The second quarter 2019 Dubai real estate review issued by leading local consulting firm ValuStrat – reports that the second quarter ValuStrat Price Index (VPI) for residential properties displayed an overall 11.5% annual fall in capital values, with quarterly declines decelerating to 2.9%. This downward trend resulted in 29.3% citywide capital value loss since the peaks of mid-2014. All established freehold locations monitored by the VPI witnessed price drops since the last quarter, ranging from 1.2% to 4.2%.
The ValuStrat Price Index (VPI) which is a valuation-based price index for Dubai’s residential capital values, displayed an overall 11.5% annual fall in capital values, with quarterly declines slowing to 2.9%. This downward trend resulted in 29.3% citywide capital value loss since the peaks of mid-2014. All established freehold locations monitored by the VPI witnessed price drops since the last quarter, ranging from 1.2% to 4.2%. On an annual basis, 3 out of 26 locations measured saw single-digit declines, villas in Palm Jumeirah and Al Furjan, as well as apartments in Dubai Sports City. Capital values dropped more than 15% annually for apartments in Palm Jumeirah, Discovery Gardens, and The Greens.
“…As capital values continue to soften, there was a relatively strong quarterly sales volume performance for 9 months in a row, off-plan up 5.5%, ready sales stable, when compared to Q1. This quarter also saw a record 10% of all ready villa sales transactions, priced higher than AED 10 million. Good market performance given that the holy month of Ramadan and Eid holidays fell on May and June …” said Haider Tuaima, Head of Real Estate Research at ValuStrat.
The Dubai VPI also analyses residential rentals. The rental VPI is a 100 index with a base set for Q1 2014, it monitors 16 apartment and 10 villa locations within Dubai’s freehold market and compares similar units within those locations on a quarterly basis. The Q2 2019 residential rental VPI in Dubai stood at 73.9 points, declining 26.1% since 2014, dropping 3.4% quarterly and 10.7% annually. Dubai’s net yields averaged 5.7%, with apartments at 5.9% and villas at 4.7%. The average residential occupancy rate stood at 84%.
As far as residential supply is concerned, 8,487 residential units, just 25% of the total estimated supply for 2019, have been completed so far. More than half of these completions were concentrated in three areas: Dubailand, Jumeirah Village Circle and Al Furjan. For the rest of the year, projected supply mix is composed of 80% apartments (20,897 units) and 20% villas (5,133 units), all expected to finish construction before year-end.
The second quarter ValuStrat Price Index for Dubai’s office capital values declined to 69.3 points, suggesting that average capital values are 30.7% lower than the same period during the base year 2015, 16.1% lower than the same period last year and 6.3% below the previous quarter. Office space in Business Bay witnessed the highest annual drop of 18.2% and 7.7% QoQ, Jumeirah Lake Towers was second in line with losses of 17% year on year and 7.2% QoQ. Downtown Dubai and Dubai International Financial Centre (DIFC) saw the least annual declines of 10.5% and 5.3%, respectively. DIFC was the only location with stable capital values since last quarter.
There were 374 office sales transactions during the second quarter, 3.4% lower than the previous quarter. Overall transacted office prices were 10.9% lower than last year, and down 2.1% QoQ. The median transacted price stood at AED 7,373 per sq m (AED 685 per sq ft). Business Bay was the most popular choice for office sales with a share of 52%, followed by Jumeirah Lake Towers (JLT) with 27% of overall office transactions this quarter.
Median office asking rents declined by 7.5% YoY and fell 2.3% QoQ. Asking rents for this quarter were 15.9% lower than two years ago. The citywide median asking rent for a typical office size stood at AED 945 per sq m (AED 88 per sq ft). Commercial office occupancy in Dubai was estimated at 82%.
The year began with a total of 91,085 hotel rooms and 24,882 hotel apartments within 716 hospitality establishments. As of April, total hotel rooms and hotel apartments stock stood at 93,734 rooms and 24,648 keys, respectively.
Total international guests Jan-May 2019 reached 7.16 million, no change when compared to the same period last year. Citywide occupancy rate for the same period stood at 77%, down 5% YoY. Revenue per Available Room (RevPAR) and Average Daily Rate (ADR) witnessed double-digit declines on annual basis, plunged 15.6% and 10.7%, respectively.
For Industrial properties, observations were that asking prices were normally inflated to allow for negotiation. Agents are finding it difficult to advise owners of achievable asking rents as landlords are still not willing to reduce the rates on their asset. This results in properties being available in the market for longer periods with eventually the price being negotiated down. Notable QoQ changes in rental and price rates have been observed in Jebel Ali Free Zone particularly for older aged properties and with lower eaves headroom height.
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About ValuStrat
ValuStrat is a leading consulting firm headquartered in Dubai providing Advisory, Valuations, Research, Industrial Consulting and Due Diligence services across a diverse range of industry sectors since 1977. Offices in the UAE, UK, Saudi Arabia and Qatar serve over 1,000 corporate clients in the Middle East. Client base includes financial institutions, local corporates, multinationals, governments, SMEs, family businesses and start-ups. Some of the key sectors serviced by ValuStrat’s consulting team include real estate, hospitality, healthcare, education, manufacturing, retail, entertainment, transport and FMCG. ValuStrat is a Royal Institution of Chartered Surveyors (RICS) Regulated Firm and the first company head quartered in all of MENA and Asia to be accepted into the prestigious RICS Tech Affiliate program.
About the ValuStrat Price Indices
The ValuStrat Price Index for Dubai’s office capital values is a valuation-based index constructed to represent the quarterly price change experienced by typical office space within Dubai. The ValuStrat Price Index for Dubai’s residential capital values is a valuation-based index constructed to represent the monthly price change experienced by typical residential units within Dubai. The ValuStrat Price Index for Dubai’s residential rental values is constructed to represent the quarterly rental change experienced by typical residential units within Dubai. The VPI applies weighted averages using data samples representing more than 90% of all property types across the city’s freehold locations and is built by our expert RICS Registered Valuers.
The latest in-depth 100+ page residential report that includes citywide analysis of 26 freehold districts, including the ValuStrat Price Index, transaction volumes, service charges, Price to Rent Ratios and Net Yields in now available to subscribers.
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