Dubai House Price Index - Amazon S3 · Downtown Dubai and Palm Jumeirah apartments registered a decrease in rental costs and a decline of 3% and 2%, respectively, in sale prices however,

Dubai House Price IndexThird Quarter 2014

Dubai House Price Index | Q3 2014 | Colliers International2

DUBAI HOUSE PRICE INDEX:

YEAR ON YEAR

Q3 2013 / Q3 2014

149

156

165

170 170

135

140

145

150

155

160

165

170

175

Q3 Q4 Q1 Q2 Q3

2013 2014

Index P

oin

ts

6% 5% 3% 0%5%

149

170

135

140

145

150

155

160

165

170

175

Q3 2013 Q3 2014

Index P

oin

ts

14%

Source: Colliers International


Executive Summary

Overview

The overall quarterly index registered no major change in Q3 2014, staying at 170 index points. The

blended average rate for residential property in Q3 2014 was AED 1,508 per ft² (AED 16,230 m²)

compared to AED 1,512 ft² (AED 16,272 m²) in Q2 2014.

The Annual Dubai House Price Index registered a14% Y-O-Y increase in Q3 2014. The

blended average rate for residential property in Q3 2014 was AED 1,508 per ft² (AED

16,230 per m²) compared with AED 1,325 per ft² (AED 14,263 m²) in Q3 2013.

DUBAI HOUSE PRICE INDEX:

QUARTER ON QUARTER

Q3 2013 / Q3 2014


BREAKDOWN OF TRANSACTIONS

BY PROPERTY TYPE Q3 2014

Q3

2014

Apartments Townhouses VillasSource: Colliers International

Villas in The Palm Jumeirah saw the

largest year on year increase, (38%),

while apartment prices in Jumeirah

Lakes Towers and Motor City recorded

the second largest increase (30%) over

the period Q3 2013 to Q3 2014.

Dubai Marina recorded the highest number of transactions

in the HPI, equating to 13% of the total transactions.

Business Bay obtained a 9% share of the total

transactions followed by Jumeirah Lake Towers at 8%.

Downtown Dubai and Motor City obtained 7% and 6%

respectively.

65%

11%

24%13%

9%

8%

7%

6%

0%

2%

4%

6%

8%

10%

12%

14%

Dubai Marina Business Bay Jumeirah Lakes TowersDowntown Dubai Motor City

TOP 5 DEVELOPMENTS BY NUMBER OF TRANSACTIONS Q3 2014

38%

30% 30%28%

25%

0%

5%

10%

15%

20%

25%

30%

35%

40%

Palm Jumeirah -Villas

Jumeirah LakesTowers

Motor City -Apartments

Palm Jumeirah -Apartments

Jumeirah BeachResidences

TOP 5 DEVELOPMENTS BY GROWTH IN SALES PRICE YEAR ON YEAR




Factors Influencing

the Residential

Real Estate Market

1. Increased Rental Rates

In the second half of 2013 and the first quarter of

2014, the escalating rental costs in prime locations

have led many tenants to relocate to more cost

effective locations such as Jumeirah Village, Dubai

Sports City, Remraam and Discovery Gardens. As

tenants’ demand increased so has the attraction to

investors with the overall impact being a

consecutive increase in rents and sale prices in

more affordable locations. Motor City particularly,

saw increased activity recording a year on year

increase of 30%. In Q2 and Q3 2014 sale prices

and rental costs again showed growth but in a

declining rate. Downtown Dubai and Palm

Jumeirah apartments registered a decrease in

rental costs and a decline of 3% and 2%,

respectively, in sale prices however, Jumeirah

Lakes Towers stabilised registering no change in

Q3 2014.

2. Mortgage Cap Announcement

In the last quarter of 2013 a new mortgage cap rule

was confirmed by the UAE government, taking

effect in December. The new rule included a

mortgage limit with a loan to value ratio of 75% and

80% for expatriates and UAE nationals respectively

for properties below Dhs 5 million. Properties over

Dhs 5 million in value were limited to 65% of the

value for expatriates and up to 70% for nationals.

In Q3 2013, prior to the new law taking effect the

expectation of the new mortgage cap put pressure

on the market, with investors accelerating their

acquisitions in an attempt to take advantage of the

mortgage finance available at that time (85% for

both expatriates and UAE nationals). This increase

in demand by investors caused a significant

increase in values and also an opportunistic

increase in asking prices beyond the market

values. In Q4 2013 the unrealistic increase in

asking prices together with an increase in transfer

fees may have discouraged buyers causing a drop

in demand, decreasing the total volume of

transactions by 41% (from 866 to 507). In Q1 and

Q2 2014, purchase and asking prices continued to

increase, however, the volume of properties

actually transacted fell again below Q4 2013 totals.

In Q3 2014 the total volume of transactions

decreased by 6% (from 481 to 454) compared to

Q2 2014. It appeared that the government

measures to stabilize the property market were

starting to have an impact. This was further

illustrated in the stabilisation of the villa index in Q2

and Q3 2014.

3. Increase in Transfer Fees

The Dubai Land Department doubled the transfer

fees for all property sales, except the first direct

sale from developer to buyer which remained at the

previous rate. Transaction costs now consist of the

transfer fee to the DLD (4%), commission to the

agent (2%), NOC fee to the developer (AED 1,500)

and loan application fee to the bank (between AED

2,000 and AED 15,000). The increase in the

transfer fees appears to be designed to temper the

increase in prices and when taken in combination

with the mortgage cap rules it seem to have had

the desired effect.


Factors Influencing

the Residential

Real Estates market

4. Foreign Investments

The capital gains tax on overseas investments

implemented by the Indian government is one of

the factors which may have affected Dubai’s

residential real estate market. Historical evidence

indicates that Indian nationals have the highest

proportion of investments in Dubai’s residential

property market. According to the Dubai Land

Department, during 2013 Indian nationals

conducted around 8000 transactions worth

approximately AED 18 billion, however, in the first

half of 2014 Indians conducted 4400 transactions

worth approximately AED 10.5 billion. Now, as per

the India Tax Law, Indian nationals have to pay

overseas capital tax on gains from the transfer of a

property as well as on capital appreciation and net

income from the rent of an overseas property.

Whilst no clear evidence exists of a link between

the change in tax regime and acquisitions by Indian

nationals, indeed the first half yearly numbers

indicate a parity (so far), it is a factor that may be

considered.

In addition to the above, Russian nationals have

had currency issues that may have affected their

consideration of Dubai’s real estate market for

investment purposes. At the end of Q2 2014 the

Russian Rouble to Emirati Dirham rate (RUB/AED)

was close to 0.107, later in Q3 2014 the rate was at

0.093, a drop of 13%. For Russian investors the

price of an apartment in Dubai in Q3 2014, over a

period of just three months, have increased by

13%. This has had a noticeable impact on the

tourism market conversely there has been a flight

of money from Russia to overseas markets as the

Rouble continues to weaken against the US Dollar.

The effects of the overseas capital gains tax and

the fluctuation of the Rouble are as yet

inconclusive. Further data is required before any

substantive analysis can be produced but as

background factors they continue to be watched.

Dubai House Price Index | Q3 2014 | Colliers International

10,470

41,391

56,974

22,233 20,647 20,401

13,437

22,728

14,251

18,479

10,905 8,891

-

10,000

20,000

30,000

40,000

50,000

60,000

2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017

Additio

nal U

nits

Forthcoming Supply

6

Forthcoming Supply

At the end of 2013, there were an approximately

431,300 residential units in Dubai. By the end of

2014, the total number of residential units is

expected to increase by 3% adding approximately

14,200 units compared to an increase of

approximately 22,700 units in 2013. By the end of

2017, the total number of residential units is

expected to increase by 8.8% adding

approximately 38,275 units.

At the end of 2013, there were approximately

187,000 freehold Units. By the end of 2014, the

number of freehold units is expected to increase

by 6% reaching an approximate 197,500 units to

add approximately 10,500 units and constitute

44% of the total number of residential units in

Dubai. By the end of 2017, the total number of

freehold units is expected to increase by 14%

adding around 27,000 units.



6% 5% 3% 0%5% 6% 5% 3% 0%5% 3% 0%

8,415

39,315

50,685

15,754

13,975 12,383

9,880

19,118

10,587

14,760

7,130 5,060

-

10,000

20,000

30,000

40,000

50,000

60,000

2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017

Additio

nal U

nits

Additional Freehold Units


Alternative Analysis

Real Estate Returns

In Q3 2014, Dubai Financial Market registered an

increase of only 1% of its value while the HPI has

seen no change in performance, staying at 170

index points.

The second chart shows that the HPI has, since

its inception in Q1 2007, outperformed the DFM

index. In this regard, a residential investment

purchased in Q1 2007 has to date, over the seven

years period, generated returns of circa 70%. A

similar investment in the DFM for the same period

has generated returns of 31% in Q3 2014.



-80%

-60%

-40%

-20%

0%

20%

40%

60%

Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3

2007 2008 2009 2010 2011 2012 2013 2014

DFM / HPI ComparisonVolatility of Returns - Quarter on Quarter

DFM HPI

0

25

50

75

100

125

150

175

200

225

250

Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3

2007 2008 2009 2010 2011 2012 2013 2014

DFM / HPI ComparisonInvestment Performance

DFM HPI


Price to Rent Ratio

To provide further analysis of the residential real

estate market, Colliers International introduced the

concept of Price-to-Rent Ratio (PRR). This ratio is

widely used as an indicator of the fundamental

value, generated from rental income, of real estate

assets.

The ratio simply measures the relationship

between the prices (taken from the HPI) of

purchasing a residential property and the rental

income. A high property price associated with a

flat rental market (as in most western markets)

increases the value of the ratio, indicating that

property values are expensive; the higher the ratio

is away from its long run average indicates the

onset of an above the average market price.

However, if rents are falling there would be the

expectations of a greater fall in property prices as

investors receiving less income would pay less for

residential property.

For the purpose of this analysis, Q2 2007 is

assumed as the base quarter and the ratio is

rebased at 1(Q2 2007 = 1).

The ratio, in Q3 2014 has seen no change

compared to Q2 2014, standing at 1.39. The long

term average (excluding the mid-2008 boom)

stands at 1.33, meaning that in Q3 2014 the

average is 4.7% above the long term average.

When comparing the ratio during this quarter (Q3

2014) to the ratio in Q3 2013, there has been a

2.7% decrease.


0.800

0.900

1.000

1.100

1.200

1.300

1.400

1.500

1.600

1.700

Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3

2007 2008 2009 2010 2011 2012 2013 2014

Valu

e

Price to Rent Ratio


Apartment Index

Year on Year

The Annual Overall Apartment Index increased 9%

in Q3 2014 compared with Q3 2013, increasing to

155 points from 142 points.

The blended average rate per ft2 for apartments in

Dubai in Q3 2014 was AED 1,567 (AED 16,867

per m²) compared with AED 1,439 per ft2 (AED

15,489 per m²) in Q3 2013.

Quarterly

The Quarterly Overall Apartment index decreased

by 1% in Q3 2014 compared to a 5% increase in

Q2 2014.

The blended average rate per ft2 for apartments in

Dubai in Q3 2014 was AED 1, 567 (AED 16,867

per m²) compared with AED 1,584 ft2 (AED 17,050

per m²) in Q2 2014.



142

146

149

157

155

130

135

140

145

150

155

160

Q3 Q4 Q1 Q2 Q3

2013 2014

Index P

oin

ts

APARTMENT INDEX: QUARTERLYQ3 2013 / Q3 2014

7% 3% 5% -1%2%

142

155

135

140

145

150

155

160

Q3 2013 Q3 2014

Index P

oin

ts

APARTMENT INDEX: YEAR ON YEARQ3 2013 / Q3 2014

14%


Townhouse Index

Year on Year

The Annual Overall Townhouse Index increased

23% in Q3 2014 compared with Q3 2013,

increasing to 164 points from 133 points.

The blended average rate per ft2 for townhouses in



11,331 per m²) in Q3 2013.

Quarterly

The Quarterly Overall Townhouse index saw a 2%

increase in Q3 2014 compared to a 5% increase

in Q2 2014.

The blended average rate per ft2 for townhouses in



13,655 per m²) in Q2 2014.




133

164

0

20

40

60

80

100

120

140

160

180

Q3 2013 Q3 2014

Index P

oin

ts

TOWNHOUSE INDEX: YEAR ON YEARQ3 2013 / Q3 2014

23%

133

143

152

160164

0

20

40

60

80

100

120

140

160

180

Q3 Q4 Q1 Q2 Q3

2013 2014

Index P

oin

ts

TOWNHOUSE INDEX: QUARTERLYQ3 2013 / Q3 2014

-2% 8% 5% 2%6%


Villa Index

Year on Year

The Annual Overall Villa Index increased 20% in

Q3 2014, compared with Q3 2013, increasing to

205 points from 170 points.

The blended average rate per ft2 for villas in Dubai

in Q3 2014 was AED 1,480 (AED 15,929 per m²)

compared with AED 1,231 per ft2 (AED 13,246 per

m²) in Q3 2013.

Quarterly

As in Q2 2014, the Quarterly Overall Villa index

saw no major change in Q3 2014.

The blended average rate per ft2 for villas in Dubai

in Q3 2014 was AED 1,480 (AED 15,929 per m²)

compared with AED 1,474 per ft2 (AED 15,868 per

m²) in Q2 2014.



170

205

0

50

100

150

200

250

Q3 2013 Q3 2014

Index P

oin

ts

VILLA INDEX: YEAR ON YEARQ3 2013 / Q3 2014

20%

170

183

205 204 205

0

50

100

150

200

250

Q3 Q4 Q1 Q2 Q3

2013 2014

Index P

oin

ts

VILLA INDEX: QUARTERLYQ3 2013 / Q3 2014

5% 8% 0% 0%12%


About the Index

The Colliers International House Price Index(HPI) was created in 2007 and established inJanuary 2008 by Colliers International and fiveleading banks and financial institutions in theEmirate of Dubai to provide statistics specificallydesigned to reflect the average growth - declinerate of house prices across certain foreignownership areas of Dubai, United Arab Emirates.The data that forms the basis of the indicespresented in this HPI has been provided by allthe member financial institutions and relates toproperties which have been mortgaged throughthese institutions. The member banks - financialinstitutions associated with the ColliersInternational House Price Index are as follows:

• HSBC Bank Middle East Limited• Emirates NBD• Standard Chartered Bank• Amlak Finance• Noor Bank

We have used the weighted average method toconstruct the overall index. Based on ourcoverage of 19 master developments in Dubai,weighting has been apportioned on the basis ofunit type (Apartment, Villa or Townhouse).Apartments, Villas and Townhouses have beenweighted at 65%, 24% and 11% respectively inorder to provide an accurate representation ofmarket trends. The Recommended minimumsample size for this HPI is 10 propertytransactions.

Primary Authors:

Ian Albert, BSc (Hons) MRICS

Regional Director | MENA

[email protected]

Catherine Clarke, BSc (Hons) MRICS

Director | Residential Valuations

[email protected]

Tel +971 4 453 7400

Fax +971 4 453 7401

Colliers International | Dubai

Al Shafar Tower 1

Tecom, Dubai | UAE

About Colliers International

Colliers International is a global leader in commercial real estate services, with over 15,800

professionals operating out of more than 485 offices in 63 countries. Colliers International delivers a

full range of services to real estate users, owners and investors worldwide, including global corporate

solutions, brokerage, property and asset management, hotel investment sales and consulting,

valuation, consulting and appraisal services and insightful research. The latest annual survey by the

Lipsey Company ranked Colliers International as the second-most recognized commercial real estate

firm in the world. In MENA Colliers International has been providing leading advisory services

through its regional offices since 1996. Colliers International currently has four corporate offices in

Dubai, Abu Dhabi, Riyadh and Jeddah.

colliers.com

Copyright © 2014 Colliers International.

The information contained herein has been obtained from sources deemed reliable. While every reasonable effort has

been made to ensure its accuracy, we cannot guarantee it. No responsibility is assumed for any inaccuracies. Readers

are encouraged to consult their professional advisors prior to acting on any of the material contained in this report.

$2.1billion in

annual revenue

1.46billion square feet

under management

15,800professionals

and staff

485 offices in

63 countries on

6 continentsUnited States: 146

Canada: 44

Latin America: 25

Asia Pacific: 186

EMEA: 84

Documents

Dubai House Price Index - Amazon S3 · Downtown Dubai and Palm Jumeirah apartments registered a decrease in rental costs and a decline of 3% and 2%, respectively, in sale prices however,