PROPERTY WATCH · 2016. 3. 9. · DuBai & aBu DhaBi ProPerTy Prices MacroecoNoMic overview caNcellaTioN of uNiT regisTraTioN DuBai real esTaTe PreDicTioNs 2016 by Holborn by Roots

To Buy orNoT To Buy

DuBai resiDeNTialMarkeT 2015

DuBai & aBu DhaBi ProPerTy Prices

MacroecoNoMic overview

caNcellaTioN ofuNiT regisTraTioN

DuBai real esTaTePreDicTioNs 2016

by Holborn

by Roots Land

by Reidin

by JLL

by Al Zahmy

by Deloitte

propertywatch.aeQ1 2016PROPERTY WATCH

3 DIRECTOR’S MESSagE

10 MaCROECONOMIC OVERVIEW

4 DUBaI RESIDENTIaL MaRKET

26 OffICE, RETaIL, HOTEL SECTOR Q4 2015

52 REaL ESTaTE REgISTER CaNCELLaTION Of UNIT REgISTRaTION

24 MaKINg a DIffERENCE IN VaLUaTIONS

20 DUBaI REaL ESTaTE PREDICTIONS 2016

16 2016 aND BEYOND

DirecTor’scoNTeNTsMessage

It is a great pleasure to welcome everyone to our latest edition of Property Watch magazine.

'So, should I go ahead and buy a property? Or should I wait? Is it true that the rent prices are going to drop?' I have been hearing these questions flying around during the last few months.

Our magazine presents the property market from different perspectives and helps readers get an accurate and unbiased understanding of the UaE real estate market. We aim to cover every sector, such as commercial, residential, hospitality and retail, with the purpose to deliver all the answers for your uncertainty along with other in-depth information specifically for the Dubai and abu Dhabi real estate market.

If you still need more answers after finishing reading this edition, you can visit our Property Watch website at www.propertywatch.ae, where you can get access to news, press releases, reports, data and many more in-depth details of the UaE market on a daily basis.

The Dubai real estate market became more mature in the last period. after witnessing a price correction, the market is shifting from investors to end users. With the government’s continuous improvement of the infrastructure, Dubai’s vision has become clearer as a big percentage of master plans and properties are now ready. The numbers of supply had a big impact on the real estate market.

Due to changes in the economic times around the world, many individuals have decided to establish themselves in Dubai and therefore adopt a more sensible lifestyle. Tenants are now preferring to buy a property rather than paying expensive rent prices in the high end areas. Many tenants are now circulating and changing areas to live in along with ways to reduce their outgoing expenses. as a result, rent prices are now softly dropping in the high end areas and stabilizing in the middle end area. areas like Jumeirah Village and IMPZ faced a soft increase and started to stabilize, as tenants have moved to more affordable areas.

as always, I would like to show my appreciation for everyone’s contribution to this edition of Property Watch magazine and to welcome new joiners. I hope you have an enjoyable read and I look forward to the next issue with more great topics and articles.

DIRECTOR

faDI BOUSH

RESEaRCH aNaLYST

ELENa BRaTU

gRaPHIC DESIgNER

REHMaN aSHRaf

COVER PHOTO

NaNDKISHORE

POB 215273 Dubai, UAE

T +971 4 329 8333

F +971 4 329 8997

E [email protected]

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Fadi BoushDirector

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60DISCLAIMERThis publication is the sole property of Roots Land Real Estate LLC and Property Watch and must not be copied or reproduced in any form or by any means, either in whole or in part without the prior written approval of Roots Land Real Estate LLC and Property Watch.

The data and other information contained in this publication have been obtained from sources generally regarded to be reliable and every effort have been made to ensure maximum accuracy. However we make no guarantee, warranty or representation in respect of the accuracy and completeness of the information contained herein. Roots Land Real Estate LLC and Property Watch does not accept any liability whether in negligence or otherwise to any party for any loss or damage suffered as a result of negligence, errors, omissions, change of price or other on this publication.

The material presented in this publication does not necessarily represent Roots Land Real Estate LLC and Property Watch view and opinion.

The listings are correct at the time of printing, availability and prices are subject to change without notice. Photos are for illustration purpose only.

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DuBai resiDeNTial MarkeTPrices, Demand and Supply — 2015

according to Dubai govern-ment, Emirates Consumer Price Index went up by 4.07%

in 2015. The overall Consumer Price Index (CPI) reached 127.05 in December 2015 and the gDP reached 4.6%. The gDP has been calculated using the methodology of production according to Dubai

statistics. The decrease of oil prices has affected the government spending and their budgets.

The economic growth, liquidity, the stock market and asset prices have also been affected by the difference in oil prices. JLL report states that this change has also impacted the

We had a continuous decrease in price rates for Dubai Marina and JBR from Q4 2014 to Q2 of 2015. Due to the decrease in prices it seems that a small increase happened in sales transactions in the first two quarters of the year, however the

financing of real estate projects as there is an increased focus on critical infrastructure and affordable housing projects. It seems like the government has decreased their spending on less urgent projects, which causes delays or scaling back of many projects.

demand has fallen until the third quarter of 2015. The sales rate has remained stable since Q2 until the last quarter of the year, even though the demand started to slowly rise in the Q4 of 2015 (see figure 2). as a result after the big price correction,

aParTMeNT salesTraNsacTioNs

figure 1

DuBai MariNa & JBrsales TraNsacTioNs

figure 2

the volume of transactions has started to slowly increase in the last quarter of the year. This action indicates that some end users have seen the correction of the prices as a good opportunity to buy, instead of paying rent.

Dubai Marina Downtown Dubai Business Bay

Q4 2015 ToP 3 coMMuNiTies — NuMBer of TraNsacTioNs

DuBai MariNa & JBr aParTMeNTs

DuBai aParTMeNTs — DeMaND aND Prices

source: reidin & roots land


The largest volume of transactions in the last few years, was registered in the first quarter of 2015 even though the sale rate was just as high. There was a downhill demand

for the area in the last three quarters of the year with a stable sale rate in the last two quarters. One of the reasons for the big number of transactions in Q1 2015 was the

completion and handover of many projects. as a result to this action, a big number of title deeds had to be registered around this period.(see figure 3)

BusiNess Bay aParTMeNTs

BusiNess Baysales TraNsacTioNs

figure 3


It seems like many long term tenants are willing to switch to owner occupation. Due to the market needs, many developers are starting to adopt market changes such us lowering their prices and give better payment plans.

The extension of the Red Line Metro will bring more demand for the surrounded areas and therefore we will witness an increase of the price rate per square foot of those areas.

Many areas showed a high number of transactions, most likely linked to the deadline for homeowners to register their properties with Dubai Land Department.

after the decline of sales transactions in Q3 2014, the market faced a soft increase in the first quarter of 2015, however since then it started to continually drop until the Q3 of the year. In the last quarter the transactions were

slowly increasing again and also the average sales rate. The apartments segment prices declined by almost 6% in the Q3, indicating further price reductions during the summer season. In the last quarter it seems that the prices had started to slowly increase by a very small percentage. The average sale price per square foot recorded at the end of Q4 2015 is similar to rates recorded in the Q4 2013. (see figure 1)


The drop of the demand in the Q2 to Q3 of 2015 is very similar to the drop that this area faced in the Q2 to Q3 of 2014. Even the slow increase in the Q4 2014 reached similar

The demand in this area has been steadily escalating from Q3 of 2014 up to the end of 2015. One of the reasons was the constant decline in prices. The average sales rate at the end of the year indicated the

numbers as the last quarter of 2015. The price rate has been up and down in the last two years. Since Q3 to Q4 2015 we saw a slow increase in the price rate. for the last few years, the

same rate as we had in Q3 2013. as the prices decreased, the number of transactions went up. Investors from overseas had no problem selling at a lower rate as they still made more profit from the exchange

market for this area has been slowly shifting its buyers from investors to end users. (see figure 5)

rate. Therefore this was a good opportunity for others to buy at a lower price and invest in Downtown Dubai. (see figure 4)

PalM JuMeirah aParTMeNTs

DowNTowN DuBai aParTMeNTs

PalM JuMeirah sales TraNsacTioNs

figure 5

DowNTowN DuBaisales TraNsacTioNs

figure 4



Many developers have postponed the expected completion date of their projects due to different reasons that affected the market and therefore delaying the deadline for handovers. Even so, it seems that the majority of the developments expected in 2015 have been handed over during the last 2 quarters and

By the third quarter of 2015 prices had significantly decreased which started at the beginning of 2015. although demand rose in the second quarter due to lower prices,

more than 1000 units have been handed over in Dubai Marina & JBR, Business Bay and on the Palm in the last quarter of the year.

The market is expected to receive the highest residential supply in 2017 as projects are already under construction. During 2016 we

only in the last quarter did the sale prices start to indicate a slight enhancement. according to the market study, the sale rate dropped by 5% quarter-on-quarter and 12%

expect new supplies from projects such as ‘Meydan Heights South’ and ‘Millennium Estates’. JLT ‘Dubai Star’, Business Bay ‘Volante’ and Dubai Marina ‘Escan Marina’ Tower, these are some of the forthcoming residential supplies.

year-on-year. also, the main areas that received the highest number in transactions were arabian Ranches, Palm Jumeirah and Emirates Living.(see figure 6)

DuBai exPecTeD resiDeNTial suPPly

DuBai villas — DeMaND aND Prices

villa salesTraNsacTioNs

figure 6


Palm Jumeirah arabian Ranches Emirates Hill

ToP 3 coMMuNiTies — villas sales TraNsacTioNs



arabian Ranches indicates a positive increase in the average sales rate but only in the third quarter of 2015, after having a whole year of downhill rates. Even in the last quarter the

The first and third quarter of 2015 had a very low demand in this area, with a steady decrease of the sale prices. Second and last quarter seemed to register a lot more

prices are lowering again. The volume of transactions on the other hand declined in the last two quarters of the year, although the demand is still higher than what

transactions than the rest of 2015. The big gap in between the sale price and sale transaction from Q4 2014 highlights the lack of supply at the particular period and therefore an

was witnessed in 2014. Slowdowns during the summer season are common in the country as majority of expats benefit from these hot months to take their annual leave.

increase in the sale price. Investors and end users have taken advantage of the decrease in the prices and therefore the demand in this area has gone up. (see figure 8)

araBiaN raNches villas

JuMeirah islaNDs villas

araBiaN raNches (high eND) sales TraNsacTioNs

figure 7

JuMeirah islaNDssales TraNsacTioNs

figure 8


a big number of transactions were registered in the second quarter of 2015 and slowly declined in the last quarter. Even though the demand was lower in the last quarter, it still indicates three times the volume of

transactions that have been made in first quarter of 2014. The price rate in Q1 2014 was very high as a result of not having a large amount of supply in the current area. Many investors have waited for the rate

price to decrease as they anticipated the drop. as a result we can see in figure 9 that the transactions volume matched or exceeded the rate price by the end of the last quarter of 2015. (see figure 9)

eMiraTes hills villas


In the third quarter we witnessed a slowdown in the number of transactions on Palm Jumeirah. This was mainly due to a lower demand for high-end properties, in comparison to mid-end villas, leading as well to lower average sale rates. That being said, we can see in the last quarter how

demand was steadily increasing as well as the average sale rate. Palm Jumeirah has always been a unique project in terms of statistics and numbers. Our graph indicates a general study, however to be able to provide more accurate statistics and numbers, this area will require a more in depth analysis. The reason

for this would be that two typical villas with the same layout and size could vary in the price range of up to 50% difference, merely because of the location distinction, view or upgraded features that one might have. (see figure 10)

PalM JuMeirah villas

eMiraTes hills sales TraNsacTioNs

figure 9

PalM JuMeirah sales TraNsacTioNs

figure 10



Elena BratuResearch Analyst, Roots Land Real Estate

www.rootsland.com

Studies have shown that over 3,750 new villas/townhouses should be handed over in locations of Meydan, arabian Ranches, Mohammed Bin Rashid City and Dubailand during

DuBai exPecTeD villa suPPly

2016. Some of the projects are Maple 2 and arabella Phase 2, developed by Emaar and Dubai Properties group.



DuBai PriMereNTal clock

aBu DhaBi PriMereNTal clock

T he real estate market in the UaE and particularly Dubai cooled down in 2015 after

expanding significantly in 2013 and the first half of 2014. Coupled with lower oil prices, the appreciation of the US dollar reduced demand for real estate and weighed on the performance of key sectors such as retail and tourism, as they become more expensive for visitors from Europe and countries with non-USD pegged currencies.

The slowdown in tourist spending has particularly weighed down on the bottom lines of luxury retailers, as the influx of high-spending tourists mainly from Russia slowed down on the back of a devaluing Ruble.

usD vs iNTerNaTioNalcurreNcies

* Hotel clock reflects the movement of RevPARNote: The property clock is a graphical tool developed by JLL to illustrate where a market sits within its individual rental cycle. These positions are not necessarily representative of investment or development market prospects. It is important to recognise that markets move at different speeds depending on their maturity, size and economic conditions. Markets will not always move in a clockwise direction, they might move backwards or remain at the same point in their cycle for extended periods.

Q4 2014

Q4 2014

Q4 2015

Q4 2015

sTreNgTheNiNg us DollarMacroecoNoMic overviewAdjusting to lower oil prices & slower economic growth

The pace of economic growth in the UaE has slowed significantly in 2015, as the

positive impact of lower oil prices on the global economy has been insufficient to offset the loss of revenue to both the government and the private sector. as a result, real gDP growth has fallen from 4.6% in 2014 to 2.7% for 2015, with a similar level of growth forecast for 2016.

Oil prices fell drastically over the second half of 2014 and have continued to drift downwards in 2015. While forecasts vary, the consensus is that prices will recover only modestly over the medium term, while remaining short of their 2011–2013 levels. The IMf is currently suggesting average prices will remain between USD 50 and USD 60 per barrel until 2020.

faced with both losses in oil revenues and higher expenditure on defense and security, the UaE government is adjusting its budget to ensure fiscal

sustainability and avoid long-term deficits. The two major components to the fiscal restructuring we can expect to see over the next 5 years are reduced government spending and increased government revenue through taxation. Both of these have implications for the real estate sector.

While we remain positive on the long term outlook for the UaE real estate

market there is little doubt that the rebalancing of the fiscal position will result in headwinds and challenges over the next 12 months.

although governments will continue to spend on development and infrastructure projects, the level of this spending will inevitably be curtailed over the medium term as spending needs are realigned with the reality of lower oil revenues.

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office MarkeT suMMary

PerforMaNce

Both Dubai and abu Dhabi remain two tiered office markets, with strong demand for single owned grade a office, but little interest in secondary locations. In Dubai, vacancies in selected grade a buildings are now minimal, pushing rents up 4%. However, overall commercial activity remained subdued and corporate activity focused on consolidation of operations as opposed to expansion. Meanwhile, rents in grade B space

suPPly

The Dubai office market saw the delivery of 700,000 sq m of gLa in 2015, increasing the total stock to 8.3 million sq m. Of the new supply, 26% was delivered in Business Bay, followed by the new Dubai Design District (17%), TECOM and Logistics City (13%). The year-end also saw the delivery of the first building in

(typically strata owned and located in less developed areas) continued to face downward pressure as supply outstrips demand in that segment.

as more grade a stock is delivered to the Dubai market over the next couple of years (e.g. Dubai Trade Center District/ICD Brookfield), rental rates across the Central Business District (CBD) these are expected to remain flat. Vacancy rates across the CBD, currently at 19%, are expected to increase.

given the more limited supply of quality stock, grade a office rents in abu Dhabi increased 7% on an annual basis. given lower demand from international corporates and government entities, grade a rents are likely to remain stable in 2016. While some progress is seen on the legislation governing the abu Dhabi global Marketplace (aDgM), it is likely that corporates with onshore activity will have to relocate, increasing vacancy rates on Sowwah Square and placing downward pressure on prime rents.

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the new Dubai Trade Center District (DTCD). Looking ahead, an additional 600,000 sq m of gLa is expected to be delivered between 2016 & 2017, with around 35% of this proposed supply expected in Business Bay.

Much less office space was comple-ted in abu Dhabi in 2015, with just 146,000 sq m added, increasing the stock to around 3.3 million sq m

of gLa. Projects delivered in 2015 included addax Tower on Reem Island and IRENa HQ in Masdar City. approximately 340,000 sq m of office gLa is expected to enter the market in 2016, dominated by the delivery of Bloom Central and aDIB HQ on airport Road, al Hilal Bank HQ on al Maryah Island and aDNOC HQ on the Corniche.

cBD rents (per sq m) / annual changesource: Jll

resiDeNTial MarkeT suMMarysuPPly

Residential completions across the UaE in 2015 remained lower than in recent years, a trend likely to continue into 2016. a total of just 7,800 residential units were delivered in Dubai throughout the year, compared to the scheduled delivery of 25,000 units forecast by developers at the beginning of 2015. Materialization rates have

PerforMaNce

The residential market in both abu Dhabi and Dubai witnessed subdued sales activity in 2015. While lower oil prices coupled with geopolitical unrest negatively impacted investor sentiment, the strengthening of the U.S. dollar made UaE property more expensive for many overseas investors.

In Dubai, data from the Land Department reveals falls of 33% and 28% in the volume and value of transactions respectively in the YT November 2015, compared with the same period in 2014. This comes

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varied between 30%-50% in Dubai in recent years. This means that much of the proposed future supply for 2016 (26,000 units) will not be delivered on schedule.a similar trend has been witnessed in abu Dhabi where the materialization rate of projects under construction was low in 2015, with only 1,000 units delivered. The

as average rents and sales prices dropped 2% and 11% respectively in the YT November according to the REIDIN general Index. following a rapid increase of residential rents and prices between 2012 and 2014, the market has now clearly stabilized, and we welcome this sign of a more mature market catering to end-user investors rather than speculative investors. This softening is expected to continue in 2016 as the market adjusts to lower levels of activity.

Rents have performed better than sale prices in all sectors of the residential market in 2015,

majority of expected supply in both emirates has now been pushed to late 2016 and 2017. These delays in project handover result from lower sales levels, reduced government spending and a realization amongst developers of the need to phase out supply in line with demand to avoid an oversupplied market.

increasing rental yields and the future attractiveness of the sector. In abu Dhabi, the average sale price of 2 bedroom apartments remained flat over the year at approximately aED 16,000 per sq m, as weaker investor sentiment reduced transaction activity.

Meanwhile rental rates for 2 bedroom apartments increased 4% in the first quarter of the year before flattening out at aED 163,000. With average rentals declining in the Dubai market, 2015 has seen a widening of the gap between residential rents in abu Dhabi and Dubai.


reTail MarkeT suMMary

PerforMaNce

activity in the retail market across the UaE came under pressure in 2015 as the volume and value of retail sales slowed down. This comes as inflationary pressures and the devaluation of the Rouble and other non-USD pegged currencies compressed both household and tourist purchasing powers. In Dubai, the saturation and competitiveness of the retail market has pushed retailers to offer discounts and other

suPPly

Dubai saw much higher levels of new retail supply than abu Dhabi in 2015. abu Dhabi saw the delivery of just 53,000 sq m of retail gLa, comprised mainly of non-mall retail space within mixed developments. In contrast, Dubai added 193,000 sq m of gLa dominated by the delivery of the extensions to Mall of the

attractive deals to entice customers.

faced with slowing retail sales over the year, some retailers are struggling to meet the high rental rates imposed, and landlords are having to revise their contracts and offer flexible deals in order to retain tenants. Rents in 2015 remained flat in both primary and secondary super regional malls in Dubai and are expected to decrease in 2016 as the market moves further in the favor of tenants.

In abu Dhabi, retail rents in the prime malls are expected to remain stable in the short term given the more limited existing stock of good quality malls, the high purchasing power among residents and less dependency on tourist spending.

The addition of a number of quality new retail malls in 2017 / 2018 is however expected to exert downward pressure on the lower quality malls in the medium term.

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Emirates and Dragon Mart.

Looking ahead, the supply of retail malls in abu Dhabi is expected to pick up in 2018 with the delivery of al Maryah Central and Reem Mall. In Dubai, future supply will continue to feature large extensions to existing centers such as Dubai Mall, Citywalk, festival City and Ibn Battuta. In Dubai, the supply

of retail mall space is expected to increase 19% over the next two years to reach 3.5 million sq m of retail gLa, dominated by extensions to existing super regional malls. as developers continue to build retail centers the market is likely to face an oversupply of mall space, which, coupled with lower demand, is expected to reflect negatively on the sector’s performance.

average retail rents (% change)source: Jll

hoTel MarkeT suMMarysuPPly

Dubai’s hotel market saw the addition of 2,700 hotel keys in 2015, increasing the total supply to 67,100 keys. Major completions include St. Regis and Steinberger in Business Bay. Much higher levels of new supply are forecasted for the next 2 years with more than 18,000 additional rooms proposed in projects including The address Boulevard, TRYP by Wyndham,

Paramount Hotel & Residences and the address Sky View, which will increase total supply to 86,200 rooms by the end of 2017.

This is expected to add further downward pressure on average Daily Rates (aDR’s). In abu Dhabi, an additional 1,000 keys were delivered in 2015, increasing supply to 20,700 keys at year end. The decision by

the abu Dhabi Tourism and Culture authority (aDTCa) to limit the number of new hotel licenses is expected to control hotel supply in abu Dhabi over the next couple of years.

an additional 4,900 keys are however scheduled for delivery between 2016 and 2017 in the Emirate.

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PerforMaNce

The UaE hotel market saw mixed performance throughout 2015. While aDR’s remained flat in abu Dhabi, room rates in Dubai saw a 9% decline during the year to October. Occupancy levels remained healthy in both markets, at 74% and 77% in abu Dhabi and Dubai respectively.

The slowdown in tourist arrivals coupled with the ongoing handover of hotel rooms in Dubai saw

hotel Performancesource: sTr global

declining aDR’s throughout 2015. With occupancy rates remaining the highest in the region however, the hotel market in Dubai is now at more competitive levels than they were in 2014.

Looking ahead, Dubai’s hotel market is expected to record a further softening in 2016, followed by a pick-up in activity from 2017 onwards with the delivery of Dubai Parks and in the run up to Expo, where the government is expecting

20 million guests by 2020.

In abu Dhabi, the improvement of the Capital’s tourist offerings and expansion of its national airlines (Etihad), has steadily increased the number of inbound tourists in 2015 and the city is expected to draw in more tourists in the next couple of years. With the future supply of hotel rooms kept under control by the aDTCa, the hotel sector in abu Dhabi is likely to see little change in its current performance levels.


2016 aND BeyoNDPoTeNTial

iranPotential upside (especially for Dubai) given likely increase in capital flowing out from Iran into UaE residential and retail sectors and the possibility that commercial operations serving Iran will base themselves in Dubai for the time being.

Domestic reform / improved legislationsNew ‘Open Data’ law is likely to improve transparency of Dubai market.

The new abu Dhabi real estate law comes into effect in January 2016. It is likely to improve the efficiency of the residential sector, but fails to reintroduce a rental cap.

further clarification of the legal position of the abu Dhabi global Marketplace could provide a boost to the office market.

expansion of cultural and entertainment offeringsCompletion of new theme parks in Dubai and the Cultural District in abu Dhabi are likely to further boost the tourism market. Emirates and Dragon Mart.

risks

geopolitical unrestHightening geopolitical tensions within the Middle East will continue to negatively impact sentiment and confidence. Increased spending on security and defence (estimated to be USD 15.7 billion in 2015 and USD 17 billion for 2016) will reduce government spending on other areas including construction and infrastructure.

higher interest ratesHigher global interest rates will reduce liquidity and increase the cost of new development. financial institutions likely to deposit their money with the Central Bank rather than investing in real estate development projects.

cut back in government spendingLower levels of government spending will inevitably result in re-prioritisation and delays in some announced projects.

uncertainty surrounding chinaNervousness about the prospects for the Chinese economy could exert downward pressure on global economic growth.

© 2016 Jones Lang LaSalle IP, Inc. All rights reserved. The information contained in this document is proprietary to Jones Lang LaSalle and shall be used solely for the purposes of evaluating this proposal. All such documentation and information remains the property of Jones Lang LaSalle and shall be kept confidential. Reproduction of any part of this document is authorized only to the extent necessary for its evaluation. It is not to be shown to any third party without the prior written authorization of Jones Lang LaSalle. All information contained herein is from sources deemed reliable; however, no representation or warranty is made as to the accuracy thereof.

DefiNiTioNs & MeThoDologyfuTure suPPly

JLL estimates of future supply are updated quarterly, based on physical inspections and data collected from developers. We remain cautious of the ability of some projects to meet their stated completion deadlines, with significant delays in project delivery leading to a low materialization rate.

iNTerPreTaTioN of MarkeT PosiTioNs iN reNTal clock

6 o’clock indicates a turning point towards rental growth. at this position, we believe the market has reached its lowest point and the next movement in rents is likely to be upwards.

9 o’clock indicates the market has reached the rental growth peak, while rents may continue to increase over coming quarters the market is heading towards a period of rental stabilization.

12 o’clock Indicates a turning point towards a market consolidation / slowdown. at this position, the market has no further rental growth potential left in the current cycle, with the next move likely to be downward.

3 o’ clock Indicates the market has reached its point of fastest decline. While rents may continue to decline for some time, the rate of decrease is expected to slow as the market moves towards a period of rental stabilization.

resiDeNTial

The supply and stock data is based on quarterly surveys of the entire Dubai and abu Dhabi metropolitan areas. This data excludes labour accommodation and local Emirati housing supply.

Completed buildings refer to those handed over for immediate occupation. future supply is based on projects in the announced and under construction phases.

Residential performance data is based on asking prices from a basket of selected developments in abu Dhabi where as in Dubai it is based on the REIDIN monthly index. REIDIN Dubai Residential Property Price Indices (RPPIs) use monthly sample of offered/ asked listing price data as well as data on actual transactions.

office

Completed buildings refer to those handed over for immediate occupation. future supply is based on projects in the announced and under construction phases. Our supply figures exclude government owned and wholly occupied buildings. In Dubai, the Central Business District (CBD) includes DIfC, Downtown, DTCD and Sheikh Zayed Road as far as Interchange 1, but excludes Business Bay.

The rents recorded in this report are average grade a rents, based on JLL estimates of the open-market net rent (excluding service charges) for a new lease in basket of grade a quality buildings, as at the survey date. Data relates to headline or face rents (exclusive of incentives).

Vacancy rate is based on JLL estimates of all office buildings in abu Dhabi, while in Dubai it relates to a basket of buildings in the CBD that make up around 80% of the CBD supply and 15% of the total current supply.

reTail

Classification of Retail Centers is based upon the ULI definition and

based on their gLa:

• Super Regional Malls have a gLa of above 90,000 sq m

• Regional Malls have a gLa of 30,000–90,000 sq m

• Community Malls have a gLa of 10,000–30,000 sq m

• Neighbourhood Malls have a gLa of 3,000–10,000 sq m

• Convenience Malls have a gLa of less than 3,000 sq m

Malls are categorized into primary and secondary based on their turnover levels. Primary malls are the best performing malls with highest levels of turnover. Secondary malls are average performing malls with lower levels of turnover.

Retail rents represents the open market net rent that could be expected for a notional line store on the main trading level in a basket of shopping centres, as at the survey date. These base rents exclude any additional turnover or sales related rentals.

Vacancy rates are based on JLL estimates of vacancies in line stores in a basket of super regional malls in Dubai and super regional and regional malls in abu Dhabi.

hoTels

Hotel room supply is based on existing supply figures provided by DTCM and aDTCa as well as future hotel development data tracked by JLL Hotels.

Room supply includes all graded hotel rooms but excludes serviced apartments.

Hotel performance data is based on a monthly survey conducted by STR global on a sample of international standard midscale and upscale hotels.

1716 www.propertywatch.ae

• average villa sales prices down 11% apartments 8% year-on-year

• average rental rates dipped just 1% across-the-board

• 22,000 apartments and 7,700 villas schedule for delivery this year, keeping downward pressure on sales and rental rates through 2017

Leading real estate consultancy asteco has released its latest Dubai report, providing an

historic review of last year and 2016 outlook, with affordable communities leading the way in terms of rental demand and investor opportunity against a scenario of significant oversupply looming in the high-end and luxury segments.

The report flags the impact of delayed project delivery in 2015 and a large pipeline for 2016, coupled with the demand slowdown and continued low oil prices, as an indicator of market prospects this year, with both rental rates and sales prices coming under further pressure.

a total of 13,500 apartments and 800 villas were added to Dubai’s residential real estate supply in 2015, and a further 22,000 apartments and 7,700 villas are scheduled to be delivered in 2016, with downward rental rate pressure likely to continue through to 2017, says the report.

Residential sales recorded across-the-board declines, with villa sales prices down year-on-year by 11% and apartments by 8%. Villas on Palm Jumeirah recorded price declines of 13% over the year, dropping to aED 2,475 per square foot on average and The Meadows was also down 15% to aED 1,150.

End-users, rather than investors, were the predominant buyers of villas and townhouses, with a clear preference for smaller 2, 3 and 4 bedroom units, rather than large villas. New communities such as Mudon and arabian Ranches Phase 2 saw improved levels of activity, offering better-priced yet good quality alternatives to some of the more established areas.

at the high end of the apartment market, Jumeirah Beach Residence was down 16% to aED 1,370 per square foot and apartments on the Palm Jumeirah dropped 14% to aED 1,720 per square foot on average.

Villa rentals were down 9% on

11% in 2015

average year-on-year, but al Barsha recorded an increase for three-bedroom villas, up 9.2% to aED 213,000 per annum while in Mirdiff similar properties rose 4.2% to aED 138,000.

The biggest falls came in Jumeirah and Umm Suqeim where three-bed villas dropped more than aED 50,000 or 20% on average to hit aED 195,000, while larger four-bedroom homes in arabian Ranches and Jumeirah Park were also down 19% to aED 243,000 and 15.5% to aED 145,000 respectively.

“With fresh new supply entering the market, this is forcing property owners, especially of older independent villas, to become increasingly competitive on pricing,” remarked Stevens.

"However, if we look to the medium and long-term, the outlook is more positive with demand more than likely to grow in line with the progress of key infrastructure projects currently underway, such as Dubai World

Central Airport and Expo 2020." said

John Stevens, Managing Director, Asteco

” ”

With supply handover slower than anticipated in 2015, apartment rental rates remained broadly stable over the year, dipping just 1% on average, although asteco recorded disparities between different areas. apartment rental rates were down by 4% on average, with Sheikh Zayed Road recording the highest drop of over 12%.

Dubai Marina and Palm Jumeirah both saw a year-on-year dip, with a one-bedroom apartment dropping 13.3% to aED 98,000 and 10% to aED 135,000, respectively.

The DIfC area was not immune either in 2015, two-bedroom units have dropped 8.7% to aED 158,000 per annum, as did JBR with the highest average decline for a two-bedroom apartment, dropping 9.2%

to aED 148,000.

“for property owners, adjustments in terms of rental expectations and payment flexibility will have to be made. and, as usual in cases of increased supply, better quality, well managed or value-for- money properties will be able to achieve higher occupancy levels than others,” noted Stevens.

The commercial office sector fared slightly better despite significant new space of 500,000 square metres coming online in 2015 and 1.1 million square metres set to be delivered in 2016. H1 2015 saw improved levels of demand leading to moderate increases in rental rates in certain areas.

“The majority of new office supply

entering the market this year will be strata-owned buildings in popular office areas like Business Bay and Jumeirah Lake Towers. Sales demand is expected to come primarily from SME level end-users,” added Stevens.

John StevensManaging Director, Asteco

www.asteco.com

DuBai ProPerTy Prices fall


DuBai real esTaTePredictions 2016

ecoNoMy overview

The Economist Intelligence Unit (EIU) forecasts real gross Domestic Product (gDP) growth in the United arab Emirates (UaE) to average 3.6 percent per annum between 2015 and 2019, a decline from the 4.6 percent growth experienced in 2014. This forecast is largely due to the significant fall in global oil prices, along with wider global economic factors, such as a slowing Chinese economy. It is likely that Dubai’s gDP growth will outperform the wider UaE economy in 2016, largely

DuBai’s resiDeNTial MarkeT PreDicTioNs for 2016

following a significant number of project launches during 2015, the focus in 2016 will be project delivery. Whilst published pipeline forecasts estimate that some 40,000 units will get delivered in 2016, consultations with key developers suggest that a more realistic number will be approximately 10,000 units.

2015 saw average residential sales prices across Dubai decline by approximately 10 percent, which can be attributed to a number of factors. These factors include exceptional

Following two years of significant capital and rental growth across much of Dubai’s real estate market, 2015 marked a slowdown.

Our outlook for the year ahead is that generally market fundamentals for Dubai will remain positive in 2016, supported by a dynamic and growing economy, world-class transport and infrastructure and a stable investment climate. However, despite these market fundamentals, we do expect certain headwinds in Dubai’s real estate market, largely influenced by external factors, to continue to put downward pressure on the market.

due to the fact that its economy is considerably less dependent on oil revenue compared to the other Emirates. Nevertheless, lower oil revenue is likely to drive lower bank deposit levels and greater withdrawals to support funding gaps that are likely to result in tighter liquidity and an increased cost of borrowing.

Despite the UaE’s forecast budget balance of 0.2 percent of gDP in 2016, significant scaling back of key infrastructure projects should be eased by federal reserves and

growth experienced during 2013 and 2014; the ongoing decline in global oil prices, which has negatively influenced sentiment and demand from the Middle East North africa (MENa) region; and the relative strength of the U.S. Dollar (to which the UaE Dirham is pegged), against currencies from key international source markets such as India, the United Kingdom and Russia, making Dubai a comparatively more expensive market.

We predict that average residential prices will decrease further in 2016 reflecting a transition to a more mature market. further, an increase in more affordable stock and

the new Law No. 22 regarding Public Private Partnerships (PPP) passed in November 2015, which aims to boost private infrastructure investment and drive development.

Meanwhile, the recent lifting of sanctions on Iran present potential opportunities for Dubai in 2016. The release of capital currently in Iran is likely to prompt an influx of investment to safe haven markets from which Dubai may benefit, as well as the opportunity for Dubai to act as a gateway for businesses and investors considering Iran.

discounting in emerging locations placing downward pressure on citywide average sales prices, will likely take place.

While there may be a softening in residential rental prices in some submarkets, it is not anticipated that this will be to the degree of recent declines in residential sales prices. Rental price decline, however, could be exacerbated further if speculative investors, who are unable to sell product at pre-determined levels, decide to release units for rent instead.

1 eiu Tourism — 2 economics — 3 Dubai airports

PerceNTage chaNge iN hosPiTaliTy source

MarkeTs, DuBai2014 vs. 2015


key TourisT reTail Mall source MarkeTsDuBai, 2015

exPecTaTioN oNDisPosaBle iNcoMe

levels iN 2015 aND 2016coMParisoN To

Previous year, DuBai

DuBai real esTaTePredictions 2016

DuBai’s hosPiTaliTy MarkeT PreDicTioNs for 2016

Occupancy levels at around 70 to 75 percent are likely to represent the “new norm” in Dubai’s hospitality market in 2016 by investors and developers, compared to 79 percent in 2014, largely due to new supply being delivered. This can potentially be viewed as a positive as it will make Dubai a more affordable destination. as operators compete for occupancy, average Daily Rates (aDRs) will soften, further

DuBai’s office MarkeT PreDicTioNs for 2016

With a number of quality office schemes in prime areas of undersupply due for completion by the end of 2015 and during 2016, rental growth is likely to slow in some submarkets and the power of negotiation will shift from landlords to tenants. We predict that free Zones will continue to perform well and occupancies will be maintained in the most prime office buildings in Dubai, especially those located in proximity to key transport infrastructure (airports, ports and logistics) as these industries are

DuBai’s reTail MarkeT PreDicTioNs for 2016

Despite a strong start to the year with 56 million visitors to the Dubai Shopping festival spending around aED145 billion, some retailers reported a fall in sales in 2015. There will likely be a further moderation in retail sales in 2016 against a strong Dollar and slowing demand from international source markets such as Russia, China and parts of Europe.Retail rental growth will be relatively

encouraging growth in tourism volumes required to support the investment in tourism infrastructure being developed over the coming years.

Serviced apartments are likely to be considered more in 2016 by investors and developers, driven by key source market trends, growing visitor demand for longer stays and better value accommodation. Notably in 2014, Saudi arabia was the largest hospitality source market with 1.51 million visitors to Dubai, whilst Iran and China experienced

projected to experience economic growth in Dubai in 2016.

Within the office sector, a trend towards more mixed-use developments and a greater allocation of space to amenities will be noticeable. This will enable schemes to differentiate against the competition and meet occupier demand for retail and other uses in proximity to the workplace, as well as a strategy for developers to diversify risk and generate a more robust cash flow.

given the shortage of high-quality office space in Dubai, expanding

flat in 2016, with the exception of super prime malls, which will likely continue to experience strong demand as they benefit from both tourist and resident spending. During the first nine months of 2015, Emaar Malls group reported 90 million visitors, equating to 11 percent growth year-to-date and a 2 percent increase in tenant sales, compared to 2014 (Q1 to Q3).

Sector specific, we predict that food and Beverage (f&B) retail will go

year-on-year growth of 42 percent and 24 percent respectively. With plans to increase capacity at al-Maktoum International airport (DWC) and Dubai International airport (DXB) to reach a combined capacity of approximately 97 million passengers in 2016, there will be opportunities to capitalize on hospitality demand from transit and destination visitor growth and by promoting extended stay-overs in the Emirate, provided appropriate infrastructure, policies and incentives are implemented.

companies will be more amenable to leasing additional space than is required at present in order to accommodate future expansion, with a view to subletting surplus space in the short term.

Linked to this, there will be more opportunities for investors and property managers to utilize data analytics and real time information to optimize lease management, occupancy, revenue and costs across their portfolio and better match occupier requirements with availability for improved financial performance.

from strength to strength in 2016, driven by greater brand penetration and expansion. good prospects are also envisaged for fashion retail following the completion of the initial phase of D3 Design District, which has attracted a number of high-profile brands and fashion houses to Dubai. These key investments should attract talent and business to Dubai’s fashion industry and contribute to trade.


The DiffereNT MeThoDs & MechaNics Making a Difference in Valuations

Q1 — When preparing valuations for clients what are some of the challenges faced within the UAE?

Perhaps one of the most important starting points is an understanding that cost does not necessarily equal value. This is particularly evident around development projects where investors acquire the land for x, the cost to complete is y and therefore adopts a value of x+y. The valuer when considering the market value for the property would be required to look at the price the asset can be sold for in the open market between two willing parties. an investor would potentially look at the revenue the asset can secure in the market and the value they would be prepared to pay would be a reflection/multiplier of this. This is not unique to the region and the valuers find conversations with clients on the differences between cost and value as well as value and worth are regular occurrences.

The various mechanics of the valuation process often rely on evidence of comparable activities – for instance rents or sale prices of similar assets, sale or lease periods, market incentives as well as both current and future demand and supply characteristics. One of the main challenges around this is the availability of verified data. This lack of transparency often results in assumptions or adjustments against a data-set which may in itself be slightly ambiguous.

Q2 — We understand that, particularly in the new and emerging parts of the emirate that studies are being commissioned to provide recommendations from a financial standpoint. This can lead to similar projects being developed and over-supply of certain properties. Do you, as CBRE , take

into consideration reports prepared by competitors or peers before giving such recommendations to clients?

Markets continue to be fluid and demand drivers are also constantly changing – for instance areas such as downtown Jebel ali were previously considered industrial but with the announcement of Dubai Parks & Resorts the focus has started to change to residential and mid-scale hotel and hospitality to leverage off this new demand driver. CBRE has a strong research and consulting team that is responsible not only for providing advice to clients around how to maximize the value (whilst mitigating the risk) of any future proposed development but also for monitoring and tracking the market. The reports and recommendations provided to our clients, much the same as our competitors are done so on a confidential basis and as such it is unusual to have access or to wish to rely on these.

Market overviews, perceptions and projections provided across the industry range with many of the components being a professional, yet subjective view on the data held and as such whilst from a market information standpoint it is always interesting to read these reports, most of which are often very informative but CBRE does wherever possible rely on its primary data as well as verified market transactions to assist informing any recommendations. Market relationships with developers, funders and investors are also key to gauge market sentiment and understand what the future landscape could look like.

Q3 — We regularly hear comment that valuers are pessimistic and valuation numbers do not reflect

prices being offered in the market – what are your views on this?

as highlighted earlier, the valuation mechanics rely on the assessment and adjustment of market variables to reflect the characteristics of the subject property being valued to the comparable provided – ie, is the location as good, is the tenant covenant as strong, is the lease term as long, is the building as well maintained etc.… These adjustments are subjective and differing valuers may attribute slightly different adjustments to these. I do not agree that valuers are all pessimistic – often the valuation reports are requested to support a purchase or a finance and when the value provided does not accord with the clients perception there is the feeling the valuer is too negative. asking prices in the market should not be confused with transaction values and often the difference between these results in a lower than “hoped” valuation which does affect the perception of the valuer as being somewhat pessimistic.

Q4 — With more and more global investors looking at the UAE and in particular real estate, how does CBRE change its methodology for the UAE as opposed to say UK or US?

This is an important question, CBRE ensures through both professional qualification (and ongoing professional development) as well as strict compliance measures that the valuations undertaken not only comply with market best practice but also are undertaken in accordance with global standards. The RICS [The Royal Institution of Chartered Surveyors] is the most common industry standard and valuers who are qualified and passed the assessment of

competence undertake valuations in accordance with their guidelines. These guidelines not only set out to ensure a uniform approach to valuation assignments but also that the interests of the client (and valuer) are protected by following the recommendations. CBRE ensures that valuations that would fall within the guidelines of the recommendations of the RICS are undertaken on the same basis whether in the UaE , UK or any other geography (adjusting where required for local market requirements).

The Lands Department has recently announced the plans to regulate valuers, whilst the details of qualification mechanics is expected soon, we see this as a major step in ensuring uniformity of valuation standards which can only be a positive in terms of improving the trust and reputation of the valuation industry in a market where there has been some challenges.

Q5: What questions should a potential client ask his valuer before proceeding?

Experience in similar valuation exercises and with the specific asset classes (hotels or specialist assets may require a different approach to say offices or land)?

• Is the valuer / his firm qualified?

• Is the firm on the panel of the banks (if required for loan security purposes)?

• Is the firm subject to any conflict of interest (a valuer needs to act on an independent way and as such should not provide valuation advice to differing parties around the same asset without consents and disclosures)?

• Does the firm hold professional indemnity insurance? Simon Townsend

Director and Head of Valuation and Consultancywww.cbre.com

Additional comments:

It is worth commenting that there has been a significant improvement in valuation standards in recent times, the RICS and Lands Department have been working together promoting standards in the profession and with the increase in International universities offering post-graduate studies around the real estate sphere within the region the awareness and understanding of the processes and potential pit-falls around valuation amongst market practitioners, lenders and potential clients has greatly increased.


MarkeT characTerisTics

• While abu Dhabi has historically been driven by corporate and MICE visitation, leisure tourism has seen a boost over the past few years supported by the development of leisure demand generators including Saadiyat Island, Yas Waterworld, Yas Mall, and the Du arena. This trend is expected to continue as future demand generators such as the upcoming Cultural District are completed. as a result, the more diversified demand base should be less susceptible to external forces.

• Passenger traffic at abu Dhabi airport was up from approximately 20 million in 2014 to over 23 million in 2015. also, the planned delivery of the Midfield Terminal in 2017 is a sign that the necessary infrastructure to support further tourism growth will be in place as the market develops.

• The declining oil price has had an impact on visitation in the capital, with many hotel operators indicating that there was a softening of corporate demand particularly in terms of oil and government related

ABU DHABIhoTel MarkeT overview

visitation. With oil prices forecast to fall further in 2016, this trend is likely to continue— however this is anticipated to be counter balanced to some degree by increasing leisure demand.

• There is a concerted effort from the abu Dhabi Convention Bureau to increase abu Dhabi’s profile as a MICE destination and aDNEC and the al ain Convention Centre certainly lie at the center of this strategy. That said, the stringent visa process in abu Dhabi – particularly when compared to Dubai – is often challenging for event organizers with delegates of many different nationalities,

figure 1 — key performance indicators, year-on-year change 2015source: sTr global

figure 2 — currency change against the dirham – Top source markets Jan 2016 vs 2015source: xe

which sometimes means that major events have to be relocated away from the capital.

• Of the ten largest source markets to abu Dhabi, six have experienced a weakening currency in relation to the UaE Dirham between January 2015 and January 2016, with relative values declining between four and nine percent. The relative strength of the dollar throughout 2016 will continue to have an impact on abu Dhabi’s key source markets—however conflicting dollar forecasts over the next twelve months mean that how this will play out is as yet uncertain.

The luxury secTor

• The luxury hotel sector in abu Dhabi has undergone rapid transformation since 2011. With a compound annual growth rate of 16 percent in luxury hotel rooms between 2011 and 2015, the market has seen the introduction of several luxury hotel developments including two St. Regis properties, the Sofitel, the Ritz Carlton, the anantara and the Rosewood, which has made the luxury sector a fiercely competitive one. Luxury hotels which do not have clear differentiators are finding themselves in an increasingly precarious position, and the anticipated future supply poses a further risk.

• The delivery of the grand Hyatt, four Seasons, Edition, fairmont, Biltmore and Hard Rock Hotel over the next 24 months, will have direct implications for the future performance of abu Dhabi’s luxury sector—however this will only be

an issue if the projects are delivered on schedule. The hotel supply in abu Dhabi is often delayed, and as such, it is unlikely that the pipeline in its current state will materialise in its entirety as anticipated.

• Unlike midscale hotels, which have ‘room driven’ business models, luxury hotels tend to have more seasonal demand, and rely heavily on ancillary revenue which is primarily driven by f&B spending. for this reason, they are more severely impacted during times of low occupancy as owners lose out not only on potential rooms revenue, but also the associated revenue. This is negated however to some degree by the fact that luxury hotels have the ability to attract walk in demand to their various f&B outlets in a way that midscale hotels do not.

• Opportunities for further hotel development still exist in the capital—however they are not necessarily in the luxury

figure 3 — Typical luxury hotel revenue mixsource: knight frank research

figure 4 — occupancy seasonality – 2 year averagesource: sTr gllobal, knight frank research

segment but rather in the development of midscale hotels and internationally branded serviced apartments. These two asset classes are under represented in the market to date, and may be a safer bet than further iconic flagship developments in the years to come.


oil Price iNsTaBiliTy coNTiNues iNTo 2016

• The Economist Intelligence Unit (EIU) estimates that overall real gDP growth in the UaE slowed to 4.6% in 2014 and is expected to fall further in 2015 to 4.0%(f) and 2.7%(f) in 2016.

• With economic growth expected to slow and UaE inflation expected to fall in 2016 from 4.0%(f) in 2015 to 3.5%(f) in 2016 according to the EIU, the outlook for the UaE remains positive.

• Current Brent Crude oil price at the beginning of January was c. USD$36 a barrel. There are some analysts predicting that average oil prices will stabilise around US$60 between 2016 and 2020.

aBu DhaBi gloBal MarkeT sQuare aND al Maryah islaND

• The aDgM has continued to publish additional regulations which effects the real estate market on al Maryah Island.

• The financial free zone and investment zone for foreigners will benefit from better clarity and regulations for all companies and individuals wishing to invest in real estate on the island. Occupiers and potential occupiers are benefiting from further updates on the structure of the free zone and how companies can operate within the free zone. Dual licensing has been a concern and is to be addressed to allow for Department of Economic Development (DED) and the aDgM licences.

ABU DHABIoffices rePorT

• With c. 150,000 sq m of vacant office space available within the jurisdiction of the aDgM, the law and structure will be imperative for growth of the financial free zone.

MarkeT coMMeNT

• There was a slowdown in enquiries in H2 2015 due to companies reviewing the impact in falling oil prices, the consequential effect on federal spending and the implications on the wider market.

• The main demand for offices was between 100 sq m and 500 sq m, with over 75% of enquiries within this range, seen in fig. 2.

• Engineering & Construction continued to be the most active sector by the number of enquires, which reflects the recent growth in the number of infrastructure and real estate projects under progress. To date, take up was led by Engineering & Construction (21%) and general Trading (20%), seen in fig. 3.

• grade a and prime supply remains subdued, which will be important for landlords to maintain headline rents. There are limited new developments under construction and those under construction could see some further delay in completion. The overall changes in the market rents over H2 2015 was minimal.

• Prime office rents remained steady in H2 2015 at aED 1,850 per sq m, whilst rental values for grade a shell and core office space remained steady at aED 1,250 per sq m, as seen in fig. 4.

figure 1 — abu Dhabi office stock, 2008 - 2016source: knight frank research

figure 2 — size requirements, h2 2015source: knight frank research

figure 3 — Demand by sector, h2 2015source: knight frank research

MarkeT seNTiMeNT

• With regional unrest and global economic headwinds, we are seeing a reduced interest from international companies looking to locate in abu Dhabi.

• Buildings which do not meet occupiers’ exact requirements in terms of specification, parking, and access will face continued voids, as occupiers that do relocate review the market more carefully.

• gDP growth in China fell to a 25-year low of 6.9% in 2015, which may impact on global markets and oil demand, which will have an impact on abu Dhabi in 2016.

• Weaker market sentiment will impact on the government and the delivery of projects and employment, which will reduce occupier take up.

aBu DhaBi real esTaTe law – MarkeT uPDaTe

abu Dhabi recently published its new property law aimed at better regulating the real estate market, which takes effect from January 2016. Part One of the law defines the real estate register, the interim real estate register, the real estate development register, real estate development projects, escrow accounts, off-plan sales, service charges and community charges. The law, in summary:

• authorises abu Dhabi’s Department of Municipal affairs (“the DMa”) to organise and develop the real estate sector in abu Dhabi, to supervise and control all aspects related to the sector and to coordinate with municipalities in this regard.

• Oversees the types of entities or persons that are allowed to obtain a licence to engage in development related activities as master developers and sub-developers, brokers and their employees, owners’ association managers, appraisers and surveyors.

• Ensures developers will not be allowed to engage in real estate development unless they have been registered in the real estate development register.

• Requires that all disposals of off-plan units which be registered in the interim real estate register.

• Ensures a developer is not allowed to sell units off-plan unless it proves that it owns a real estate right over the project land and that it has opened an escrow account for the project.

• allows units sold off-plan to be mortgaged provided that the loan amount is paid into the relevant escrow account and the loan is allocated for payment of the purchase price.

• Owners’ associations will be independent legal entities that hold title to the common parts of developments and will be responsible for the management of those common parts.

• Outlines punishments for anyone who violates its provisions. This will benefit occupiers long term as more developers/landlords will provide competition for occupiers.

figure 1abu Dhabi office stock, 2008 - 2016source: knight frank research


figure 1abu Dhabi office stock, 2008 - 2016source: knight frank research


article extract from al Tamimi & co law firm, 2016 (modified)28 29www.propertywatch.ae

live life aT your PriceNshama at Town Square

Setting a new trend in the property market, Nshama is a private developer of integrated

lifestyle communities that are differentiated by their focus on offering distinct value propositions for aspiring home-owners.

With its name inspired from a traditional arab Bedouin word used to describe bravery, generosity and virtue, Nshama has captivated the market with the launch of its flagship project, Town Square.

Dubai's first of its kind smartly designed, stylish, green neighbourhood by Nshama, the 750-acre (31 million sq ft) Town Square is a vibrant development anchored by a central square, named Town Square Park, the size of 16 football fields, and featuring a range of lifestyle choices including Vida Town Square Dubai hotel and a Reel Cinemas cineplex and open-air cinema.

In addition to a 2.5 million sq ft retail precinct featuring over 600 stores and f&B outlets, Town Square also features day-care facilities, playgrounds, play zones for all ages, swimming pools, fitness centre, athletic spa, interactive water features, skate parks, playgrounds, adventure zones, modern medical facilities and splash parks.

Town Square is located in close proximity to arabian Ranches golf Course, Dubai Polo and Equestrian Club and al Maktoum International airport, near the site for the World Expo 2020. It will feature over 3,000 townhouses and over 18,000 apartments as well as substantial retail, hospitality and commercial space.

With a high land-to-building ratio,

thus opening up more open spaces for a greener community, Town Square is distinguished by an unmatched value proposition. It offers a new model whereby middle income professionals and families who have traditionally been renting out homes can become home-owners.

The ‘live at your price’ value proposition of Town Square has received overwhelming response from investors that is highlighted by the strong sales of its first residential townhouses and apartments.

Nshama has launched several residential projects including Zahra Townhouses and apartments, Hayat Townhouses and Safi apartments – all of which have been well-received by the market for the exceptional price points.

for example, prices for Hayat Townhouses started from a very competitive aED 999,988 for three bedroom homes. The prices for Safi apartments started at aED 349,988 for a studio, aED 499,988 for a one-bedroom, aED 699,988 for a two-bedroom and aED 999,988 for a three-bedroom apartment.

Recently, Nshama also unveiled Jenna, the first residential apartments located right on the Town Square Park. Jenna residents will live next door to a new Vida Town Square Dubai hotel, Reel Cinemas cineplex and open-air cinema, and over 2.5 million sq ft of retail of which over 350 shops and f&B outlets are located around the Town Square Park itself.

fred Durie, Chief Executive Officer of Nshama, observes: “The strong response to homes in Town Square from end-users, particularly the

middle income professionals in the salary range of aED 15,000 to 20,000 per month, highlights that it perfectly addresses the market need for homes that are within reach of a growing number of aspiring home-owners. We are meeting the fundamental need for these professionals and entrepreneurs to shift from a rental model to own homes, and live a lifestyle at their price.”

He added: “Our value proposition is clearly focused on singles, coupes and families who wish to build their future in one of Dubai’s stylish, vibrant and youthful neighbourhoods. all facilities and amenities are designed to be within

walking distance, placing foremost priority on the convenience of families. Town Square homes also offer a great opportunity for young professionals to make a solid investment in Dubai, a true global destination for business and leisure.”

Nshama has achieved significant progress in the construction of its first phase of homes. The grading works for the entire 750-acre (31 million sq ft) development is ongoing with contract awarded to al Naboodah Contracting Co LLC. The first phase deep services work is being undertaken by Binladin Contracting group while UNEC is constructing the first two apartment blocks of Zahra and Safi.

Several other development contracts have been awarded to various contractors and consultants, all of them experts in the field, underlining Nshama’s commitment to project execution as per agreed timelines.

Bringing the expertise of project development professionals from around the world, backed by strong domain knowledge, Nshama is creating elegantly master-planned neighbourhoods that are smart, interconnected, networked, tech-driven and sustainable.

Investing in Nshama enables customers to shift their lifestyle and buy into a new development

approach to Dubai that draws on the Dubai Plan 2021 and support the key theme of establishing the city as a ‘preferred place to live, work and visit.’

Fred DurieChief Executive Officer

www.nshama.ae


office sales

• Office sale rates across major freehold office locations registered a drop of 6% quarter-on-quarter and 13% year-on-year. a combination of increased supply, vacant stock and weak demand has resulted in a sharp drop in sale rates. areas such as Jumeirah Village, arjan, Dubai Motor City and Dubai Sports City which are not primarily established as commercial office destinations have recorded the highest drops in sales rates.

• Jumeirah Lakes Towers and Business Bay, which are relatively popular in terms of small to medium size offices,

office suPPly

• Over 6.0 million sq.ft. of new office space entered the Dubai market in 2015, taking the total office stock to circa 90 million sq.ft.

• approximately 60% of the new supply delivered during 2015 is located in Business Bay, Dubai Design District and Dubai Investment Park areas which

have witnessed a drop in sale enquiries, as end users and investors are adopting a wait and watch strategy in anticipation of further correction in sale rates. The majority of enquiries during the last quarter were from investors seeking income producing space rather than shell and core or vacant space.

• Office transactions in both value and volume terms dropped more than 50% year-on-year, according to data sourced from the Dubai Land Department. During Q4 2015, over 445,000 sq.ft. of office space was transacted at a total value of circa aED0.59 billion as compared to 900,000 sq.ft. of

together added 4.1 million sq.ft. of new office space.

• a total of 1.49 million sq.ft. of strata space entered the market during 2015, representing a considerable drop from previous years. With the addition of several office properties either converted to residential or hospitality use over the past two years and weak demand for strata space, we expect new

Q4 2015office secTor

office space with a total value of aED1.26 billion in Q4 2014.

• The majority of transactions closed during the last quarter were for office units measuring less than 2,000 sq.ft. Of the 300 transactions recorded during the quarter, circa 252 transactions (84%) were for office sizes of less than 2,000 sq.ft. with a total value of aED264 million for small unit sizes, which strongly indicates the investor profile is either for new start-up companies or SME’s. a limited mortgage offering for commercial office space is also impacting transaction volumes despite a rise in new companies in the Emirate.

supply to shrink further over the course of the next two years.

• New office space expected to enter the market during 2016, includes supply from Dubai World Trade Centre district, Onyx towers on Sheikh Zayed Road and strata space from delayed projects in the Business Bay and Dubai Silicon Oasis areas.

DuBaioffice sTock

Q4 2015

office reNTs

• Office rents in the prime CBD area remained stable for three consecutive quarters. a lack of new supply and relatively high occupancy rates helped maintain stable rents. average rents in Downtown Dubai and office towers along Sheikh Zayed road range between aED110-265 per sq.ft. per annum.

• However, secondary locations recorded a sharp drop in rental rates, mainly across new

towers that have been delivered to the market over the past six months. Strata space owners in the Business Bay area who were previously quoting a rate of aED120-130 per sq.ft. per annum during Q2 and Q3 2015 are now offering the same space at rents ranging between aED85-95 per sq.ft. per annum (a decline of 25-30%).

• an increase in supply combined with weaker demand is leading to a drop in rental rates across strata owned developments,

whilst single held assets continue to enjoy high occupancy and rental rates.

• With circa 4.5 million sq.ft. of new office stock scheduled for delivery in 2016, we expect office rents to remain under stress with secondary and tertiary locations likely to see a drop in rents along with increased landlord incentives to entice new tenants and achieve lower void periods.

officereNTs aeD/sQ.fT

Q4 2015

officeaverage salePrices Q4 2015


• Despite a slowdown in sales, the retail sector in the Emirate continues to attract new brands. Several regional and international brands setup base for the first time in Dubai during 2015 resulting in consistently high occupancy rates. Prime retail assets are currently achieving over 95% occupancy rates associated with a long waiting list of retailers looking to expand or set base in Dubai.

• Rents across prime retail centres remained stable during the year whilst a number of secondary retail centers that are struggling to maintain a healthy retail mix witnessed a drop in rents in the

Q4 2015reTail secTor

range of 7-10% year-on-year.

• Dubai’s organised retail stock grew by 8% year-on-year reaching 34.8 million sq.ft. gLa (gross leasable area). The only new retail addition during Q4 2015 was Dragon Mart 2 offering a total gLa of 1.7 million sq.ft. located in the International City master development. The development which lacked a major hypermarket also saw the opening of geant Hypermarket, an anchor tenant of Dragon Mart 2.

• Over the past two years, the retail market has witnessed a rise in community retail concepts

due to a rise in population base across new residential developments. During 2015, several new community retail centres opened in Majan, the Villa, al Waha community and arabian Ranches developments adding circa 280,000 sq.ft. of retail space.

• Retail sales for general goods and services targeted towards local population are likely to outperform as compared to luxury goods. Events such as Dubai Shopping festival, Dubai Summer Surprises and Eid in Dubai will continue to promote sale activity.

PriMe shoPPiNg Mall average reNTsQ4 2015

source: MPM Properties researchNote: The rents quoted above are based rents excluding any turnover provisions and service charges

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hoTel suMMary

• Dubai’s hospitality stock rose by 1.7% from the previous quarter with an addition of 1,709 new hotel rooms and apartments during Q4 2015, taking total hotel room count to circa 97,000 rooms and apartments. all new properties to enter during the quarter are first time entrants to Dubai’s ever burgeoning hospitality market with the inclusion of Versace, St.Regis, Steigenberger and Hilton garden Inn brands.

• around 43% of new supply falls

Q4 2015hoTel secTor

under the four star rating with the opening of three garden Inn brands from Hilton, with properties located in Mina, Muraqabat and Mall of the Emirates accounting for a total of 735 rooms. five star hotel rooms accounted for the other 974 rooms, located within Palazzo Versace. St. Regis and Steigenberger hotels.

• The Dubai’s hospitality market witnessed rebranding of existing properties, including the rebranding of a 212 room Metropolitan Palace hotel to Carlton Palace hotel and

471 room Radisson Royal Tower to Nassima Royal hotel.

• With supply out stripping demand, the hospitality sector continues to record a decline across all key performance indicators. although the number of tourists into the Emirate continues to rise by 8% year-on-year, the rise in room supply is having a negative impact on hotel trading performance. Overall, occupancy levels for the full year 2015 dropped by 3% while aDR’s dropped by 10.2% compared to the same period last year.

PriMe hoTelrooMs suPPly

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Property Price IndicesDuBai resiDeNTial

DuBairesiDeNTial

Price chaNge

DuBairesiDeNTialPrice iNDex

DuBairesiDeNTial

Price iNDex vs.golD Prices vs.

oil Prices

Property Price IndicesaBu DhaBi resiDeNTial

DuBairesiDeNTial

Price chaNge

DuBairesiDeNTialPrice iNDex

uae PriceTo reNT raTios

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DuBai resiDeNTialCHANGE IN SUPPLY

at the end of 2014, the consensus between analysts predicting supply being

handed over in 2015 was between 22,000 to 26,000 units. However, in 2015 a total number of 10,932 units were completed. We opine

that due to exogenous factors such as the strengthening of the dollar and crash of oil prices, the ambitious completion dates of developers has been stunted causing a deficit in incremental supply versus incremental demand in 2015.

This has been due to developers slowing down the rate of handover in response to declining prices, and this trend is expected to continue as markets adjust to lower demand; this implies that concerns of oversupply are exaggerated.

given the low completion rate of approximately 40% by the end of 2015, we opine a deficit of approximately 9,000 units had occurred in 2015 compared to a

projected surplus of 6000 units. If completion rates continue at this pace, demand will continue to outstrip supply causing prices to move higher, especially on account

of a continuing expansionary fiscal policy in the run up to world expo 2020.

exPecTeD vs.realizeD suPPly

iN 2015

suPPly & DeMaND aNalysis

To Buy or NoT To Buy?Investing in your Home

Is that the question or do you need more information? Mortgage rates have generally stayed flat for the

past couple of years with most countries keeping their national lending rates at record lows, apart from america who recently raised theirs and then regretted the rise with a possibility of reducing it again very soon. Mortgages are currently a cheap way to hedge an investment in property whether it be as a home or as a buy to let. In the UaE buyers need a 25% deposit to take out a mortgage, but this doesn't include a few other charges that need to be included in the overall cost of purchase, that said, property is often a good investment in an

individual or a couples diversified investment portfolio with a longer term objective. Lenders across the UaE are now more willing to look at cases on an individual basis when they are presented correctly and with underwriters having discretion rather than a “computer says no” response. It is advisable to get a good, reputable and qualified adviser to do this work for you as there are a lot of mortgage options and it is imperative your objectives are met by your mortgage product.

The opportunity cost of what you can do with this capital is what must be considered rather than placing it all in a property. and again keeping in mind diversification, you could probably buy two or more properties

by using mortgages. With different reports on the property market coming out regularly and varying interpretations it can be almost impossible for a potential buyer who has been sitting on the fence to make an informed decision, do you need any more information? Roots Land Real Estate’s accurate, comprehensive and unbiased quarterly report points to an end to the spiral of property values, it looks like we may have reached the bottom and in some areas there are actual rises. Property, both as a home and as an investment, should be an important segment in your financial plan and not taken

as a separate entity. The mortgage market has changed a lot over the past few years, not just in the UaE but also worldwide. Pre 2007 there wouldn't have been much interest in a movie about mortgage backed securities, however, fast forward to 2016 and it's probably one of the best films out at the moment, a-list celebrities included. Elsewhere, the UK has had its mortgage market and regulations redrawn from top to bottom with its own regulator, the former fSa, being scrapped and split into two with the new fCa and the PRa. The mortgage market itself has had the new stricter rules and regulations of the MMR implemented and likewise financial advice with the RDR. This

has brought in higher minimum qualifications for advisers meaning most of the advisers in the UaE would have a years studying to do before they could even sit down with a client and offer regulated advice or to give mortgage advice in the UK when not qualified to do so is a criminal offence. However even with all these changes there are now mortgages available in the UK with only a 5% deposit for the right person, although I doubt very much we will be watching a blockbuster in 10 years time about the UK mortgage market. The good news here in the UaE is checks are more stringent but also underwriting is understanding to specific circumstances. Cases that I have had approved in the UaE for all the right reasons would have been non runners in the UK and this open minded approach by underwriters is a breath of fresh air. Loan to values have not decreased although this is one mechanism the central bank has in its armoury to give the housing market a boost. The minimum deposit for first purchases seems to be the main stumbling block for most buyers, especially up until now where there was a lack of confidence. If you are still sitting on the fence and wondering whether to buy or not to buy, this could be your opportunity to jump in and grab it with both hands.

Darragh GallagherSenior Associate, Holborn Assets

www.holbornassets.com


DuBai resiDeNTial MarkeTSale Performance Report — Q4 2015

aParTMeNTs

villas

• apartment prices declined, on average, by 1% in Q4 2015, where International City declined slightly faster at 2%.

• During the last 12 months, apartment price declines

• Villa prices have declined by an average of 1% in Q4 2015, slower than the 2% in Q3 2015.

• On average, villa prices have declined by approximately 8% in the last 12 months.

varied significantly across Dubai, dropping an average of 6% with peripheral locations such as Discovery gardens, International City and Motor City declining the most at 9%, 9% and 10% respectively.

Prices at more established villa communities such as The Meadows and Springs declined by 12% and 18% respectively as buyers opted to purchase in the newer and upcoming communities.

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DuBai resiDeNTial MarkeTRent Performance Report

aParTMeNTs

• apartment rents have slightly declined by 1% in Q4 2015 and approximately 3% during 2015 across Dubai.

• The rate of decline varies from one development to another with International City rents declining at a higher rate of 2%, similar to the sale price trend in Q4 2015.

• On average, studio rental rates have increased while one and two bed rents have during Q4 2015.

villas

• Villa rents have followed a similar trend as apartments with an average drop of 1% in Q4 2015 from Q3 2015 and a 3% decline during 2015.

• Rents in prime villa communities such as arabian Ranches, Jumeirah golf Estates and Jumeirah Islands remained relatively stable in Q4 2015 as in Q3 2015.

• Rents of three and five bed villas remained stable, whereas four bed villa rents have declined in Q4 2015.

apartments rental Performance

villas rental Performance


DuBai resiDeNTial MarkeT rePorT

resiDeNTial MarkeT survey

Residential Supply — Q4 2015

2015 coMPleTioNs

PiPeliNe

lookiNg Back — Q4 2015 — sales aND reNTs

• approximately 8,800 additional residential units entered the Dubai market in 2015.

• Over 70% of those are apartments with the remainder

• approximately 7,000 units have been delayed from 2015 to 2016.

• Excluding those, 30,000 units have been scheduled for delivery in 2016, which may be subject to potential delays.

being villas and townhouses

• Major completions in Dubai Sports City, Dubai Silicon Oasis and Dubailand.

• The Dubai government budget for 2016 was increased by 12% to aED 46.1 billion, of which 14% allocated to infrastructure, which shows continued commitment toward the growth of Dubai leading up to 2020.

DuBai resiDeNTial MarkeTSurvey

Q1 2016 sales ouTlook

APARTMENTSPercentage of agents who predicted apartment prices would:

Q1 2016 reNTs ouTlook

APARTMENTSPercentage of agents who predicted apartment prices would:

VILLASPercentage of agents who predicted villa prices would:

VILLASPercentage of agents who predicted villa prices would:


aBu DhaBi resiDeNTialPrice Performance — Q4 2015

aParTMeNTs

• apartment prices have marginally declined by 1% in Q4 2015 across the investment zones covered within our report.

• In the last 12 months, apartment prices have dropped an average of 3%, a slower rate than that in Dubai.

villas

• Villa prices have also slightly declined at a rate of 1% during Q4 2015.

• During a 12 month period, villa prices declined by an average of 4%.

apartments Price Performance

villas Price Performance

aBu DhaBi resiDeNTialRent Performance — Q4 2015

apartments rent Performance

villas rent Performance

aParTMeNTs

villas

• The change in apartment rents varied across different areas as average rents in locations such as al Raha Beach and al Reem Island remained stable in Q4 2015.

• average villa rents have remained stable in both al Raha gardens and al Reef, whilst Saadiyat Beach Villa rents slightly increased by 1% as supply remains limited on the island.

• al ghadeer rents have slightly increased by 1%, where rents in al Reef Downtown and Saadiyat Beach Residences have dropped by approximately 1% and 2% respectively in Q4 2015.

• four and five bedroom villa rents have increased whilst three bedroom villas have decreased.

2015 coMPleTioNs PiPeliNe

• approximately 2,700 units delivered in investment zones during 2015, mainly on al Reem Island and Saadiyat Island.

• 14,600 residential units scheduled to enter the abu Dhabi investment zones from 2016 - 2018.

• Over 60% of that supply is scheduled to be delivered in 2017.

resiDeNTial MarkeT survey


afforDaBle housiNg Addressing Challenges in Dubai

affordable housing is a global challenge set to magnify in coming years – and Dubai is

not exempt from this challenge.

Indeed, over the past decade in Dubai, it is only recently that the market has started to address the issue of affordable housing. To be a truly world-class city, Dubai must serve the real estate needs of all economic sections.

globally, an estimated 330 million households “occupy unsafe and inadequate housing or are financially stretched by housing costs,” according to an October 2014 report by The McKinsey global Institute, “a Blueprint for addressing the global affordable Housing Challenge.” By 2025, the number of households may reach 440 million—or 1.6 billion people.

as a response to the challenge in Dubai, Sun and Sand Developers, a real estate firm that was founded and has operated in the UaE since 2005, has launched SunBeam Homes, a pilot project for affordable homes. It has also developed a case study “affordable Housing, addressing the Challenges in Dubai” setting out the difficulties and exploring possible solutions. The firm is also uniquely placed to draw on the experiences of its sister company in India, which for more than 30 years has built affordable housing there.

“Our pilot project is really a way for us to showcase our vision for affordable homes and demonstrate how they can be delivered at lower costs than standard homes,” says Sailesh Israni, Managing Director of Sun and Sand Developers. “This is also a way for us to test the market appetite for a project at a much bigger scale.”

a lack of affordable housing has a detrimental impact on a city’s residents. People may have to live in housing far from their places of work; expat workers may be unable to bring their families to Dubai to live with them; families may be forced to share accommodation with others, depriving them of privacy and destabilising the atmosphere in the home.

It’s important to define what is meant by affordable housing. first, there are a number of parameters relating to quality. affordable housing should be structurally stable and use good quality materials; it must have light and ventilation; offers privacy despite being compact; has adequate internal amenities (such as sanitary fixtures, doors and windows); sufficient car park space; and has lower running costs than standard housing.

There are also financial parameters, which follow certain rules of thumb. for buyers, the property value must not be more than five times the annual salary and the EMI – or the Equated Monthly Instalment to pay off a loan over time and must not exceed 30 to 40 per cent of a monthly salary. Similarly, for those renting, monthly rent must not exceed 30 to 40 per cent of a monthly salary.

Under these criteria, an affordable one-bedroom property with a hall and kitchen should be available for those earning aED 6,000 - 8000 per month.

There are a certain number of challenges associated with providing affordable housing, and overall success depends on the effective contribution of four groups: the government/master developer, the

developer, financial institutions and customers themselves.

The first challenge is land. The land for developing affordable housing must have infrastructure – roads, water, and power in place. It must be accessible to the place of work and schools, with a commuting time of less than 30 minutes. Public transport must be available nearby and land should not exceed 25 per cent of total construction costs.

The second challenge is final sale price. The developer must use value engineering and design to control construction costs without compromising on quality.

for the end user, special financing must be available which may include low-interest mortgages and no early repayment fees or charges.

To keep prices low over the long term, procedures should be put

Mr. Sailesh IsraniSun and Sand Developers

www.sasdgroup.com

in place to stop practices such as flipping (reselling the property immediately after buying for profit).If the four groups support each other, the cost of a standard apartment can fall as much as 36 per cent. This means families can save between aED 2,000 to aED 2,500 per month on housing.

Compared with a standard apartment, calculations made by Sun and Sand Developers shows there can be a saving of 50 per cent in land costs, a saving of 38.5 per cent in construction costs, a 31 per cent saving in overheads and a 23 per cent saving in the developer’s margin.

Despite lower margins for developers, building affordable housing represents a sizeable and much overlooked business opportunity.

Because demand for such housing is

high, lower prices attract high sales. Developers can increase production and achieve economies of scale.

Work on the pilot project, which is located in Dubai Industrial City (DIC), is scheduled to start in early 2016. The location was chosen because of its proximity to the Expo 2020 site, DWC airport and a new metro line – and because of the demand for affordable housing that evidently exists in DIC. The site is home to more than 150 companies and Sun and Sand research shows that many employees currently commute across the city to reach their place of work.

The complex will consist of four buildings with 32 apartments in total: 24 one bedroom flats and eight two bedroom flats. In addition to a hall and kitchen, every home will have two toilets and a terrace or balcony. There will be ample car parking, landscaping and designed

lobbies. Rent for the one bedroom flats will be aED 29,000 annually; rent for the two bedroom flats will be aED 39,000 annually. These homes will not be for sale at the moment because approvals are still pending, once they have completed the formalities the asking prices would be aED 325,000 (one bedroom) and aED 459,000 (two bedroom).

“I truly hope our pilot scheme is a small step towards many such projects flourishing in Dubai,” Mr Israni says.


real esTaTe regisTerCancellation of Unit Registration

In the light of the development witnessed by the Emirate of Dubai, and with the increasing activity of

purchasing and selling, I take this opportunity to quickly comment on one of the problems that has been practiced and discussed frequently. This problem cannot be ignored and that is of course the cancellation of unit Registries from the initial Land Record which used to be registered by the name of investor (purchaser) in the initial record

as understood by all, the law of the Emirate of Dubai has compelled the developer to register the real estate units in the initial record in the name of its owner for insuring their rights in case the sold property wasn’t ready for hand over. It obliged the developer to assure its handover on the due time and agreed upon time and the investor shall pay the installments as per the mutual agreed schedule between them.

These situations are when the investor (purchaser) delays the payment of the due installments within the scheduled dates.

In these instances the legislative authority of the Emirate of Dubai has responded by addressing this issue, in the light of which, the Executive Board's decision No. 6, 2010 is issued, this approves the adoption of the executive orders as per the law No. 13, 2008 concerning the initial property registry in the Emirate of Dubai which stipulates in its articles especially article 15, the necessary procedures to be followed by the developer with Land registration authority before

attaining the order for canceling the name of the investor from the initial record.

The decision was made in response of the real estate development which is witnessed by the Emirate of Dubai in order to meet the legal requirements of the work in this regard. The concerned authorities in the Emirate of Dubai have issued the real estate laws which must be applied to all disputes and legal real estate cases as established by Dubai Courts of cassation.

Such laws fixed, organised and described the obligation add the rights of both the developer and the investor. Such law fixed also the procedures to be followed and the penalties arising in case of any breach from the side of either party. also the competent authorities should apply the same as well as the entities to issue decisions based on such law.

In other words, lands and owners department should notify the investor to comply with the payment and then issue its decision to cancel the registration of the unit in his name due to his failure to pay, its decision should be applicable.

In accordance to the provision of article 15 of law No. 13 of 2008 (resolution of the executive council No. 6 of 2010 to approve the executive regulation thereof).

The said article explains the steps to be followed in case of failure by the investor starting from the notification till the penalties

imposed on such failure.

Regarding article 17 of the same law, it explained that for the purpose of applying article 15 if such decision the following 1-2 should be observed:

In other words the above said law fixed (1) the steps and 2) the penalties and (3) application techniques and 4) the competent entities to issue the decisions.

Thus, the resolutions issued by the Land and Property Department to cancel the restriction of a real estate unit due to the investor's non compliance to pay are resolutions issued by an authorised and competent administrative body, therefore, these resolutions shall not be neglected nor derogated by conferring a title of (recommendation or proposal) on them, while some provisions had applied this trend and cancelled some of the resolutions issued by the Land and Property Department which had already been issued to cancel a unit restriction in a name of an investor.

The importance of this problem requires to rethink again of the legal power that must be conferred on these decisions in order to be final decisions that grant the developer the right of selling the unit again after receiving the cancellation decision, and compel the investor to show no leniency in abiding by installments or payments agreed upon, leading to the ongoing stability of the transactions in this regard.

Mohamed Raaed GhafeerLegal Advisor

www.alzahmyadvocates.com


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MulTi-coMPoNeNT owNers associaTioNsKey Challenges in Management of Shared Areas

With the complexity and interdependence of the various components

of mixed-use community, the challenges and the potential risks are increased over those associated with the typical single-use project.

Mixed-use projects are characterized by three or more different types of uses – typically retail, office, and residential, and sometimes including hotel or entertainment – all integrated by means of a master plan.

The challenge in creating a successful, smoothly running mixed-use community of divergent residential and commercial interests lies in how “sharing” is handled. Preparing the legal documentation for and administering a mixed-use community is largely an exercise in determining how to share and, more importantly, how to avoid sharing.

What is shared in a mixed-use community? Places such as driveways, corridors, plant rooms; things such as utilities, parking, governance; and costs associated with the shared areas, such as insurance, maintenance, utility and administration costs, are all shared to some extent in a mixed-use community.

In general the commercial owner, investor or lender wants to be able to see the edges of its asset. It wants the asset discreet and definable so that it can be readily appraised, financed and controlled. It can be confounding for the commercial interest holder to share with residential owners, especially when all uses are placed within the same owners association. Typically, the more the components of the commercial asset are shared with residential owners, the greater the challenge to commercial interest

holders to achieve and maintain predictability and control.

The general thesis is, then, that the benefits of a mixed-use community can be maximized by minimizing sharing.

goverNeNce ofMixeD-use ProJecTs

The most critical governance issue in a mixed- use project is the balancing of control between the various unit owners. Here the term “control” has multiple meanings – decision-making over design elements and fit-out; financial administration; maintenance, repair and replacement of the common area components; actual control of the property owners association(s); and dispute resolution mechanisms. The Jointly-Owned Property Declaration (JOPD) and its related documents like Building Management Statement (BMS) must must define community standards and control measures so that the various parties can coexist within the same structure, not compete in the administration of the project’s operation, and resolve their disputes through a effective dispute resolution process.

The JOPD and BMS provide the vision and general framework for the regulation of the mixed-use community, together with standards and procedures for the management, operation and maintenance of the project.

shareD faciliTiescosT allocaTioN

Mixed use projects present challenges in the allocation of maintenance costs for common areas and shared facilities. Maintenance of improvements

owned and used exclusively by one property owner should be the sole responsibility for that owner, even where the improvements are actually located on other property.

For shared facilities, cost allocations based upon usage or benefits is the most common.

Problems arise when either a key tenant or owner negotiates an exemption or discount from the normal cost allocation arrangement. This forces the remaining owners to bear an over-allocation of maintenance costs for those facilities. Proper cost allocation depends on many factors, including design, configuration, location, ownership, infrastructure, utilities, and specific characteristics of the project such as the type of use, intensity of use and potential disproportionate impacts of one or more segment of users over another. although allocation based on square footages is convenient, oftentimes in mixed-use developments this type of cost allocation leads to unfair results since usage infrequently correlates well with floor areas. a more equitable allocation is based on the intensity of the anticipated or known use by the different user groups within the project.

Allocating the costs of operating and maintaining the common areas of a mixed-use project in a fair and equitable manner can be challenging.

1. Costs of maintaining common area that exclusively benefits one user should be allocated completely to that user even if located on other property.

2. Costs of common area that is shared but not equally are more difficult to allocate – for example, loading and trash

areas where a simple floor area fraction often will not work. Several methods of expense allocation include the following: (a) allocation based on common interest percentages (the simplest formulation). (b) Delegation to the Master Owners association of the responsibility to allocate expenses reasonably and fairly. (c) Installation of submeters or other check devices for the utilities and other services provided to the project component, with expenses then allocated based on meter readings. (d) allocation of expenses based on anticipated usage.

MaNageMeNT ofshareD areas

In many cases Oa managers use ‘cross easements’ approach to manage mixed-use communities. However, it may be possible to avoid using cross easements if the residences and commercial spaces are located on separate legal parcels or separate plots.

The benefit of using cross easements is that they create stable and predictable relationships that are not susceptible to change.

On the other hand, cross easements are less beneficial when the residences and commercial spaces, though on separate parcels, share lots of things and areas; Secondly, cross easements tend to be inflexible, perhaps a little too stable and predictable. They don't evolve well as a community evolves; they can't respond readily to new and unanticipated issues that a community encounters after the easement was drafted and recorded.

In cases where the commercial and residential components are in a single building or otherwise cannot be feasibly subdivided into separate parcels, then the community managers may need to look to the option of establishing separate owners associations for every component, leaving the shared areas within master association.

This enables the residential and commercial interest holders to control their own respective affairs.

The objective is to minimize the master association's obligations and interests while maximizing the ability of each element of the mixed-use community to exist without interference from the other.

In some simple mixed-use communities, multiple associations may not be necessary. The classic example is a large residential building with a coffee shop or a flower shop, and/or multiple shops

owned by one owner. In this case the retail component lacks the critical mass to sustain its own association, and therefore the usual approach is to place everyone in a single owners association, but create different classes of membership for the residential owners and the retail owners. This approach also involves delegating as much authority as possible to each class to run its own affairs, except as to elements that must be shared.

It's therefore important for the mixed-use owners association with help of community managers to strategize how to manage sharing within their communities.

This article is published for general information, not to provide specific legal advice. The application of any matter discussed in this article to anyone's particular situation requires knowledge and analysis of the specific facts involved.

Alexander KarabetManaging Director

Mansions Owners Association Managementwww.mansions.ae


City Life al-Khor, ajman has been envisioned as the new dynamic retail area. It is planned to be the ultimate destination for family outings with venues for Retail, Entertainment and f&B Outlets. The City Life, a shopper’s paradise in the heart of ajman. Located next to the ajman free Zone, in al Rashidiya, it overlooks the Creek and the Marina.

The Mall will offer approximately 125,000 sq.ft. of retail space for rent. Our aim is to provide value and diversity to the Mall for the people of ajman to enjoy. Thus we invite quality brands to contact us and book their shop in this promising venue.

ajman Emirate entered a strong development and prosperous phase with many projects, including malls, which will offer services and various activities of high standard and quality to families estate.

Roots Land Real Estate was appointed by al Khaleejiah Holding as the exclusive leasing company and is currently negotiating with many brands to create a good mix of tenants for the Mall.

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Prime VillasSports City

Prime Villas, a secured gated community comprising of 31 units which are segregated

into 19 five bedrooms and 12 four bedrooms villas & semi-detached villas.

The community overlooks the lush green and beautiful Els golf Club. It is located next to the only mosque in Dubai Sports City’s vicinity.

Residents can enjoy the facilities provided in the community centre like swimming pool, latest fully equipped gym, sauna, bbq area, a small party hall and its own

jogging track and garden facility too. The floor plans are designed with spacious living areas for its residents.

Dining area is well connected with open kitchen equipped with Bosch appliances along with Hacker’s Cabinetry and safety alarm system for gas leakage and maid’s room.

Each bedroom is decorated with sleek furnishings and modern decor and will host a balcony.

Entrance foyer is decorated with high finishing marble along with a

storage area. all villas are tastefully decorated with Pergola along with the block tiles at their entrances.

Book your villa By PayiNg oNly 15% Now!

• Expected Completion 1st Quarter 2016

• 25% linked to construction and 60% on handover

• Sizes range from 3602 sq.ft. to 4613 sq.ft.

M +971 50 400 1066 E [email protected]

liviNg legeNDs — DuBailaND

500 modern villas providing international standards in the designs. The villas are elevated on gentle slopes to give the best views-contemporary arabian themes.

• Completion Date December 2016• Starting Price aED 739/Sq.ft• average Sizet 2300 sq.ft.

villa laNTaNa — al Barsha souTh

MuDoN villas — DuBailaND

freehold villa project with a mix of 3 to 5 bedroom. Contemporary and minimalist designed homes.

• Completion Date Phase1 Mar- Phase2 aug 2016• Starting Price aED 1073/Sq.ft• average Size 2592 sq.ft.

Mudon offers both ready and off plan units ranging from 3 to 5 bedrooms. The villas and townhouses offer perfect layouts and high quality finishing.

• Completion Date Ready, Underconstruction• Starting Price aED 756/Sq.ft• average Size 1984 sq.ft.

rukaN villas — DuBailaND

Rukan villas, an enriching community and environment with arabian culture in the modern context providing an aroma of oriental luxury to its villas.

• Completion Date april 2018• Starting Price aED 830/Sq.ft• average Size 2222 sq.ft.

www.rootsland.com ORN

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More DuBai villasFor Sale

foR SALE — DiRECt fRoM DEVELoPER — SHow ViLLA READy

nO cOMMiSSiOn — diREcT FROM dEvElOPERcAll FOR APPOinTMEnTS


Marina towersAnkara, turkey

Project under constructionHigh class finishingfull Lake view flexible payment plan for 18 or 24 monthsupto 8% cash discountStarting Price AED 574 /sqft


Sinpas Palasistanbul, turkey

Phase 1 to be completed by December 20172500 Residential and 40 Commercial units

Across the new international financial Centerflexible payment plan for 18 or 24 months

upto 11% cash discountStarting Price AED 1114 /sqft

PROjEcTS in TuRkEY PRESEnTEd BY ROOTS lAnd

APARTMEnTS FOR SAlE

BOOk YOuRuniT nOw!

Mix of 1, 2 & 3 bedroom apartmentsAttractive payment plan — Starting price AEd 925 /sqft

OnlY FEw uniTS lEFT FOR SAlEconstruction started, come and visit us in the show apartment!


BELgRAViA Jumeirah Village Circle, Dubai

Real Estate news, Market Reports, Research,Projects, Finance, legal & Events information.

T +971 56 464 7806 E [email protected]

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aParTMeNTs coMMercial villas

FOR INQUIRIES

T +971 4 329 8333 / E [email protected] / W www.rootsland.com

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Documents

PROPERTY WATCH · 2016. 3. 9. · DuBai & aBu DhaBi ProPerTy Prices MacroecoNoMic overview caNcellaTioN of uNiT regisTraTioN DuBai real esTaTe PreDicTioNs 2016 by Holborn by Roots