The third quarter 2019 Dubai real estate review issued by leading local consulting firm ValuStrat – reports that the third quarter ValuStrat Price Index (VPI) for residential properties displayed an overall 11.2% annual fall in capital values, with quarterly declines decelerating to 2.6%. This downward trend resulted in 31.1% 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 1.8% to 4.5%.
The ValuStrat Price Index (VPI) which is a valuation-based price index for Dubai’s residential capital values, displayed an overall 11.2% annual fall in capital values, with quarterly declines slowing to 2.6%. This downward trend resulted in 31.1% 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 1.8% to 4.5%. On an annual basis, 3 out of 26 locations were more resilient to downward pressure and saw single-digit declines, villas in Palm Jumeirah and Emirates Hills, as well as apartments in Dubai Sports City. Capital values dropped more than 15% annually for apartments in Discovery Gardens, and Dubai Production City.
“…Residential capital values per square foot approached 2012 levels prompting 40% annual rise in off-plan sales and 34% growth in ready home sales. Additionally, more than half of residential sales were for apartments priced less than one million dirhams and villas priced less than 2 million dirhams …” said Haider Tuaima, Head of Real Estate Research at ValuStrat.
The Dubai VPI analyses residential rental values. 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 Q3 2019 residential rental VPI in Dubai stood at 72.6 points, declining 27.4% since 2014, softening 1.7% quarterly and 7.9% annually. Dubai’s net yields averaged 5.9%, with apartments at 6% and villas at 4.8%. The average residential occupancy rate stood at 86%.
As far as residential supply is concerned, 12,948 residential units, 37% of the total estimated supply for 2019, have been completed so far. More than half of these completions were concentrated in four areas: Dubailand, Jumeirah Village Circle, Dubai Marina and Dubai Silicon Oasis. For the remainder of the year, projected supply mix is composed of 72% apartments (16,000 units) and 28% villas (6,200 units), all expected to finish construction before year-end.
‘…With improved transaction volumes in recent months, it will be interesting to see what buyer demand developers find at this week’s Cityscape Global event in Dubai - and if this trend continues over the remainder of the year…’ says Declan King MRICS – MD & Group Head Real Estate ValuStrat.
Dubai’s office capital values dipped 2.5% since last quarter to 67.6 VPI (ValuStrat Price Index) points, this translates to capital values being 32.4% lower than the same period during the index base year 2015, and 16.3% lower than the same period last year. Office space in Jumeirah Lake Towers witnessed the highest annual drop of 19.3% and 3.8% QoQ, this is followed by Business Bay with declines of 14.7% annually and 1.3% quarterly. Dubai International Financial Centre (DIFC) demonstrated relative resilience to the overall citywide downward trend, as capital values softened annually by 5.3%.
Construction of an estimated 86,141 sq m (927,213 sq ft) Office GLA (Gross Leasable Area) was completed so far. Available data on remaining office space under construction is estimated at 395,207 sq m (4.3 million sq ft) GLA, expected for delivery in 2019.
Median office asking rents declined by 2.4% YoY and fell 2.1% QoQ. The citywide median asking rent for a typical office size stood at AED 926 per sq m (AED 86 per sq ft). Office occupancy in Dubai is estimated at 84%.
As of July, total hotel rooms and hotel apartments stock stood at 93,767 rooms and 24,442 keys, respectively.
Total international guests Jan-July 2019 reached 9.58 million, up 3.6% when compared to the same period last year. Citywide occupancy rate for the same period stood at 74%, dipped 2% YoY. Revenue per Available Room (RevPAR) and Average Daily Rate (ADR) witnessed double-digit declines on annual basis, plunged 13.5% and 11.3%, respectively.
Most industrial property prices remained stable QoQ ranging between AED 1,507 to 3,121 per sq m (AED 140 to 290 per sq ft) in established industrial areas with buildings of good quality and specification priced at the higher range. And rental rates saw marginal declines as asking rates quoted generally ranged between AED 200 per sq m to AED 550 per sq m (AED 19 to 51 per sq ft) depending on various factors such as location, size, condition and age of the building.
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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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