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Dubai House Price IndexFirst Quarter 2014
Dubai House Price Index | First Quarter 2014 | Colliers International
Contents
About The Authors ……………………... 3
About The Index ………………………... 5
Executive Summery ……………………. 6
Overall factors
Influencing The Residential
Real Estate Market ………….......……... 7
Factors Influencing
The Residential Real
Estate Market in Q1 2014 ……………… 9
Forthcoming Supply …………………... 11
Alternative Analysis …………...........… 12
Apartment Index ……………………… 14
Townhouse Index ……………………… 15
Villa Index …………………………...… 16
2
Dubai House Price Index | First Quarter 2014 | Colliers International3
Ian Albert, BSc (Hons) MRICS
Regional Director | MENA
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.
About The AuthorsIan has an extensive background covering over 27 years in
the real estate industry working for both real estate
companies and real estate consultants. Over the years he
has acquired a range of multi-disciplinary skills, including;
investment strategy, acquisitions and disposals, property
management, development solutions and masterplan
analysis, valuations, market research, complex feasibility
studies and corporate solutions.
Ian has worked extensively throughout the United
Kingdom and The Middle East, North and Southern Africa
having been involved in projects in all of the Arabian Gulf
Countries, the Levant, North and South Africa GCC
countries plus Republic of Mozambique, Republic of
Namibia, Kingdom of Swaziland, Lesotho, Sudan, Egypt,
Lebanon, Syria and Jordan.
For the last 18 years Ian has been in the GCC region,
firstly as an Associate Partner with a consultancy firm,
then as the General Manager of a UAE focused Real
Estate Investment Company. For the last 13 years Ian has
lead the Valuation and Advisory teams of Colliers
International MENA offices.
Dubai House Price Index | First Quarter 2014 | Colliers International4
Catherine Clarke BSc (Hons)
MRICS
Director | Residential Valuations
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.
Prior to joining Colliers International - Middle East,
Catherine was employed by a number of reputable
Chartered Surveying firms in the United Kingdom, where
she had predominantly been involved in carrying out
valuations for mortgage, executor, tax, audit, secured
lending and sales purposes. She has also been involved in
development appraisals for developers, financial
institutions and public bodies within the UK.
Catherine has been practicing in the UAE for six years and
is currently overseeing the Residential Valuation division
within Consultancy Services. This includes contract
accounts for 20 major local and International banks. In
addition to these contracts, the department provides
valuations for acquisition, audit, matrimonial and portfolio
purposes.
Catherine is also responsible for the implementation and
development of the Colliers International House Price
Index. Established in 2008 and was the first bank
supported index in the UAE.
Dubai House Price Index | First Quarter 2014 | Colliers International5
About The IndexThe Colliers International House Price Index
(HPI) was established in January 2008 by Colliers
International and five leading banks and financial
institutions in the Emirate of Dubai to provide
statistics specifically designed to reflect the
average growth - decline rate of house prices
across certain foreign ownership areas of Dubai,
United Arab Emirates. The data that forms the
basis of the indices presented in this HPI has been
provided by all the member financial institutions
and relates to properties which have been
mortgaged through these institutions. The member
banks - financial institutions associated with the
Colliers International 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 to
construct the overall index. Based on our coverage
of 19 master developments in Dubai, weighting
has been apportioned on the basis of unit type
(Apartment, Villa or Townhouse). Apartments,
Villas and Townhouses have been weighted at
67%, 27% and 6% respectively in order to provide
an accurate representation of market trends. The
Recommended minimum sample size for this HPI
is 10 property transactions.
Dubai House Price Index | First Quarter 2014 | Colliers International
138
141
149
156
165
120 130 140 150 160 170
138
165
120 130 140 150 160 170
6
Dubai House Price Index: Year on Year
Q1 2013 / Q1 2014
Source: Colliers International
Dubai House Price Index: Quarterly
Q1 2013 / Q1 2014
Q1
2013
Q2
2013
Q1
2013
Q1
2014
6%
5%
2%
19%
Q3
2013
Q4
2013
Q1
2014
5%
Executive Summery
Overview
The overall quarterly index increased in Q1 2014,
reaching 165 index points compared with 156 in Q4
2013, registering a 5% increase.
Year on year the index increased 19% in Q1 2014
compared with Q1 2013.
67%6%
27%
Apartments Townhouses Villas
Breakdown of Transactions
Q1 2014
Dubai House Price Index | First Quarter 2014 | Colliers International
Factors Influencing the
Residential Real Estate
Market
Availability of Finance
Unrest in the Arab Region
Increased Number of
Cash Transactions
Improved Investor & End-User Sentiment
Tax-Free Investments
Better Economic Outlook
Improved Status of Complete
Developments
7
Overall Factors Influencing The Residential
Real Estate Market
Dubai House Price Index | First Quarter 2014 | Colliers International8
Factors Influencing
the Residential
Real Estates
market in Q1 20141. Increased Rental Rates
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 and Discovery Gardens. As tenant demand
increased so has the attraction to investors with the
overall impact being a consecutive increase in
rents and sale prices. Motor City particularly, has
seen increased activity.
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 2014, purchase and asking prices
continued to increase, however, the volume of
properties actually transacted fell again below Q4
2013 totals. It appeared that the government
measures to stabilize the property market were
starting to have an impact. (Refer to 3.)
Dubai House Price Index | First Quarter 2014 | Colliers International9
3. Increase in Transfer Fees
The Dubai Land Department doubled the transfer
fees for all property sales, excepting the first
direct sale from developer to buyer which will
stay 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.
4. Dubai Expo 2020 Bid
The anticipation of the Dubai expo 2020 bid
caused an increase in demand for residential real
estate and a spike in asking prices for both land
sites and existing properties in Q3 2013. In Q1
2014, four months after the successful bid was
announced, asking prices kept increasing causing
a 5 to 10% gap between asking prices and actual
sale prices. However, in Q1 2014 the total number
of mortgage transactions decreased by 48% in
comparison to Q3 2013. This could be due to the
unrealistic increase in asking prices and
purchasers unable/unwilling to meet these
escalated prices, especially with the doubled
transfer fees. (Refer to 3.)
Dubai House Price Index | First Quarter 2014 | Colliers International
10,470
41,391
56,974
22,233
20,647 20,401
13,437
22,728
14,251
5% 18% 21% 7% 6% 5% 3% 6% 3%
2006 2007 2008 2009 2010 2011 2012 2013 2014
10
5. Forthcoming Supply
At the end of 2012, there were an approximate 408,500
residential units in Dubai. At the end of 2013, the total
number of residential units increased by 6% adding
approximately 22,700 units compared to an increase of
approximately 13,400 units in 2012. By the end of
2014, the total number of residential units is expected
to increase by 3% adding approximately 14,200 units.
At the end of 2012, there were an approximate 167,800
freehold Units. At the end of 2013, the number of
freehold units increased by 11% reaching an
approximate 186,900 units to add approximately
19,100 units and constitute 43% of the total number of
residential units in Dubai. By the end of 2014, the total
number of freehold units is expected to increase by 6%
adding around 10,300 units.
Additional Freehold Units
Source: Colliers International
Forthcoming Supply
8,415
39,315
50,685
15,754
13,975 12,383 9,880
19,118
10,587
2006 2007 2008 2009 2010 2011 2012 2013 2014
Additional Supply
Dubai House Price Index | First Quarter 2014 | Colliers International
110
165
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
2007 2008 2009 2010 2011 2012 2013 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
2007 2008 2009 2010 2011 2012 2013 2014
11
Alternative Analysis
Real Estate Returns
In Q1 2014, Dubai Financial Market performed
positively, increasing 40% of its value while the HPI
has seen a 6% increase in performance.
From the following chart 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 year period, generated
returns of circa 65%. A similar investment in the DFM
for the same period has generated returns as high as
10% in Q1 2014.
DFM / HPI Comparison
Investment Performance
Source: Colliers International
DFM / HPI Comparison
Volatility of Returns - Quarter on Quarter
DFM HPI
Source: Colliers International
DFM HPI
Dubai House Price Index | First Quarter 2014 | Colliers International12
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).
Price to Rent Ratio
Source: Colliers International
The ratio, in Q1 2014 has experienced an increase,
standing at 1.35 compared to 1.34 in Q4 2014. The
long term average (excluding the mid-2008 boom)
stands at 1.31, meaning that in Q1 2014 the average is
3.1% above the long term average. When comparing
the ratio during this quarter (Q1 2014) to the ratio in
Q1 2013, there has been a 7.2% decrease, indicating a
decline in prices
1.31 1.31
0.9
1
1.1
1.2
1.3
1.4
1.5
1.6
1.7
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
2007 2008 2009 2010 2011 2012 2013 2014
Dubai House Price Index | First Quarter 2014 | Colliers International
129
149
120 130 140 150 160 170
Q1
2013
Q1
2014
15%
129
133
142
146
149
110 120 130 140 150 160
13
Apartment Index
Year on Year
The Annual Overall Apartment Index increased 15% in
Q1 2014, compared with Q1 2013, increasing to 149
points from 129 points.
The blended average rate per ft2 for apartments in
Dubai in Q1 2014 was AED 1,504 (AED 16,189 per
m²) compared with AED 1,308 per ft2 (AED 14,079
per m²) in Q1 2013.
Apartment Index: Quarterly
Q1 2013 / Q1 2014
Source: Colliers International
Apartment Index: Year on Year
Q1 2013 / Q1 2014
Quarterly
The Quarterly Overall Apartment index grew by 2% in
Q1 2014 compared to a 3% increase in Q4 2013.
The blended average rate per ft2 for apartments in
Dubai in Q1 2014 was AED 1, 504 (AED 16,189 per
m²) compared with AED 1,479 (AED 15,920 per m²)
in Q4 2013.
2%
3%
7%
3%
Q1
2013
Q2
2013
Q3
2013
Q4
2013
Q1
2014
Dubai House Price Index | First Quarter 2014 | Colliers International
131
136
133
143
152
110 120 130 140 150 160
131
152
110 120 130 140 150 160
Q1
2013
Q1
2014
17%
14
Townhouse Index
Year on Year
The Annual Overall Townhouse Index increased 17%
in Q1 2014 compared with Q1 2013, increasing to 152
points from 131 points.
The blended average rate per ft2 for townhouses in
Dubai in Q1 2014 was AED 1,208 (AED 13,003 per
m²) compared with AED 1,036 per ft2 (AED 11,152
per m²) in Q1 2013.
Townhouse Index: Quarterly
Q1 2013 / Q1 2014
Source: Colliers International
Townhouse Index: Year on Year
Q1 2013 / Q1 2014
Quarterly
The Quarterly Overall Townhouse index saw a 6%
increase in Q1 2014 compared to an 8% increase in Q4
2013.
The blended average rate per ft2 for townhouses in
Dubai in Q1 2014 was AED 1,208 (AED 13,003 per
m²) compared with AED 1,138 per ft2 (AED 12,249
per m²) in Q4 2013.
6%
8%
-2%
4%
Q1
2013
Q2
2013
Q3
2013
Q4
2013
Q1
2014
Dubai House Price Index | First Quarter 2014 | Colliers International
160
162
170
183
205
150 160 170 180 190 200 210
160
205
140 150 160 170 180 190 200 210
Q1
2013
Q1
2014
28%
15
Villa Index
Year on Year
The Annual Overall Villa Index increased 28% in Q1
2014, compared with Q1 2013, increasing to 205 points
from 160 points.
The blended average rate per ft2 for villas in Dubai in
Q1 2014 was AED 1,480 (AED 15,931 per m²)
compared with AED 1,155 per ft2 (AED 12,432 per
m²) in Q1 2013.
Villa Index: Quarterly
Q1 2013 / Q1 2014
Source: Colliers International
Villa Index: Year on Year
Q1 2013 / Q1 2014
Quarterly
The Quarterly Overall Villa index saw a 12% increase
in Q1 2014 compared to an 8% increase in Q4 2013.
The blended average rate per ft2 for villas in Dubai in
Q1 2014 was AED 1,480 (AED 15,931 per m²)
compared with AED 1,326 per ft2 (AED 14,273 per
m²) in Q4 2013.
12%
8%
5%
2%
Q1
2013
Q2
2013
Q3
2013
Q4
2013
Q1
2014
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 © 2013 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
Primary Authors:
Ian Albert, BSc (Hons) MRICS
Regional Director | MENA
Catherine Clarke, BSc (Hons) MRICS
Director | Residential Valuations
Tel +971 4 453 7400
Fax +971 4 453 7401
Colliers International | Dubai
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Tecom, Dubai | UAE