There is no Dubai and Abu Dhabi; we are one. Whoever doesn't understand this should do their homework before they start talking. We will be there for each other when we need it.”
Mohammed bin Rashid Al Maktoum
Abu Dhabi and Dubai: Price Movements in the Second
Cycle
Abu Dhabi: 2nd Price Cycle Dubai: 2nd Price Cycle
An analysis of prices in the second real estate cycle reveals that Dubai experienced a price appreciation twice to that of Abu
Dhabi (trough to peak). Equally, what is witnessed is that the recent price correction in Dubai has been greater than what has
been witnessed in Abu Dhabi. The latter’s relatively moderate price movements may be amplified with the expected surge in
new developments that will be rolled out in the next few years.
0
200
400
600
800
1,000
1,200
1,400
1,600
Trough Peak Now
0
200
400
600
800
1,000
1,200
1,400
1,600
Trough Peak Now
36% -9%
86%
-13%
Source: REIDIN Source: REIDIN
Dubai Prices Falls Stabilize, While Abu Dhabi continues to
Drop
Abu Dhabi and Dubai: Peak to Trough Price Analysis Abu Dhabi and Dubai: Peak to Trough Price Analysis (% change)
A closer look into price movements of both emirates reveals that Dubai prices begin to bottom-out as the month-on-month
declines begin to taper. However, in Abu Dhabi the month-on-month price drops continue to amplify signaling that the market
has not bottomed out as yet.
1,250
1,300
1,350
1,400
1,450
1,500Dubai Abu Dhabi
-3.0%
-2.5%
-2.0%
-1.5%
-1.0%
-0.5%
0.0%
0.5%
1.0%
1.5%
2.0%Dubai Abu Dhabi
Source: REIDIN Source: REIDIN
Abu Dhabi and Dubai: Rent Movements in the Second Cycle
Abu Dhabi: 2nd Rent Cycle Dubai: 2nd Rent Cycle
In the rent cycle, we witness a similar trend to that of prices. Dubai rents escalated 5 times to that of its neighboring emirate
Abu Dhabi in the boom period. In the down cycle, both areas have fallen by a similar amount, indicating rental convergence
between the two cities. This is not surprising especially as South Dubai and North Abu Dhabi areas begin to develop
contagiously.
-9%
0
1
2
3
4
5
6
7
8
9
10
Trough Peak Now
9% -10%
0
1
2
3
4
5
6
7
8
9
10
Trough Peak Now
59% -8%
Source: REIDIN Source: REIDIN
Dubai rents declines begin to taper, while Abu Dhabi
continues to fall
Abu Dhabi and Dubai: Peak to Trough Rent Analysis Abu Dhabi and Dubai: Peak to Trough Rent Analysis (% Change)
Since the peak rents in Dubai are down 8%, whereas Abu Dhabi is down 10%. The month on month changes in both emirates
reveals that Dubai trends have begun to bottoming out, whereas Abu Dhabi continues to decline. There has been some
migratory effect that has been witnessed between the two Emirates, suggesting that rental pressures may continue in Abu
Dhabi; equally clear has been the variable of well advertised job losses in the emirate. What is also witnessed is that the
rental dynamics between the two cities are starting to move in sync, suggesting that Abu Dhabi may soon be entering a
bottoming out phase as well.
7.0
7.5
8.0
8.5
9.0
20
14
-01
-01
20
14
-03
-01
20
14
-05
-01
20
14
-07
-01
20
14
-09
-01
20
14
-11
-01
20
15
-01
-01
20
15
-03
-01
20
15
-05
-01
20
15
-07
-01
20
15
-09
-01
20
15
-11
-01
20
16
-01
-01
20
16
-03
-01
20
16
-05
-01
20
16
-07
-01
20
16
-09
-01
20
16
-11
-01
20
17
-01
-01
Dubai Abu Dhabi
-3%
-2%
-1%
0%
1%
2%
3%
20
14
-03
-01
20
14
-05
-01
20
14
-07
-01
20
14
-09
-01
20
14
-11
-01
20
15
-01
-01
20
15
-03
-01
20
15
-05
-01
20
15
-07
-01
20
15
-09
-01
20
15
-11
-01
20
16
-01
-01
20
16
-03
-01
20
16
-05
-01
20
16
-07
-01
20
16
-09
-01
20
16
-11
-01
20
17
-01
-01
Dubai Abu Dhabi
Source: REIDIN Source: REIDIN
Supply Analysis of Abu Dhabi and Dubai
"Future generations will be living in a world that is very different from that to which we are accustomed. It is essential that we prepare ourselves and
our children for that new world."
Sheikh Zayed bin Sultan Al Nahyan
Dubai’s Supply Structure Skewed towards Freehold Units,
whereas Abu Dhabi is still predominately Leasehold
Abu Dhabi: Supply Break-up by Freehold and Leasehold Dubai: Supply Break-up by Freehold and Leasehold
A comparison between Abu Dhabi and Dubai supply structure reveals that in the former the majority of units are in the
leasehold space (80%), where as the latter is skewed towards the freehold (57%). Given the ambitious development that Abu
Dhabi has in the pipeline, we opine that the new supply pipeline will tilt the overall dynamics towards freehold in the years
ahead.
20%
80%
Freehold Leasehold
57%
43%
Freehold Leasehold
Source: REIDIN Source: REIDIN
Supply Break-up of Freehold Abu Dhabi and Dubai Housing
Market by Price
Abu Dhabi: Supply Break-up by Price (Aed Per Sqft) Dubai: Supply Break-up by Price (Aed Per Sqft)
A price analysis of the freehold housing stock of both emirates reveals that units below 1000 AED Per Sqft account for 18% in
Abu Dhabi and 50% in Dubai. Dubai’s housing structure has become relatively better positioned to cater to the mid-income
segment, whereas Abu Dhabi still predominantly caters to the upper income segment. However, we expect to see this
paradigm shift as Aldar has announced its intention towards supplying units in the mid income market area.
18%
82%
Below 1000 Psf Above 1000 Psf
50% 50%
Below 1000 Psf Above 1000 Psf
Source: REIDIN Source: REIDIN
Supply Break-up of Abu Dhabi and Dubai Housing Market
by Living Space
Abu Dhabi: Supply Break-up by Apartments and Villas Dubai: Supply Break-up by Apartments and Villas
Horizontal living accounts for a greater share of the freehold supply in Abu Dhabi (28%) compared to Dubai (14%). This is
unsurprising, given the size of the former; however we opine that structurally Abu Dhabi will shift towards vertical construction,
especially with the onset of construction of units catering to the mid income market.
72%
28%
Apartments Villas / Townhouses
86%
14%
Apartments Villas
Source: REIDIN Source: REIDIN
Emaar and Aldar
Mohamed Alabbar – Chairman of
Emaar
“The Burj was over. I was thinking where to go, what to do next? Yes we got there, but we’re human beings, so when we get there we say
‘So what are we going to do after this? Are you going to crawl and go back in a little hole?’ I can tell you this, that’s not me.”
“We are proud of our stable and maturing business and continue to play to our strengths: delivering the right product, at the right price,
in the right location”
Mohamaed Khalifa al Mubuarak – CEO of
Aldar
Emaar Vs Aldar: Earnings per Share and Revenue Growth
Aldar and Emaar: Earning per Share 2013 vs 2016 Revenue and Profit Growth Rates Emaar and Aldar
Emaar and Aldar are two largest listed developers in the UAE; whilst the growth trajectory in Emaar has been higher than that
of Aldar, this has predominantly been due to the latter at a different stage of growth cycle relative to the former. Given recent
announcements of Aldar, we expect there to be a growth surge in the next three years as Aldar capitalizes on mid income
market opportunities in order to balance the housing market in Abu Dhabi; this would be similar to the growth that Emaar
witnessed in its growth spurt phase in the first real estate cycle of 2004-2008.
0%
20%
40%
60%
80%
100%
120%
Revenue Profit
Emaar Aldar
0
0.1
0.2
0.3
0.4
0.5
0.6
0.7
0.8
2012 2013 2014 2015 2016
Emaar Aldar
Source: Emaar, 4-Traders Source: Emaar, Aldar
Eps
Emaar Vs Aldar: Supply Handed Over and Expected Supply
Aldar and Emaar: Completed Residential Units Aldar and Emaar: Under construction Residential Units
0
5,000
10,000
15,000
20,000
25,000
30,000
35,000
40,000
Emaar Aldar
0
2,000
4,000
6,000
8,000
10,000
12,000
14,000
Emaar Aldar
7% of Total Dubai Supply
10% of Total Abu Dhabi Supply
10% of Total Dubai Expected Supply
10% of Total Abu Dhabi Expected Supply
Emaar has completed more than 33,000 units in Dubai contributing 7% of the entire housing stock. Whereas Aldar has
handed-over more than 12,000 units in Abu Dhabi, accounting for 10% of the entire housing stock. Interesting to note is the
fact that both companies have in their pipeline 10% of overall expected announced supply, indicating their “market making”
position. It is critical to note that both companies are on the cusp of accelerated rollout of supply in the coming years, and it is
therefore likely that the expected pipeline is expected to surge in the coming years.
Source: REIDIN, Emaar, Aldar Source: REIDIN
No
. of
Un
its
No
. of
Un
its
Launch Prices of Aldar and Emaar Apartment Projects
Aldar and Emaar Project Launch Prices (2016)
The above graph reveals that the launch prices of apartments of both developers in 2016. Both developers have historically
concentrated in the upper-end of the market. However, in 2016 Emaar entered the mid-income segment by launching Urbana
South which was in the range of 700-800 AED Per Sqft. This move signals the pent up demand in the mid-income segment,
which developers are trying to capitalize. Whilst Aldar has not yet entered this price bracket, it has announced its intentions to
do so in its latest earnings report; we opine that there will be a gradual yet aggressive rollout of such projects in 2017-18.
0
500
1000
1500
2000
2500
3000
3500
4000Emaar
Aldar
Urbana
Below 1000 Aed per Sq/Ft
Source: REIDIN
Aed
/Sq
ft
Conclusions
Abu Dhabi and Dubai: Prices and Rents Supply Analysis of Abu Dhabi and Dubai
A comparison between
Abu Dhabi and Dubai
supply structure reveals
that in the former the
majority of units are in the
leasehold space (80%),
where as the latter is
skewed towards the
freehold (57%)
Emaar and Aldar Conclusions
A closer look into price
movements of both
emirates reveals that
Dubai prices begin to
bottom-out as the month-
on-month declines begin
to taper. However, in Abu
Dhabi the month-on-month
price drops continue to
amplify signaling that the
market has not bottomed
out as yet.
A price analysis of Dubai and Abu Dhabi, reveals that
during the boom period in the second cycle, prices in
the former appreciated twice as much as the latter.
Equally, what is witnessed is that the recent price
correction in Dubai has been greater than what has
been witnessed in Abu Dhabi as well.
However, a month on month price change signals that
Dubai declines have tapered signaling a bottoming out.
Whereas, Abu Dhabi continues to fall.
Emaar and Aldar are two largest listed developers in
the UAE; whilst the growth trajectory in Emaar has
been higher than that of Aldar, this has predominantly
been due to the latter at a different stage of growth
cycle relative to the former.
Emaar has completed more than 33,000 units in Dubai
contributing 7% of the entire housing stock. Whereas
Aldar has handed-over more than 12,000 units in Abu
Dhabi, accounting for 10% of the entire housing stock.
Interesting to note is the fact that both companies have
in their pipeline 10% of overall expected announced
supply, indicating their “market making” position
Emaar and Aldar represent the flagship bellwether
development companies in the freehold segment.
Therefore it is unsurprising that thematically speaking, the
strategies of both companies are starting to move
towards the theme of mid income housing, even as the
historical emphasis on creating iconic developments
remains in focus.
This thematic shift underscores the latent demand for
such product that is inherent in both cities. As the pace of
development gathers pace, investor interest is expected
to increase as the price and product range on offer
widens in scope.
A supply analysis of both the emirates reveals various
differences. Firstly, Dubai supply of its housing stock is
skewed towards the freehold areas, whereas the majority
of units in Abu Dhabi are in leasehold areas. However,
given the ambitious development that Abu Dhabi has in
the pipeline, we opine that the new supply pipeline will tilt
the overall dynamics towards freehold in the years ahead.
Secondly, a price analysis of the freehold housing stock of
both emirates reveals that units below 1000 psf account
for 18% in Abu Dhabi and 50% in Dubai. However, we
expect to see this paradigm shift as Aldar has announced
its intention towards supplying units in the mid income
market area.
Dubai/Abu Dhabi: Game of Thrones
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for our clients.
GCP is the author for these research reports
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