In this months issueMarket Overview - June 2009 1 Focus on Abu Dhabi - June 2009 3 Developer Focus - Sorouh & TDIC - Golf Gardens 4 Chesterton UK Overview 4

Chesterton News 5

The Chesterton ChronicleIssue 2 June 2009

Chesterton International LLCAl Salam Street

(Next to OnetoOne Hotel)Abu Dhabi, UAEPO BOX 128983

W: www.chesterton.aeE: info@chesterton.aeT: +971 (0) 2 642 6063F: +971 (0) 2 642 3815

June 2009The summer is finally here. And with rising temperatures we see the annual migration of people to the airports to seek cooler climates or return to their homes abroad. Traditionally we see a slowdown in the market; however this year, no one appears to have told the property market this.

We are seeing a continuation of increasing prices noticed from the previous month. Sales Manager, Sameer Debabneh said, “We have received a lot of demand on the Al Reef Villas, especially the Arabian phase. This is due to its early completion. We have both investors and end users, with most investors looking to buy more than one unit for long term investments. There is increasing demand also for Al Raha Beach, especially the Al Bandar phase, where

prices have increased slowly and even investors are also buying more than one unit”.

Looking at the bigger picture, Al Raha Gardens is showing strong interest where demand is more for rentals. Many of these properties are owned by UAE Nationals, and therefore in the current market, rental returns are looking strong especially for those properties purchased during the launch of the scheme.

The leasing market remains healthy, however in light of the coming summer months, leasing demand will remain constant with some areas seeing an increase in demand. Ahmed Mahgoub, Leasing Consultant says, “Rental demands were lower in June than in May, however this is normal as we move into the summer vacation period. There is still strong demand in Raha Gardens, Khalifa City A and Mohammed bin Zayed City. Naturally

there is significant demand for the areas on the main island, which are the favourite locations. However current trends show lower company allowances given to expatriates which means that clients have to look for cheaper properties having to sacrifice location to achieve this balance”.

Due to the requirement for increased deposits and uncertainty on completion of some schemes, vendors were forced to negate their premium and recover as much of the original price as possible. For a vast majority of cases in Abu Dhabi this is being achieved.

There is a continuing increase in market activity and this in the long term will help prices of properties to begin to increase. The increases will be small (less than 5% per annum) but imminent regulation and increased security will create a more controlled and stable market.

Market Overview

* The estimated timeframe for supply and demand of residential units in Abu Dhabi to reach an equilibrium.

Market data taken from Financial Times, National Bank of Dubai, Emirates Business 24-7 and Chesterton Research

EconomicThe economic outlook for the UAE appears to be robust, however there are still differences of opinion as to how long the current global economic downturn will continue.

At the end of June, Emaar announced talks for a merger with three companies under the Dubai Holdings parent company. The companies, Dubai Properties, Sama Dubai and Tatweer will all become a single entity in the next 4 months making it the largest property company in the world. The proposed merger is being carefully considered by the Securities and Commodities Authority, in order to satisfy themselves on the rights of shareholders, the transaction structure and valuation in detail.

FinancialIn recent months, many of the large banks have begun to announce the “bad debts” they hold, highlighting the gap between their funding and asset values. All the banks which have been involved in home finance and mortgages have been hit by the economic climate. In an article on 24 June 2009 by Business 24-7 ,the liquidity gap indicated for Amlak was estimated to be in the region of AED12billion.

Property prices in Dubai have dropped by up to 50% from the peak, and as such, those banks with home finance products are now seeing a significant gap in their asset portfolios. With rentals also dropping in Dubai, the risk associated with these properties is growing. In Abu Dhabi, although some areas have seen a drop in prices, this has not been as significant drop as Dubai. However the rental demands for these properties has remained relatively strong as tenants continue to prefer to stay within the confines of the city itself, rather than the long commute from Dubai. There are however growing numbers of residents commuting, rather than live in Abu Dhabi, due to the differences in rental levels between the Emirates.

LegislatureLast month we noted there were discussions that the 6-month visa for purchasers of UAE property over AED1million was going to be introduced. We are aware that this has now been introduced although there had been no formal notification in the press or on the government websites. There are restrictions to the visa, however this may, in the short term, assist the property market but is unlikely to improve areas of the market where significant price drops have been noticed.

Feedback from property experts is that the 6-month visa rule is not sufficient to encourage investors to return to the UAE en masse.

UAE StatisticsThe price of Brent Crude Oil has remained relatively constant at US$68– US$70 per barrel. This is approximately 2.5 times that of which the economy of the UAE is based upon. This has followed a recent attack on a platform in Nigeria which has caused a significant drop in production thus maintaining strong prices.

Market Data as at 30 June 2009

GBP to AED 6.11217

EUR to AED 5.18349

Brent Oil

Per Barrel US$72.42

Supply Demand Equilibrium

Residential (Abu Dhabi)* Q4 2011

Focus on Abu Dhabi – June 2009 Price IndicatorsIn a recent news article in Business 24 - 7 Sorouh announced that there were plans to reduce the price of units in Al Ghadeer by up to 20%. At the peak, prices in Al Ghadeer raced up to AED1,600 per sq ft from the original price, however these have been dropped back and with discounts could bring prices back to around AED1,250 per sq ft. However further discounts may be offered in the future as completion is estimated to take place by 2012.

We are also seeing prices in some developments in Abu Dhabi, including Manazel’s Al Reef and Aldar’s Al Raha Beach, maintaining price levels for units which are soon to be completed.

Rental IndicatorsIndications are that the market is noticing a reduction in rental prices in some areas of the Abu Dhabi City. Areas such as the Tourist Club are as well seeing a small but noticeable increase in vacant units. The reason for this is tenants are relocating away from the current problematic parking situation and traffic congestion caused by the Al Salam Street construction. However Chesterton research shows yields in some properties remain high in the region of 14% – 17% in many cases.

Asking Price to Achieved Sale Price RatiosIn areas such as Al Reef, we are seeing property prices marginally increase. As such, the differences between achieved prices and asking prices is getting smaller The figures are still approximately 5% but this is likely to keep decreasing as demand levels increase.

Vendors of properties in schemes which are nearing completion are aware there is increasing demand for these units. Currently the marketplace in Abu Dhabi is still undersupplied.

DemandWe are aware that demand for schemes such as Al Reef is increasing. Chesterton has sold a number of units in the last three weeks in this development. A fourfold increase in sales since the beginning of the month. We believe that the imminent completion and practical handover of the scheme is creating more market activity, hence allowing more units to be with agents to be marketed.

We believe that the imminent completion and practical handover of schemes is creating increased market activity. There are therefore more units in the schemes being marketed by agents.

There has also been increased demand for schemes which are on Al Reem Island. Most enquiries are for Marina Square, which is due for completion between the end of 2009 beginning of 2010.

Chesterton ForecastWe expect positive signs of recovery in Q2 2009 to continue through the summer. Early indications are that the market is showing signs of recovery. There is a small lag period between increasing demand and transactions and increasing prices, and we feel that this is now being seen in Al Reef. We expect the same to occur in Al Raha Beach, Al Raha Gardens and Marina Square within the 6 months to completion and the post completion period.

Plans are in place for a tunnel to run from the front of Abu Dhabi mall towards Mena Zayed. These workings have not commenced, however this will no doubt cause further delays upon commencement. The limited parking and road construction are making living in these areas harder. Timeframe for the completion of this project is estimated to be by mid 2012.

Parking restrictions are also beginning to be implemented within busy areas of Abu Dhabi City. Initially near the Stock Exchange estimated from 1st July 2009. These will include meters and monitoring of parking with fines being issued when required. A new system of pay meters and resident permit parking areas will be introduced. This will attempt to alleviate the increasingly problematic parking issue faced currently. It is believed that the main areas of Khalidiya and Tourist Club are likely to be implemented first.

Demand for properties in Al Raha Beach and Al Reef will continue to remain strong. We expect tenants to also start looking at the purchasing opportunity rather than continuing to rent. This is especially true as both developments have phases imminently ready for occupation. The levels of mortgage availability from banks are still low and the Loan to Value (LTV) ratios are still between 60% to 80%. However, more people are able to afford these properties as sales prices have dropped significantly.

We anticipate that the summer months demand will shift from sales to leasing. This is when tenants look to renegotiate leases or look for newer and cheaper accommodation as a replacement.

Type of Property No. of Properties

(Estimated)

Large Villas 14

Medium Villas 275

Townhouses 100

Change AverageResidential Property Price

Change Month-on-month change

Change Year-on-year change

London Up £291,210 Up 0.4% Up -15.3%

South East Up £186,767 Down 0.2% Up -14.4%

South West Down £163,833 Down -0.6% Up -14.9%

Developer Focus Sorouh & TDIC — Golf GardensThe development is a joint venture with TDIC and Sorouh, due for completion in mid to late 2009. Situated alongside Abu Dhabi Golf Club, the scheme will comprise approximately 390 villas and townhouses set in a community environment. As a location, the scheme is situated between Airport Road and the main Beach Road adjacent to the main Abu Dhabi to Dubai road.

The Gardens Club is situated in the heart of the development, and will feature high-end restaurants, health and fitness centers, swimming pools, tennis and squash courts, in addition to gardens and parks. Pedestrian walkways throughout the project will provide a healthy alternative for residents who wish to access the recreational facilities.

There are only a handful of golf courses in Abu Dhabi, and the course at Golf Gardens will be a PGA standard course, which has already held one of the European PGA tour events. The mix of properties within the development will be geared towards purchasers looking at units in the middle of the range. There will be approximately 14 large villas, 275 medium villas and 100 townhouses within the scheme.

Completion is anticipated within the next six months, however we expect the first properties

InternationalChesterton Humberts — UK Poll of Polls

UK Overview• House prices rose by 0.1% over the month to

June, the first such rise since April 2008. The monthly increase took the annual decline to -14.3% year-on-year, an increase from -16.0% in May. Whilst it is probably too early to affirm that prices have passed their lowest point, this month’s results do suggest that the turning point in the housing market is closer than ever.

• The Bank of England has held interest rates at the historically low level of 0.5% since March this year, increasing the affordability of mortgages for home buyers

• The housing market is open to seasonality effects, with purchases tending to be made at around this time of year. This makes interpretation of June’s price rise – the first in thirteen months – particularly difficult.

• Taking into account the timeliness, lag and accuracy of the indices, the Chesterton Humberts’ House Price Poll of Polls shows that the average selling price of a residential property in England and Wales experienced a slight increase in prices over the month to June. Prices rose by 0.1% bringing the average price of a house to £163,352 from a downwardly revised level of £163,239 in May.

to be available in the next 4–8 weeks. As the scheme is not in a freehold area, it is restricted to purchase by UAE nationals only.

Demand for the properties was strong on release with a majority of the units being sold in a short period of time. The remainder of the units have subsequently been sold and some of these are now being resold on the market. Currently asking prices are ranging between AED1,000 to AED1,400 per sq ft or between AED4,750,000 and AED7,500,000. We have not seen some of the larger exclusive villas coming to the market as yet though sales of these may be off market transactions.

Rental demand for properties in Golf Gardens is relatively strong, with the developments seen as one of the best off the main island. The rental prices are reflective of this with rents between AED350.000 to AED500,000 per annum.

With the importance of open space associated with the occupation of villas, these villas are attracting the upper end of the market and therefore does not directly compete with schemes such as Al Raha Gardens, Al Reef and Khalifa City A.

Source – CEBR

London South East South West

Residential property price June 2009 £291,210 £186, 767 £163, 833

Residential property price May 2009 £290,122 £186, 474 £164, 758

Change since May 2009 0.4% 0.2% -0.6%

Residential property price June 2008 £343,709 £218,111 £192,479

Change since June 2008 -15.3% -14.1% -14.9%

Monetary value of monthly change £1,088 £293 -£925

Average residentialproperty price

Annual change % Monetary value

Kensington and Chelsea £628,159 -27.3% -£236, 226

City of Westminster £542,451 -7.1% -£41, 618

Camden £486,894 -9.4% -£50, 497

Hammersmith andFulham £405,394 -18.4% £91,451

Richmond Upon Thames £402,250 -9.2% -£40, 757

• This month’s marginal house price increase comes after thirteen consecutive months of price falls and could mean that prices have now reached their lowest point in the current economic cycle. House prices in June 2009 were 14.3% lower compared to the same month in the previous year, compared to an annual fall of 16.0% over the year to May.

London• The Poll of Polls shows that house prices

in London increased by 0.4% over the month to June bringing the annual decline to 15.3% from a downwardly revised annual contraction of 17.2% in the previous month. The annual decline in London is now at its shallowest since January 2009.

• The price of an average house in the capital stands at £291,210, some £62,726 or 17.7% below peak in February 2008.

• In line with the picture emerging across the country as a whole, around half (53.1%) of local authorities in London experienced monthly price contractions in June from May. Of the five most expensive areas, all of which are in London, Kensington and Chelsea has experienced the largest annual decline. The most expensive properties are likely to have benefited to some extent from the depreciation of sterling over the previous year. However, the low number of property transactions is also likely to be affecting the accuracy of the results.

• Of the five least expensive areas, none of which are in London, four show double-digit annual declines.

Chesterton News

Sales have increased fourfold which represents a significant change to the market. Chesterton is becoming more familiar to the local market through regular marketing in the press.

Further, our leasing enquiries have also increased fivefold, which is keeping our leasing agents extremely busy with viewings and negotiations.

In addition, a number of clients with large portfolios have approached Chesterton to market their units to sell or to lease, with active property management included as part of Chesterton’s services.

In the UK, Chesterton and Humberts have undergone a major rebranding exercise. The two companies of Chesterton and Humberts are as of 22 June 2009 called “Chesterton Humberts”.

Humberts, one of the most respected real estate advisors in the UK, operated in excess of 50 offices across the Midlands and Southern England prior to its merger with Chesterton

in early 2009 to create Chesterton Humberts. Humberts, as with Chesterton, has a long heritage stretching back to 1842 with its roots and expertise in all types of rural property from cottages to castles. Humberts currently retain the contract for the Crown Estates in the UK and as such offer a wide range of services which compliment and blend with Chesterton, creating a significant market presence in UK Real Estate.

Source – CEBR

Source – CEBR

ValuationsMortgage or Loan Valuations; Transactional Valuations; Investment Purposes; Accounting Purposes; Court-related Purposes; Portfolio and Asset Management Valuations; Market Rental Estimations; Viability Studies; amongst others

ResearchMarket Research Reports; Viability Studies; Financial Feasibility Reports; Development Studies; Investment Feasibilities; amongst others

SalesOur experienced team is able to help our clients purchase and sell all kinds of properties in Abu Dhabi.

LeasingOur professional and experienced staff are able to assist in all matters relating to leasing properties, either as a tenant or a landlord.

Property ManagementWe are also able to manage all kinds of properties from single units to apartment buildings.

Tel: +971 (0) 2 642 6063 Fax: +971 (0) 2 642 3815Email: info@chesterton.ae Website: www.chesterton.ae

Contact Details: Abu Dhabi

Chesterton’s Services

Disclaimer:All articles and data presented herein is intended for information purposes and has been compiled from sources deemed reliable including the Valuations and Research department of Chesterton, sales and leasing staff, published data, and secondarysources. Though information is believed to be correct, materials presented is subject to errors, omissions, changes or withdrawal without notice.

Robin Teh MRICS V & R Director

Andrew Laver MRICS V & R Valuer

Sameer Debabneh Sales Manager

Zubin Firozi Leasing Manager

Jackeline Alexander MRICS V & R Project Valuer