Q3 2018
Abu Dhabi Market Report
FOREWORD Cavendish Maxwell is a highly respected, independent firm of chartered surveyors and property consultants, focusing on property services throughout the Middle East and Africa. Established in 2008, Cavendish Maxwell is now one of the regions most influential property consultancies. We provide comprehensive and detailed reports prepared to internationally accepted standards that meet a diverse range of client requirements. As a fully qualified member firm of the Royal Institution of Chartered Surveyors (RICS), with extensive knowledge of the region, we have the necessary experience, expertise and insight to deliver property advice of the highest standard. Our experience covers property, land and business asset valuations; investment; disposals and acquisitions; rent reviews; lease renewals; development appraisals; advisory services; market research; feasibility studies; education advisory and valuation; project management; building consultancy and data analytics. The Cavendish Maxwell and Property Monitor Quarterly Residential Market Report for Abu Dhabi provides analysis and summary of the apartment and villa/townhouse properties in freehold communities. Price movement, rent and yield and upcoming supply of residential properties is provided through Property Monitor, a real estate data analytics and intelligence platform powered by Cavendish Maxwell.
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Q3 2018
Abu Dhabi Market Report
CONTENTS 4
Price Performance
5
Rent Performance
6
Q4 2018 - Q1 2019 Upcoming Supply
8
Sector Focus – Building Consultancy
10 Methodology
Š Property Monitor 2018 | propertymonitor.ae
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Q3 2018
Abu Dhabi Market Report
PRICE
PERFORMANCE
Pace of decline in prices in Abu Dhabi investment zones has slowed over the third quarter
Residential property sales have remained sluggish since the start of 2018, with a noticeable decline in interest from investors for larger premium properties. Investors are being more cautious and waiting for stability to return to the market before making any decisions regarding property purchases. Meanwhile, off-plan transactions continued to dominate market activity, which remains subdued overall. According to the Property Monitor Index, apartment sales prices in investment zones have declined by 2.7% on average over the last 12 months, whereas prices declined marginally by 1.7% over the quarter. Villa/townhouse sales prices also followed a similar trend, with quarterly and annual declines on average of 2.8% and 4.2%, respectively. Al Reef villas registered the highest decline of 3.7% over the quarter. Meanwhile, developers have been launching projects in the middle-income segment since the end of 2017, for instance Pixel Towers in Al Reem Island was launched by Imkan in Q4 2017 with studios starting as low as AED 560,000. Among more recent launches was the Al Ghadeer Phase II by Aldar with studios starting as low as AED 350,000 and two bedroom villa/townhouse prices starting at AED 1 million. Apartment Price Performance
1,370
-2.1 -2.6
Al Reem Island
884
-1.4 -2.1
Al Reef Downtown
1,212
-1.2
-2.4
Al Ghadeer
804
-0.8
0
QoQ% change Q2 2018 - Q3 2018
Average price AED per sq ft
% change
0
-0.5%
1,540
-3.2
Al Raha Beach
-1.0%
-2.8
-1.5%
-3.3
-2.0%
-3.0%
-2.5%
-3.5%
-4.0%
-4.5% Saadiyat Beach Residences
12 month % change Q3 2017 - Q3 2018
200
400
600
800
1,000 1,200 1,400 1,600 1,800
Source: Property Monitor
Q3 2018
Villa/Townhouse Price Performance
916
-1.6
682
-3.7
-4.4
1,583
-3.0 0
QoQ% change Q2 2018 - Q3 2018
4
12 month % change Q3 2017 - Q3 2018
Q3 2018
200
400
600
800
Average price AED per sq ft
% change
0
-0.5%
-1.0%
-1.5%
Saadiyat Beach Villas
-2.0%
-5.1
-2.5%
-3.2
-3.0%
Al Reef Villas
-3.5%
-4.0%
-4.5%
-5.0%
-5.5% Al Raha Gardens
1,000 1,200 1,400 1,600 1,800
Source: Property Monitor
Š Cavendish Maxwell 2018 | cavendishmaxwell.com
Q3 2018
Abu Dhabi Market Report
RENT
PERFORMANCE
Apartment and villa/townhouse rents have continued to decline in Q3 2018, albeit at a slower pace than 2017.
According to the Property Monitor Index, residential rents in Abu Dhabi investment zones have registered a 12 month decline of 5.6% on average, where apartment rents in Al Reem Island and villa/townhouse rents in Al Raha Gardens and Saadiyat Beach declined by more than 6%. One bedroom apartments on Al Reem Island can now be rented at AED 84,000 on average, with rents for this unit type declining by 6.2% over the last 12 months. Similarly, three bedroom villa/townhouse in Al Raha Garden are being rented for AED 150,000 on average, with declines of over 6.2%. Meanwhile, tenants continue to be spoilt for choice and are migrating to communities and buildings with superior facilities, thus putting further pressure on older stock. Apartment Rent Performance
AED 32,340
-4.8
AED 47,545 AED 61,694
-5.6
Al Reef Downtown
AED 84,475 AED 126,495
AED 43,680
-5.1
Al Reem Island
AED 85,935 AED 89,390
AED 58,538
-5.8
AED 84,150 AED 104,980
Saadiyat Beach Residences
-4.7
AED 107,500 AED 171,990
200,000
180,000
160,000
140,000
120,000
100,000
80,000
60,000
2 BR Rent
40,000
1 BR Rent
20,000
0
Studio Rent
Average rent AED per annum
Al Raha Beach % change
-0.0
-1.0
-2.0
-3.0
-4.0
-5.0
-6.0
-7.0 Al Ghadeer
Source: Property Monitor
12 month % change Q3 2017 - Q3 2018
Villa/Townhouse Rent Performance
-0.0
-1.0
-2.0
-3.0
-4.0
-5.0
-6.0
-7.0
AED 151,470
Al Raha Gardens -6.7
Average rent AED per annum
AED 183,820 AED 220,711
% change
AED 123,139
-5.1
Al Reef
AED 141,750 AED 147,730
AED 348,000
Saadiyat Beach Villas
-6.4
AED 377,848 AED 424,350
500,000
450,000
400,000
350,000
300,000
250,000
200,000
Š Property Monitor 2018 | propertymonitor.ae
12 month % change Q3 2017 - Q3 2018
150,000
5 BR Rent
100,000
4 BR Rent
50,000
0
3 BR Rent
Source: Property Monitor
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Q3 2018
Abu Dhabi Market Report
Q4 2018 - Q1 2019
UPCOMING SUPPLY An estimated 3,200 residential units have been handed over across investment zones in Abu Dhabi during the third quarter. The majority of the residential stock, including both apartments and villas/townhouses, were handed over in Al Reem Island, Al Reef and Al Raha Beach. As of September 2018, approximately 7,700 units are scheduled for handover during the next six months, though actual completions may vary. The key locations for upcoming supply are Saadiyat Island, Yas Island and Al Reem Island, which have a total of over 2,500 units scheduled for completion this year.
76%
APARTMENTS
24%
VILLAS/TOWNHOUSES
PROPERTY MONITOR
SUPPLY TRACKER Supply scheduled to be completed by end of 2018 0 - 200
200 - 400
400 - 600
1,000 - 1,500
1,500 - 2,000
2,000+
600 - 1,000
Source: Property Monitor
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Q3 2018
Saadiyat Island
Abu Dhabi Market Report
Al Raha Beach
Al Reem Island
Masdar City
Š Property Monitor 2018 | propertymonitor.ae
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Q3 2018
Abu Dhabi Market Report
SECTOR FOCUS
BUILDING CONSULTANCY There are various interwoven factors that can influence the value of a building, which will change over time as the building ages and the area around the property develops. Some of the tangible elements that a building owner should consider when keeping their property in a condition of peak performance are building age, condition, and energy efficiency. For example, in most countries buildings will typically account for 40% of overall energy use, whereas in the UAE this is around 80%. While changes to regulations will have an immediate improvement on new builds, the existing building stock is more difficult to tackle but continues to be in need of improvement to maintain value. While making the decision for considering any property for refurbishment, the following aspects should be assessed:
Building
Condition Survey
Information*
Life Cycle Costing
Fire Issues
Energy Efficiency
*AutoCAD drawings, asset registers, material schedules etc.
CONDITION SURVEYS Condition surveys are important when considering refurbishment of any development and are carried out to identify any defects and establish a baseline for refurbishment. Some of the most common defects we find in UAE buildings are incorrect design, lack of proper maintenance and poor workmanship, which accounts for around 50% of all defects discovered.
Condition Assessment Process
Factors causing defects in UAE buildings
During the condition survey process, repair works can be scheduled using cross tabular analysis of condition rating and potential risk in order to prioritise remedial works. Condition
Condition Score
Condition Description
A - Very Poor
1
Asset unserviceable - over 50% of the asset requires replacement
B - Poor
2
Significant renewal/upgrade required (20% - 40%)
C - Fair
3
Significant maintenance required above the norm (10% - 20%)
D - Good
4
Minor defects, only minor maintenance required above the norm
E - Very Good
5
Only normal annual maintenance required
Priority
Condition Score
Urgent
3
Considered serious and/or need to be attended urgently
Desirable
2
Requiring attention in the short term, not considered serious or urgent
Long Term
1
No repair required or future maintenance required in the long term
8
6%
v
18% 47% 12%
17%
Condition Description
Poor workmanship
Lack of proper maintenance
Climatic conditions
Quality / type of materials
Incorrect design
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Q3 2018
Abu Dhabi Market Report
BUILDING LIFE CYCLE COSTING Building costs have traditionally been expressed in terms of the initial capital cost only, which can allow a low development cost but with the disadvantage of high operating expenditure (OPEX) costs for owners and tenants in the future. Life cycle costing is the process of estimating the total cost of an asset over an extended period of time and if implemented correctly, using forecasting to make rational choices, can provide significant savings in the maintenance and running costs of a building in the future. It is most effective if used during the planning stage, but can still be adopted for existing buildings in terms of making decisions on repairs, retrofitting and refurbishment programmes, taking into account capital sums (both present and future), recurring costs (maintenance, running costs etc) and sinking funds to replace assets on life expiry. A life cycle cost problem we identified within the UAE has developed in relation to both development and short term ownership patterns, whereby developers with no long term interests in a building may prefer low initial construction costs, and owners of jointly owned properties may feel unwilling to contribute to sinking funds for communal assets that will require replacement long after they have left the building. This can have the effect of both high OPEX costs and insufficient funds for replacements.
Refurbishment
Maintenance
Planning
Costing stages in a building life cycle
Operation
Construction
Life cycle costing for existing buildings can assess the cost of maintaining and/or replacing an asset and services after a building’s handover and prior to the end of a building’s life. It is important to note that for every AED 1 spent in construction, AED 60-80 will be spent in operating the building over its life cycle. Life cycle costing works very well in weighing up the retrofitting of shorter-life assets, such as mechanical, electrical, plumbing and fire services equipment, where foreseeable energy, maintenance and renewal costs can all be very clearly compared. The decision to refurbish rather than rebuild or relocate will generally come down to architectural importance, building adaptability, environmental impact and cost. It is essential to have a sound real estate strategy to achieve intelligent economies of scale while maintaining value as a property ages.
Š Property Monitor 2018 | propertymonitor.ae
Design
AED
AED 1 spent in construction
AED 60-80 spent in operating the building over its life cycle
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Q3 2018
Abu Dhabi Market Report
METHODOLOGY Sale prices and rents are derived from Property Monitor (www.propertymonitor.ae), a real estate intelligence platform established by Cavendish Maxwell in 2014. Property Monitor provides real-time, market-wide transactional data and trends. Working with governments, agencies, banks, developers and corporate investors, it provides deeper insight into real estate advisory, investment, and lending activities. The average sales price per sq ft is based on the Property Monitor Index which incorporates signed contracts, registered transactions, valuations and listings verified by Cavendish Maxwell’s market leading valuation department. Supply projections for residential projects are based on the Property Monitor Supply Tracker which tracks supply in real time, regular tracking of construction projects, new launches and delays. This is achieved through site inspections as well as regular feedback from developers, contractors, Cavendish Maxwell’s building consultancy team and related government entities.
STRATEGIC CONSULTING AND RESEARCH
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Our consulting and research team includes seasoned professionals with international advisory experience offering bespoke and localised services. Through them, our clients immediately gain access to our knowledge base, technical expertise and highly skilled individuals, making us the development partner of choice. The team leverages their global expertise to offer tailored advice to clients in the MENA region covering all real estate classes including residential, office, hospitality, education, mixed-use developments, among others. The team partners with developers, investment companies, family offices and the government to deliver actionable development and real estate investment strategies aligned with prevailing and forecasted market conditions. The work of the advisory team is supported by Property Monitor, the UAE’s only real estate data source offered by RICS accredited property professionals, as well as multidisciplinary valuation and investment departments.
BANKS
Our documents and advice meet banking and audit criteria, proven by our presence on over 40 bank panels across the Middle East.
KEY SERVICES Market Research
Portfolio Strategy
Development Recommendations
Property Data
Advisory Services
Education Advisory and Valuation
Feasibility Studies
Highest and Best Use Studies
Market Entry Strategy
Site Analysis
Disclaimer:
The information and analysis contained in this report has been obtained from and is based on information from a variety of sources generally regarded to be reliable and assumptions which are considered reasonable, and which was current at the time of undertaking market research, but no representation is made as to their accuracy or completeness. We reserve the right to vary our methodology and to edit or discontinue the indices at any time, for regulatory or other reasons. The report and analysis does not purport to represent a formal valuation of any property interest and must not be construed as such. Such analysis including forward looking statements are opinions and estimates only and are based on a wide range of variables which may not be capable of being determined with accuracy. Variation in any one of these variables can have a material impact on the analysis and we draw your attention to this. Cavendish Maxwell and Property Monitor do not accept any liability in negligence or otherwise for any loss or damage suffered by any party resulting from reliance on this report.
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© Cavendish Maxwell 2018 | cavendishmaxwell.com
Q3 2018
Abu Dhabi Market Report
PEOPLE Jay Grant MSc IRRV (Hons) MRICS
Nigel Armstrong FMAAT
E: jay.grant@cavendishmaxwell.com
E: nigel.armstrong@cavendishmaxwell.com
Paul Barker BSc (Hons) MRICS
Sofia Underabi MRICS AAPI
E: paul.barker@cavendishmaxwell.com
E: sofia.underabi@cavendishmaxwell.com
Moe Abeidat
Eng.
E: moe.abeidat@propertymonitor.ae
E: craig.ross@cavendishmaxwell.com
Andrew Love MA (Hons) MRICS
Manika Dhama BA (Hons), MBA
E: andrew.love@cavendishmaxwell.com
E: manika.dhama@cavendishmaxwell.com
Founder and Chairman
Partner Head of Commercial Valuation
Chief Technology Officer Property Monitor
Partner Head of Investment and Commercial Agency
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Chief Executive Officer
Partner Head of Residential Valuation
Craig Ross BSc (Hons) MRICS
Partner Head of Building Consultancy
Associate Partner Strategic Consulting and Research
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