Cavendish Maxwell_Abu Dhabi Residential Market Report_Q1 2016

Abu Dhabi Residential
Market Report
Q12016

© Cavendish Maxwell 2015 | www.cavendishmaxwell.com © Cavendish Maxwell 2015 | www.cavendishmaxwell.com 32
Dubai Residential Market Report - Q3 2015
• Abu Dhabi residential market highlights
• Macro-economic factors
• Sale price performance
• Rent performance
• Residential supply
Content

Abu Dhabi Residential Market Report - Q1 2016
2016 Pipeline
2,400 additional units
Abu Dhabi residential market highlights
UAE real estate market SWOT
Q4 2015 - Q1 2016
-1% -2%
Q1 2015 - Q1 2016
-4% -4%
“Annual inflation rate declined to 5.4% at the
end of 2015 after it had reached its highest level
of 6.1% in August 2015.”
“Announced petrol and diesel prices for April
2016 have increased by an average of 11% from
the previous month.”
• The Abu Dhabi Consumer Price Index (CPI) and annual inflation rate
have gradually decreased partially due to a decline in petrol prices.
• Moody’s rating agency, estimates that the Abu Dhabi GDP will
grow by 3.2% in 2016 due to the lower oil prices, whilst the emirate
continues to reduce the oil sector contribution to GDP.
• In an effort to improve competitiveness, transparency and encourage
further investment into the real estate market, the Abu Dhabi
government has implemented Law No. (3) of 2015 as of January 2016.
• The UAE and GCC nations are strategically preparing for a post-oil
future, with the most recent announcement of introducing a value
added tax (VAT) by up to 5% in 2018.
• Whilst, OPEC crude oil prices continued to decline reaching the
lowest price of 22.48 USD/barrel in mid January 2016, prices began
to rebound towards the end of January and continued on this upward
trend reaching an average of 34.33 USD/barrel at the end of March
2016.
• On April 17, 2016 representatives from OPEC and non-OPEC
producing nations are set to meet in Qatar to discuss the possibility
of a production freeze agreement. Whilst news of this forthcoming
meeting may have had a stabilising effect on recent crude oil prices, it
is thought this may be short lived unless an agreement is reached and
implemented to alter production.
Macro-economic factors
140
135
130
125
120
115
110
105
2.4
2.2
2
1.8
1.6
1.4
1.2
1
6%
5%
4%
3%
2%
1%
0%
Annual inflation rate
Unleaded Petrol 98 Unleaded Petrol 95
Unleaded Petrol 91 DieselCPI
2014
Jan
162015
Feb
16
Mar
16
Apr
162011
Oct
152010
Sep
152009
Aug
152012
Nov
152013
Dec
15
CPI
AED/litre
Annualinflationrate
Source: Abu Dhabi Statistics Centre Source: UAE Ministry of Energy
Figure 1 Figure 2
Average price movement Residential supply
(investment zones)
Abu Dhabi CPI and annual inflation rate UAE petrol prices
Unit types
80%
apartments
20%
villas
(may be subject to delays)
Strengths
• Hydrocarbon reserves
• Low government borrowing
• Regional ‘safe haven’
• Tourism
• Cosmopolitan cities
• Transparency (regionally)
Opportunities
• Improving legislation
• Iranian sanctions easing
• Theme parks in Dubai and museums in Abu Dhabi
• Improving transportation network
• Expo 2020
• Real estate PPP law
Weaknesses
• Oil price declines
• Water availability
• Dollar strength
• Ruble decline
• High household debt
• Transparency (globally)
Threats
• Regional political instability
• Increasing interest rates
• Introduction of VAT
• Affordability
• Global economy/Chinese slowdown
• Liquidity/credit availability

1,800
1,600
1,400
1,200
1,000
800
600
400
200
0
1,800
1,600
1,400
1,200
1,000
800
600
400
200
0
0%
-1%
-2%
-3%
-4%
-5%
-6%
0%
-1%
-2%
-3%
-4%
-5%
-6%
AlRahaBeach
AlReefVillas
AlReefDowntown
SaadiyatBeachVillas
AlReem
Island
SaadiyatBeachResidences
AlGhadeer
AlRahaGardens
AveragepriceAED/sqft
AveragepriceAED/sqft
%change
%change
Apartment price performance Villa price performance
-1% -1% -1% -1% -1%
• Prices in the Abu Dhabi market have remained relatively resilient to
price declines due to the limited increase in residential supply within
the investment zones.
• Further supply scheduled for delivery in 2016 in Al Reem Island may
place slight pressure on prices of apartments.
• Villa prices declined slightly at 1% in both Al Reef and Saadiyat Beach
villas, similar to the rate of decline in Q4 2015, whilst the rate of
decline in Al Raha Gardens increased to 2% in Q1 2016.
• The current prices in Al Raha Gardens and Al Reef may represent
attractive opportunities for investors as gross investment yields range
between 6% and 7%.
• There is still a wide gap between the strong demand for high quality
villas and the existing supply, keeping the price declines at a much
lower rate than in Dubai.
Apartments:
“Marginal decline of 1% in apartment
prices during Q1 2016.”
Sale price performance
Figure 3 Figure 4
Source: Property Monitor Index Source: Property Monitor Index
Villas:
“Villa prices declined between 1% and 2%”
Q4 2015 Q1 2016
QoQ % change Q4 2015 - Q1 2016 12 Month % change Q1 2015 - Q1 2016
Q4 2015 Q1 2016
QoQ % change Q4 2015 - Q1 2016 12 Month % change Q1 2015 - Q1 2016
-4%
-5%-5% -5%
-3% -3%
-4% -4%
-2%
-1% -1%

• Rents in Abu Dhabi declined in Q1 2016 from Q4 2015 as the rental
market catches up with the sale market trend.
• Studio apartment rents dropped by 1% in Al Ghadeer, and 2% in Al
Reef Downtown and Al Reem Island.
• One bed apartment rents declined by 1% in Al Ghadeer, Al Raha
Beach and Al Reem Island, and 2% in Al Reef Downtown and Saadiyat
Beach Residences.
• Two bed apartment rents declined by 1% in Al Ghadeer, Al Raha
Beach, Al Reef Downtown and Al Reem island, and 2% in Saadiyat
Beach Residences.
• Al Ghadeer rents are considerably lower than other investment
zone apartment locations within Abu Dhabi as the community is
on the outskirts of the emirate but has been popular with residents
commuting to Dubai for work.
• As rents in Dubai continue to decline, the demand from commuters
is likely to shift from Al Ghadeer to communities within Dubai, which
may offer competitive rents.
• Saadiyat Beach Residences and Al Raha Beach rents are considerably
higher as they offer better quality units.
Apartments
“Apartment rents declined between 1% and 2% in Q1 2016.”
Figure 5 Figure 6
Rent performance
• Villa rents in Al Raha Gardens and Al Reef have declined by 2% for
three, four and five bedroom villas in Q1 2016 from Q4 2015.
• Saadiyat Island villa rents have remained the most resilient as the
supply remains limited on the island with average drops of 1% in both
the four and five bed units.
• Villa rents on Saadiyat Island remain the highest in the Abu Dhabi
investment zones with average rents of AED 430,000 per annum for a
four bedroom villa.
• Whilst the anticipated completion of Hidd Saadiyat villas in Q3 2016
is likely to place slight pressure on villa prices and rents on the island,
the strong demand for high quality villas is likely to prevent drastic
declines for these unit types.
Villas
“Villa rents have declined by an average of 2% in Q1 2016.”
Apartment rents - Q1 2016 Villa rents - Q1 2016
Al Ghadeer Al Raha Beach Al Raha GardensAl Reef Downtown Al Reem Island Al Reef VillasSaadiyat Beach Residences Saadiyat Beach Villas
180,000
160,000
140,000
120,000
100,000
80,000
60,000
40,000
20,000
-
600,000
500,000
400,000
300,000
200,000
100,000
-
3%
2%
1%
0%
-1%
-2%
-3%
3%
2%
1%
0%
-1%
-2%
-3%
AEDperannum
AEDperannum
%change
%change
Studio 1 bed 2 bed QoQ % change Q4 2015 - Q1 2016 3 bed 4 bed 5 bed QoQ % change Q4 2015 - Q1 2016
-1%
-2%
-1%
-2%-2%-2%
-1%-1%
-2%
-1%
-2%-2% -2%
-1%
-2%
-1%
-2%
-1% -1%-1%
-2%
Source: Property Monitor Index Source: Property Monitor Index

Abu Dhabi investment zones residential supply 2015 - 2018
• The majority of the pipeline supply is scheduled for delivery in Al
Reem Island, adding approximately 1,500 apartments.
• Approximately 70% of the 2016 pipeline supply is set to be
completed in Q2 2016.
• 80% of the total supply are apartments and 20% are villas.
• The largest introduction of residential supply is anticipated in 2017
with approximately 8,700 units. These projects may be subject to
delays as developers keep a close eye on the market movement and
conditions.
• Anticipated completions in 2016 include Hidd Al Saadiyat villas on
Saadiyat Island adding approximately 414 villas and The Leaf Tower
adding 400 apartments on Al Maryah Island.
Pipeline Supply
“2,400 additional units expected to be delivered in the investment zones during 2016.”
Figure 7
2015 2016 2017 2018
10,000
8,000
6,000
4,000
2,000
-
255
250
245
240
235
230
225
220
Additionalunits
Cumulativesupply(‘000)
Cumulative supply Pipeline supply
Source: Cavendish Maxwell research
Delivered

Miles Phillips BSc (Hons) MRICS ACIArb
Partner
Head of Operations - UAE
M: +971 56 604 2750
E: miles.phillips@cavendishmaxwell.com
Amit Shukla
Senior Associate
Development Advisory and Real Estate Research
M: +971 56 360 3540
E: amit.shukla@cavendishmaxwell.com
Sofia Underabi BPropEc AAPI
Partner
Head of Residential Valuation
M: +971 50 435 6527
E: sofia.underabi@cavendishmaxwell.com
Dima Isshak BSc
Research Manager
M: +971 50 482 7938
E: dima.isshak@cavendishmaxwell.com
PROPERTY SERVICES
MIDDLE EAST & AFRICA
Jay Grant MSc IRRV (Hons)
Managing Partner
M: +971 50 192 1658
E: jay.grant@cavendishmaxwell.com
T: +971 (0) 4 453 9525 E: info@cavendishmaxwell.com
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