A six-month growth trend in residential sales volume and ticket sizes on back of softening capital values
The first quarter 2019 Dubai real estate review issued by leading local consulting firm ValuStrat – reports that the first quarter ValuStrat Price Index (VPI) for residential properties displayed an overall 12.4% annual fall in capital values, with quarterly declines of 3.2%. This downward trend resulted in 27.1% 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 5.2%.
The valuation-based VPI for Dubai’s residential capital values, displayed an overall 12.4% annual fall in capital values, with quarterly declines of 3.2%. This downward trend resulted in 27.1% 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 5.2%. On an annual basis, 5 out of 26 locations measured saw single-digit declines, villas in Palm Jumeirah, Emirates Hills and Al Furjan, as well as apartments in Dubai Sports City and Jumeirah Village Circle. Capital values dropped more than 16% annually villas located in Jumeirah Islands, apartments in Palm Jumeirah, International City, Discovery Gardens, Business Bay, and The Greens.
“…as capital values softened by an average of 1% per month for the last 16 months, a six-month streak in buying activity has been observed for both off-plan and ready homes, residential ticket sizes were also on the increase. Interestingly, ready villas are becoming more attainable to owner-occupiers as we found that a quarter of all ready villa sales were priced between AED 1m and 2m …” said Haider Tuaima, Head of Real Estate Research at ValuStrat.
The Dubai VPI now 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 Q1 2019 residential rental VPI in Dubai stood at 76.5 points, declining 23.5% since 2014, softening 1.9% quarterly and 9.0% annually. Dubai’s net yields averaged 5.5%, for apartments at 5.7% and villas with 4.5%. The average residential occupancy rate stood at 88%.
As far as residential supply is concerned, last year’s project completions reached 20,364 units which is equivalent to approximately 45% of the initial total projections. For 2019, expected supply was adjusted downwards to 42,176 apartments and villas. This number is 54% less than the preliminary supply forecast, more delays are expected during the year, mitigating excessive residential supply concerns.
The first quarter ValuStrat Price Index for Dubai’s office capital values stood at 74 points, suggesting that average capital values are 26% lower than the same period during the base year 2015, 14.4% lower than the same period last year and 4.7% lower than the previous quarter. Office space in Jumeirah Lake Towers witnessed the highest annual drop of 16.7% and 6.5% QoQ, Barsha Heights was second in line with losses of 15% year on year and 7.7% QoQ. Downtown Dubai and Dubai International Financial Centre (DIFC) saw the least quarterly declines of 1.4% and 2.1% respectively.
Office transaction volumes during the first quarter jumped 64% when compared to the previous quarter, however, included a substantial number of bulk sales of office space priced at less than AED 6,458 per sq m (AED 600 per sq ft). Overall transacted office prices were 20.9% lower than last year, and 20.3% QoQ. The median transacted price stood at AED 7,535 per sq m (AED 700 per sq ft). Business Bay was the most popular choice for office sales with a share of 58.9% followed by Jumeirah Lake Towers (JLT) with 28.4% of overall transactions this quarter.
Median office asking rents declined by 4.4% YoY and dipped 1.0% QoQ. The citywide median asking rent for a typical office size stood at AED 968 per sq m (AED 90 per sq ft). Commercial office occupancy in Dubai was estimated at 84%.
The year began with a total of 91,085 hotel rooms and 24,882 hotel apartments within 716 hospitality establishments. An estimated 2,259 units were added during Q1 from the opening of eight hotels.
2018 citywide hotel occupancy rate stood at 78%, up 2% annually and the Revenue per Available Room (RevPAR) and Average Daily Rate (ADR) continued to witness downward pressures on an annual basis, retreating 7.6% and 5.5%, respectively.
Industrial property prices remained relatively stable QoQ but declined 1.7% YoY on average. Prices generally ranged between AED 1,938 per sq m to AED 4,306 per sq m (AED 180 per sq ft to AED 400 per sq ft) in established industrial areas with high specification/quality built, and modern cold storage facilities priced at the upper end. No notable quarterly change in rental rates recorded during the first three months of this year, however, compared to a year ago, rents were down 0.48% on average. Asking rents for industrial warehouses generally ranged between AED 296 to AED 538 per sq m per annum (AED 27 to AED 50 per sq ft per annum) depending on factors such as industrial-grade specifications / quality, age / condition, and size of industrial facility.
Declan King MRICS – Managing Director & Group Head Real Estate commented ‘… We are delighted to build our VPI stable of informed real estate data further, with the introduction of a rental index for Dubai. This provides all stake holders in the city with trust worthy real time opinion on what is happening in the residential rental sector, as per our expert research team and RICS Registered Valuers…’
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.
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.