The second quarter 2018 Dubai real estate review issued by leading local consulting firm ValuStrat – reports that the second quarter ValuStrat Price Index (VPI) for residential properties was down 3.8% since the previous quarter, the sharpest quarterly dip recorded in four years. This downward trend resulted in citywide capital value falls of 20% since the peak of mid-2014. The steep declines may have boosted sales, as transaction volumes and average ticket sizes both increased across the board. Quarterly declines of more than 5% were registered locations such as The Springs and Meadows, Jumeirah Islands, International City, Downtown Dubai, Business Bay, Motor City, The Greens, and The Views. However, villas on Palm Jumeirah and in Emirates Hills continued to resist downward pressures with only marginal dips displayed.
The second quarter 2018 ValuStrat Price Index, VPI – Residential, displayed an overall 6.7% annual decline in capital values, and the sharpest quarterly drop of 3.8%, a four-year record. This downward trend results in a citywide capital value loss of 20% since the peak of mid-2014. All 26 established freehold locations monitored by the VPI witnessed price drops since the last quarter, ranging from 0.2% to 6.1%. However, steep declines in capital values may have boosted sales activity this quarter , as transaction numbers increased across the board, with off-plan sales volumes up 10.9% YoY and 18.7% QoQ. Whilst the numbers of secondary properties sold also rallied, up 1.5% YoY and 10.2% QoQ. Established areas that witnessed substantial off-plan sales transactions during the last three months included Business Bay at 86% of all sales being off-plan, Downtown Dubai at 70% and Jumeirah Village 65%. Average ticket prices have also risen, off-plan saw a 5.6% QoQ increase to AED 1.4 million, whereas ready property ticket sizes jumped 23.9% QoQ to reach AED 1.9 million, suggesting improved interest in prime properties.
“…Recently announced government incentives towards investors, and record low prices seemed to have encouraged the quarterly double-digit growth of residential homes and office space transactions, this is despite the fact that the Ramadan season fell in the second quarter this year, typically not a very busy time for real estate deals, …” said Haider Tuaima, Head of Real Estate Research at ValuStrat.
An estimated 8,718 apartments and villas, equivalent to 23% of the total expected supply for 2018, have been completed year to date. About 64% of these completions were located mainly in three areas: Dubailand, Jumeirah Village Circle (JVC) and Dubai Silicon Oasis. The expected upcoming supply mix for this year is composed of 86.4% apartments (25,102 units) and 13.5% villas (3,942 units).
Overall residential asking rents fell 8.4% YoY. However, on a quarterly basis asking rents declined moderately by 1.7%. Compared to the same period last year, listed rents were down 8.6% for apartments and 7.5% for villas.
Dubai’s second quarter VPI – Office, which analyses and reports the change in capital values experienced by a representative fixed basket of freehold office units in Dubai, has shown that office capital values fell sharply by 9.7% annually and 4.4% quarterly. Barsha Heights witnessed the biggest annual loss of 15.7% and 3.4% QoQ, Business Bay was second in line with an 9.5% annual capital loss, 1.7% QoQ. Offices in Park Tower (DIFC) and Emaar Square (Downtown Dubai) were the only locations that saw annual capital gains averaging 4.2%.
Office transaction volumes this quarter were 6.8% higher than the previous quarter. Recently announced government initiatives related to 100% ownership outside free zones may further improve volume in the medium term. Overall transacted office prices were 21.3% lower than last year and 13.2% lower QoQ. The median transacted price stood at AED 8,277 per sq m (AED 769 per sq ft). Business Bay was the most popular choice for office sales with a share of 45% followed by Jumeirah Lake Towers (JLT) with 36% of overall transactions.
As of May 2018, Dubai had a total of 85,792 hotel rooms and 24,834 hotel apartments. An estimated total of 3,048 rooms were added during Q2 from the opening of 11 hotels. The citywide occupancy rate was 82%, down 3% YoY, likely due to Ramadan season which began mid-May. Revenue per Available Room (RevPAR) and Average Daily Rate (ADR) saw annual declines of 7.1% and 3.9%, respectively.
Industrial property prices continued to remain relatively stable during Q2 2018. Prices were generally in a range between AED 2,045 per sq m to AED 4,306 per sq m (AED 190 per sq ft to AED 400 per sq ft), with high specification/quality build and modern cold storage warehouses leaning towards the upper end. Asking prices for large and older warehouse properties were being offered at justy under AED 2,045 per sq m (AED 190 per sq ft).
Declan King MRICS – Managing Director & Group Head Real Estate commented ‘… Second quarter Increases in transaction volume and ticket sizes for residential properties is noteworthy. However, it is far too early to say whether this is a one off statistical event that won’t continue or is an emerging trend of improved buyer sentiment and market demand - on the back of significant price reductions …’
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About ValuStrat
ValuStrat is a leading consulting firm headquartered in Dubai providing Advisory, Valuations, Research, Due Diligence and Divestment services across a diverse range of industry sectors since 1977. Offices in the UAE, Saudi Arabia and Qatar serve over 800 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 freehold office sector is constructed to represent the quarterly price change experienced by typical office space within Dubai. The ValuStrat Price Index for Dubai’s freehold residential sector is constructed to represent the monthly price change experienced by typical residential units within Dubai. The VPI uses a comprehensive weighted sample representing more than 90% of all property types across the city 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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