Abu Dhabi Residential Market Report - Q3 2015

Abu Dhabi Residential Market Report

Q32015

• Cavendish Maxwell

• Property Monitor Index

• Abu Dhabi residential market headlines

• Macro-economic factors

• Legal framework

• Residential market overview

• Sales price performance

• Rental rates performance

• Residential supply

Content

© Cavendish Maxwell 2015 | www.cavendishmaxwell.com4

Abu Dhabi Residential Market Report - Q3 2015

60+ people across 8 departments

350MILLION

worth of completed property transactions

over AED

We undertake valuations for over 30 banks across the UAE

master planneddevelopments across Dubai and Abu Dhabi

live transactionaldata from over

42of commercial land

and buildings currentlyunder instruction

MILLION SQ.FT

Cavendish Maxwell is a highly respected independent firm of chartered surveyors and property consultants, focusing on property services throughout the Middle East and Africa. Established in 2008, Cavendish Maxwell has grown into one of the region’s largest and highest profile property companies, employing over 60 people across 8 departments. Our experience covers property, land and business asset valuations; investment; asset management; fund management; disposals and acquisitions; rent reviews; lease renewals; development appraisals; advisory services; market research; feasibility studies; project management and building consultancy.

As a fully qualified member firm of the Royal Institution of Chartered Surveyors (RICS), and with extensive knowledge of the region, we have the necessary experience, expertise and insight to deliver property advice of the highest standard. Our reports are used for loan security, audit, insurance reinstatement, dispute resolution, risk management, debt recovery and performance analysis. We provide a comprehensive range of property services across all our departments, each of which is headed by highly skilled, experienced and fully qualified RICS chartered surveyors. Our various teams provide valuation, agency, advisory, research and building consultancy services across all property types and sectors.

Cavendish Maxwell - Chartered Surveyors and Property Consultants

We have built a first class reputation on the quality of our reporting, certainty of timing and thoughtful approach to helping

clients add value to their land and property portfolios

Cavendish Maxwell has grown into

one of the REGION’S LARGEST

and HIGHEST PROFILE property companies

© Cavendish Maxwell 2015 | www.cavendishmaxwell.com 5

Advising clients throughout the Middle East and Africa

Specialist sectors

Student Housing Media Corporate

Logistics

Airports

Plant &Machinery

Hotels &Resorts

Labour AccommodationEducation

RICSregulatedcompany

worth of projects in the last year

Advisedon over

BILLION7AED 527

Building surveys of

highrise tower floors undertaken in

the last 6 months

Industrial Leisure

Institutional

Commercial

Insurance

H

worth of commercial property valued in the last 12 months

BILLION30 Over

AED



Cavendish Maxwell’s Property Monitor Index (PMI) offers a unique perspective on the market due to the unique and exclusive access to real-time data, fueled by the Property Monitor data service.

The figures in our Q3 2015 residential market report represent a consensus view of Cavendish Maxwell’s market leading team of chartered surveyors and residential valuers. (www.propertymonitor.ae).

In formulating the index our valuers have access to various data sources that should provide users with confidence in the results: • Property Monitor, Approved Partner data: includes an expanding

number of reputable agencies and developers, capturing data in real-time

• Agent consultation: evidence sourced from reputable and active agents to support our valuation business.

• Publically available evidence: variety of published data sources.

Property Monitor Index


• A relatively stable quarter in terms of price movements, recording an overall market decline of 1%.

• Both apartment and villa prices dropped by an average of 1% in Q3 2015.

• Rents remain stable across both the apartment and villa markets.

• Abu Dhabi government initiatives and the recent property registration laws to be implemented as of January 2016, should have a positive impact the real estate market bringing more transparency which in turn should increase confidence to both foreign and domestic investors.

• Approximately 15,000 residential units to enter the market over the next four years in the major investment zones of Abu Dhabi.

Abu Dhabi residential market headlines

Q2 2015 - Q3 2015

-1% -1%

Q3 2014 - Q3 2015

-4% -4%



• Abu Dhabi inflation rate has increased to its highest levels to 6.1% as of August 2015. This hike was mainly driven by the increase in transportation cost by 12% in August due to the deregulation of gasoline prices.

• Following the hike in gasoline prices in August of this year, the Fuel Prices Committee reduced prices by 8% in September and a further 9% with the recently released gasoline prices for the month of October 2015.

• According to the Urban Planning Council’s Abu Dhabi 2030 Plan, the population in the Abu Dhabi region (including the Mainland, Islands and North Coast) is expected to grow to 3 million by the year 2030.

• Expats make up approximately 80% of the total Abu Dhabi emirate population.

• As of 2014, the population in the Abu Dhabi Region alone (excluding Al Ain and the Western Region) was approximately 1.5 million.

Macro-economic factors

Figure 2

Abu Dhabi GDP by economic act iv i ty 2014. Top seven sectors

Mining and quarrying

Construction

Financial and insurance

Public administration and defence

Manufacturing

Real estate

Other51+10+7+6+5+5+1651.0%

9.6%

7.2%

5.8%

5.5%

4.6%

16.3%

Figure 1

Abu Dhabi Emirate populat ion: 2006-2014*

1.000,000

800,000

600,000

400,000

200,000

0

360

1,10

1

Pop

ulat

ion

10%

8%

6%

4%

2%

0%

Gro

wth

Rat

e

Nationals Expats Growth Rate

377

1,19

6

395

1,30

0

1,41

2

414

433

1,53

3

439

1,68

1

476

1,85

7

495

1,95

7

506

2.15

0

2006 20112007 20122008 20132009 20142010

5%

8%

10%

8% 8%8% 8%8%

*Figures include Abu Dhabi region (mainland, islands and north coast), Al Ain, Al Gharbia.Source: Statistics Centre - Abu Dhabi

“Petrol prices in the UAE have dropped by approximately 16% in October 2015 from the hiked prices of August.”

“The contribution of the oil industries to GDP has decreased to 51% in 2014 from 55% in 2012 as Abu Dhabi government initiatives focus on growing other sectors such as construction and manufacturing.”

Source: Property Monitor Index


Legal frameworkGiven the upcoming implementation of the new Abu Dhabi real estate law, Cavendish Maxwell has consulted with the law firm of Berwin Leighton Paisner to summarise the law as stated below.

After much consultation and consideration, the long awaited new Abu Dhabi real estate law has at last become a reality with the issue of Abu Dhabi Law No. (3) of 2015 (the “New Law”).

Whilst the New Law has yet to be published in the Gazette, we understand that it will take effect in or around January 2016 and that all of the supporting executive regulations envisaged by the New Law will be published simultaneously with the substantive law itself. The intention appears to be that, in contrast with the ‘piecemeal’ approach taken by other Emirates, Abu Dhabi will, when the New Law comes into force with immediate effect have a modified real estate system which is fully integrated, articulated and functional.

As expected, the New Law resembles various Dubai laws passed since 2007 and, among other things, provides for:

1. the overall (and detailed) supervisory control of the market by the Abu Dhabi Department of Municipal Affairs (“DMA”) (whose role will be broadly similar to that of RERA in Dubai);

2. a regime to enable the DMA to compile records of a wide range of relevant information relating to real estate development projects;

3. a licensing regime for all relevant market participants (i.e. - developers, brokers, brokers’ employees, auctioneers, directors of owners’ associations, valuers and surveyors) prohibiting them from carrying on business unless they are duly licenced;

4. various obligations and restrictions in relation to activities carried on by brokers;

5. rules governing the manner in which valuers undertake the valuation of properties;

6. a regime for the registration of real estate development projects and restricting the marketing of new projects ‘off-plan’ without prior authorisation from the DMA;

7. rules to do with the termination of off-plan sale contracts; 8. an ‘escrow account’ regime requiring monies (including mortgage

proceeds and interim payments from buyers) to be deposited in a restricted account, from which sums may only be released (subject to various conditions) for the purposes of funding the relevant works and paying for the project;

9. the creation of an entirely new registry (a ‘preliminary real estate registry’) for the registration of new development projects and off-plan contracts, and providing that such sale contracts will be non-binding unless duly registered in the new register;

10. detailed arrangements concerning real estate mortgages which include the introduction of the concept of ‘priorities’ between mortgagees and creation of a right for contractual purchasers to ‘mortgage’ their contractual rights;

11. recognition of the concept of a mortgageable ‘long lease’ (an entirely new concept under Abu Dhabi law);

12. for the implementation of jointly owned property arrangements, through Owners’ Associations, in relation to estate developments with shared common areas and in which the units are to be sold off;

13. the imposition upon developers of a form of ‘decennial’ liability for 10 years from the final completion certificate issued by the Municipality in relation to the structural and common parts of a development, as well as a liability to put right all defects affecting the construction works which appear within one year from the completion certificate issued by the Municipality.

As will be apparent, the law is intended to cover all material concerns and issues which have already been addressed under Dubai law, in a single piece of legislation. It also appears that the Abu Dhabi authorities have taken the opportunity to learn from the Dubai experience and to avoid some of the issues experienced in Dubai.

Although it remains to be seen what the detailed regulations will bring once they are published and how the New Law will operate in practice, it is encouraging to see that many important concerns have been addressed in the law which are important to ensure the smooth and efficient operation of the market.

The above legal information is supplied courtesy of Berwin Leighton Paisner. (For more information go http://www.blplaw.com.)

David NunnPartner, Commercial Real EstateBerwin Leighton Paisner




Figure 3

Residential market overview

• Whilst real estate is one of the top five contributing economic activities to Dubai’s economic growth, it is still a growing sector in Abu Dhabi’s economy.

• During the first real estate market boom of 2008, the overall market prices in Abu Dhabi were higher than those in Dubai. Whilst Dubai reached the peak in Q3 2008, there was approximately a quarter lag to Abu Dhabi peak in Q4 2008.

• Following the market crash in Dubai towards the end of Q4 2008, Abu Dhabi prices dipped drastically in Q1 2009 and continued to decline through mid 2012.

• The market bottomed out in Abu Dhabi around Q2 2012, reflecting approximately a nine month lag from Dubai’s market bottom in Q3 2011. During this price compression both markets declined in the range of 60% to 70% from the peak in 2008.

• As both markets began to recover from the declines throughout 2012 and 2013, the Abu Dhabi market grew at a rate three times slower, than the Dubai market.

• Prices in Abu Dhabi began to increase in Q3 2013 and throughout the first half of 2014, reaching the second market peak in Q3 2014.

• Abu Dhabi is traditionally less driven by investors and more by the decisions of end users which leads to a market less responsive to speculative trends and more controlled.

Current Dubai market

Current Abu Dhabi market

Abu Dhabi 2nd market

peak

1800

1600

1400

1200

1000

800

600

400

Ave

rage

sal

e pr

ice

(AED

per

sq.

ft.)

Q1

2008

Q2

2008

Q3

2008

Q4

2008

Q1

2009

Q2

2009

Q3

2009

Q4

2009

Q1

2010

Q2

2010

Q3

2010

Q4

2010

Q1

2011

Q2

2011

Q3

2011

Q4

2011

Q1

2012

Q2

2012

Q3

2012

Q4

2012

Q1

2013

Q2

2013

Q3

2013

Q4

2013

Q1

2014

Q2

2014

Q3

2014

Q4

2014

Q1

2015

Q2

2015

Q3

2015

Q4

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Q1

2016

Abu Dhabi market peak

3 m

onth

s la

g

9 m

onth

s la

g

3 m

onth

s la

g

Dubai market peak

Dubai 2nd market peak

Dubai market low

Abu Dhabi market low

Abu Dhabi vs Dubai real estate market trend


Abu Dhabi vs Dubai: “The peak in the Abu Dhabi market typically lags Dubai by approximately 3 months in time.”

VS



Figure 4

Sale price performance

• Villa prices in Q3 2015 have declined between 1% at Saadiyat Beach villas to 1.3% at Al Raha Gardens.

• With limited supply and high demand for quality villas in the market, prices have remained stable with minimal drops quarter on quarter throughout this year.

• When looking at villa prices during a 12 month period (Q3 2014 to Q3 2015), there has been a significant variance in price compression throughout the Abu Dhabi villa market. Villa prices dropped by an average of 4% in Al Raha Gardens to 7% in Al Reef.

• Apartment prices have relatively remained stable, dropping minimally by 1% in Q3 2015 from Q2 2015.

• Over a 12 month period (Q3 2014 to Q3 2015) apartment prices have dropped between 3% to 4% across the investment areas.

• The handover of stock in the first half of 2015 has placed a slight pressure on the prices in Q3 2015. Additionally, new launches have shifted buyer attention towards the off-plan market, especially with investors looking for a high yield.

Apartments: “Slight drops in apartment prices by 1% in Q3 2015.”

Villas: “Villa prices declined on average by 1% during Q3 2015.”

Vi l la sale performance Apartment sale performance

2,000

1,800

1,600

1,400

1,200

1,000

800

600

400

200

0

2,000

1,800

1,600

1,400

1,200

1,000

800

600

400

200

0

0%

-1%

-2%

-3%

-4%

-5%

-6%

-7%

-8%

-9%

-10%

0%

-1%

-2%

-3%

-4%

-5%

-6%

-7%

-8%

-9%

-10%

Ave

rag

e p

rice

(AED

/sq

. ft.)

Ave

rag

e p

rice

(AED

/sq

. ft.)

% c

hang

e

% c

hang

e

-1%

-4%

-7%

-3%

-1% -1%

Al Raha Gardens

Al Reef Saadiyat Beach Villas

-4%

-3%

-4%

-3%

-4%

-1%-1%-1%-1%-1%

Al Ghadeer Al Raha Beach Al Reef Downtown

Al Reem Island

Saadiyat Beach Residences

QoQ % changeQ2 - Q3 2015

12 Month % changeQ3 2014 - Q3 2015 Source: Property Monitor IndexQ2 2015 Q3 2015


Figure 6

Figure 5

Rent rates performance

Rents:“Rents remain relatively stable across both the apartment and villa markets.”

“Rents remain relatively stable across both the apartment and villa markets.”

Al Raha Gardens

Al Reef

Saadiyat Beach Villas

5 bed4 bed3 bed

67

57

93

63

-

70

60

53

62

Rental rate/sq.ft./annumSeptember 2015 Al Ghadeer

Al Raha Beach

Al Reef Downtown

Al Reem Island


2 bed1 bedStudio

Rental rate/sq.ft./annumSeptember 2015

76

-

77

125

-

70

125

74

104

126

65

108

65

103

98

Villas

Apartments

• An average three bed villa in Saadiyat Beach remains significantly higher than other villa locations.

• Rents in prime locations such as Al Reem Island, Al Raha Beach and Saadiyat Beach continue to command the highest rents.


200,000

180,000

160,000

140,000

120,000

100,000

80,000

60,000

40,000

20,000

0

500,000

450,000

400,000

350,000

300,000

250,000

200,000

150,000

100,000

50,000

0

Average annual rent2 bedroom apartment

Ave

rag

e an

nual

rent

AED

Ave

rag

e an

nual

rent

AED

Al Ghadeer Al Raha Beach

Al Reef Downtown

Al Reem Island


Average annual rent3 bedroom vi l la

Al Raha Gardens

Al Reef Saadiyat Beach Villas




• Abu Dhabi developers have ramped up the number of launched projects to be delivered in the coming four years in the major investment locations, supporting the city’s 2030 plan.

• Approximately 80% of the upcoming supply will be apartment units and 20% villa units.

1. Masdar City2. Yas Island3. Saadiyat Island4. Shams Abu Dhabi5. City of Lights6. Najmat Abu Dhabi7. Al Maryah Island8. Al Raha Beach

• The bulk of the pipeline supply is on Al Reem Island with over 6,000 units, followed by Saadiyat Island with over 3,500 units and Yas Island with over 2,000 units scheduled for delivery over this time period.

Pipeline Supply:“Approximately 15,000 residential units scheduled for delivery through the year 2018.”

Residential supply

> - 500

501 - 1,000

1,001 - 1,500

1,501 - 2,000

2,001 - 2,500

2,501 - 3,000

3,001 - 3,500

Range

Figure 7


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Miles Phillips BSc (Hons) MRICS ACIArbPartnerHead of Operations - UAE

M: +971 56 604 2750 E: [email protected]

Adam Wisher BSc (Hons) MRICSPartnerHead of Development Advisory and Real Estate ResearchM: +971 56 139 4315E: [email protected]

Sofia Underabi BPropEc AAPI PartnerHead of Residential Valuation M: +971 50 435 6527 E: [email protected]

Dima Isshak BScResearch Manager


Jay Grant MSc IRRV (Hons) Managing Partner


Documents

Abu Dhabi Residential Market Report - Q3 2015