Unitas’Consultancy’(A’GLOBAL’CAPITAL’PARTNERS’GROUP ... · 6 0% 10% 20% 30% 40% 50% 60%...

Dubai: Amidst a Slowdown, Underlying Strength

Unitas Consultancy (A GLOBAL CAPITAL PARTNERS GROUP COMPANY) Q4 2014

This document is provided by Unitas Consultancy solely for the use by its clients. No part of it may be circulated, quoted, or reproduced for distribuSon outside the organizaSon without prior wriUen approval.

STRICTLY CONFIDENTIAL

Office No. 103, The Palladium, Plot No. C3, Jumeriah Lake Towers, Dubai, UAE, [email protected] 1

•  Even as transacSonal acSvity has fallen by 50%, this year, an analysis reveals that brunt of the decline has

been in cash transacSons, indicaSng a systemic decline in speculaSve acSvity. However, the opposite trend-‐line is seen in mortgage transacSons across both segments, as we hypothesize that end user purchases conSnues to increase, reaffirming the house hypothesis. This increase in mortgage acSvity is led by two bedrooms in the apartments segment, whereas in villas its dominated by the four and five bedrooms further giving credence to the claim, and the strongest indicator of a maturing real estate market.

•  A closer look into the data reveals a crossover between transacSons of four bedroom apartments to four

bedroom villas when it comes to home-‐ownership. Mortgage transacSons in four bedroom apartments have registered virtually no growth over the last 8 years while four+ bedroom villa mortgages have conSnued to rise steadily.

•  A city-‐wide price comparison unit-‐wise, shows that within the villa segment 5 bedrooms have consistently out-‐performed the market in the last 8 years. In the apartment space, smaller sizes conSnue to aUract investor acSvity; however there appears to be a clear shi` towards the two bedroom plus spaces; we opine that this trend will conSnue to grow as end users increasingly dominate the market going forward.

•  A rental comparison of the RERA Index of the third quarter of 2010 to date shows that the largest percentage increase is in the four and five bedrooms compared to the smaller size units. This increase implies that the larger units, will incur a higher number of mortgages as residents begin to buy their own homes as renSng becomes uneconomical.

ExecuSve Summary

2

Table of Contents

A)  TransacSonal AcSvity …….……….………..…………………….……………….………………………...…....4 B)  The Crossover Between Villas and Apartments………………………………………………………..11

C)  Unit-‐wise Price Analysis ………………………………………………….…………….………………………..14

D)  Rent Convergence……………………………………………..…………………………………………………….17 E)  Conclusions………………………………………………….………………………………….……………………….20

3

4

TransacSonal AcSvity

“Today people who hold cash equivalents feel comfortable. They shouldn't. They have opted for a terrible long-‐term asset, one that pays virtually nothing and is certain to depreciate in value” -‐

Warren BuffeU

5

TransacSonal AcSvity Overview

1,376 1,560 1,564 1,623

1,771 1,711 1,803

1,082

2,154

1,547 1,636

2,107

1,512 1,689

1,773

1,510

1,279

1,524

863 875

1,115

-‐

500

1,000

1,500

2,000

2,500

TransacSonal analysis conducted over the last year reveals that the volume has declined by approximately 50% on a yoy basis, reaffirming market reports that speculaSve froth has disappeared.

Reidin.com

6

0%

10%

20%

30%

40%

50%

60%

0

500

1000

1500

2000

2500

3000

2006 2007 2008 2009 2010 2011 2012 2013 2014

Cash Mortgage Mortgage as a % of Total

0%

5%

10%

15%

20%

25%

30%

35%

-‐

2,000

4,000

6,000

8,000

10,000

12,000

14,000

16,000

2006 2007 2008 2009 2010 2011 2012 2013 2014

Cash Mortgage Mortgage as a % of Total

Mortgage TransacSons Trend Higher for Both Villas and Apartments

Villa TransacSons Apartment TransacSons

A Sme series analysis of transacSons for both apartments and villas, shows a clear upwards trends for mortgages, indicaSng a stronger end-‐user base for Dubai. Villa mortgages as a percentage of total volume has risen by 10% YOY, while apartments have risen 6%, exhibiSng a steady rise even over the longer term villa mortgage growth rate of, apartment

Reidin.com

7

0

100

200

300

400

500

600

700

800

1/1/06

4/1/06

7/1/06

10/1/06

1/1/07

4/1/07

7/1/07

10/1/07

1/1/08

4/1/08

7/1/08

10/1/08

1/1/09

4/1/09

7/1/09

10/1/09

1/1/10

4/1/10

7/1/10

10/1/10

1/1/11

4/1/11

7/1/11

10/1/11

1/1/12

4/1/12

7/1/12

10/1/12

1/1/13

4/1/13

7/1/13

10/1/13

1/1/14

4/1/14

7/1/14

1 Bedroom 2 Bedroom

3 Bedroom 4+ Bedroom

Studio

Unit-‐wise Break Down: Cash TransacSon for Apartments

A granular analysis of cash transacSons of apartments shows that the most popular unit is the one bedroom followed by two bedrooms and studios, where as three and Four bedrooms have remained stagnant for the last 8 years. In the last 8 months, the market has witnessed a dramaSc fall in acSvity as speculaSve acSvity has subsided. to see a fall in studios, one bedrooms, and two bedrooms.

Reidin.com

8

0

20

40

60

80

100

120

140

160

180

1/1/06

4/1/06

7/1/06

10/1/06

1/1/07

4/1/07

7/1/07

10/1/07

1/1/08

4/1/08

7/1/08

10/1/08

1/1/09

4/1/09

7/1/09

10/1/09

1/1/10

4/1/10

7/1/10

10/1/10

1/1/11

4/1/11

7/1/11

10/1/11

1/1/12

4/1/12

7/1/12

10/1/12

1/1/13

4/1/13

7/1/13

10/1/13

1/1/14

4/1/14

7/1/14

2 Bedroom 3 Bedroom

4 Bedroom 5 Bedroom

6+ Bedroom

Unit-‐wise Break Down: Cash TransacSon for Villas

Within the villa segments, we can see that three, four, and five bedroom are the most popular, followed by two and six bedrooms.

Reidin.com

9

0

50

100

150

200

250

Jan-‐06

Apr-‐06

Jul-‐0

6

Oct-‐06

Jan-‐07

Apr-‐07

Jul-‐0

7

Oct-‐07

Jan-‐08

Apr-‐08

Jul-‐0

8

Oct-‐08

Jan-‐09

Apr-‐09

Jul-‐0

9

Oct-‐09

Jan-‐10

Apr-‐10

Jul-‐1

0

Oct-‐10

Jan-‐11

Apr-‐11

Jul-‐1

1

Oct-‐11

Jan-‐12

Apr-‐12

Jul-‐1

2

Oct-‐12

Jan-‐13

Apr-‐13

Jul-‐1

3

Oct-‐13

Jan-‐14

Apr-‐14

Jul-‐1

4

1 Bedroom 2 Bedroom

3 Bedroom 4+ Bedroom

Studio

Unit-‐wise Break Down: Mortgages TransacSon for Apartments

The mortgage acSvity shows a dramaScally different scenario with the 2 bedroom condominium registering the highest growth rate, closely followed by the 1 bedroom space.

Reidin.com

10

0

10

20

30

40

50

60

70

80

Jan-‐06

Apr-‐06

Jul-‐0

6

Oct-‐06

Jan-‐07

Apr-‐07

Jul-‐0

7

Oct-‐07

Jan-‐08

Apr-‐08

Jul-‐0

8

Oct-‐08

Jan-‐09

Apr-‐09

Jul-‐0

9

Oct-‐09

Jan-‐10

Apr-‐10

Jul-‐1

0

Oct-‐10

Jan-‐11

Apr-‐11

Jul-‐1

1

Oct-‐11

Jan-‐12

Apr-‐12

Jul-‐1

2

Oct-‐12

Jan-‐13

Apr-‐13

Jul-‐1

3

Oct-‐13

Jan-‐14

Apr-‐14

Jul-‐1

4

2 Bedroom 3 Bedroom

4 Bedroom 5 Bedroom

6+ Bedroom

Unit-‐wise Break Down: Mortgages TransacSon for Villas

Similarly in the villa segment, transacSonal acSvity conSnues to spiral upwards as homeownership take place. A grass-‐root level analysis shows that three, four, and fives bedrooms have the highest number of mortgages, whereas the two and six bedrooms trail behind (indicaSng that the laUer is more in the domain of the trophy and luxury space).

Reidin.com

11

The Crossover between Villa and Apartment living

“The ache for home lives in all of us. The safe place where we can go as we are and not be quesSoned.” -‐ Maya Angelou

12

A Closer Look at Home Ownership – Villas vs. Apartments

Apartments Mortgages (Jan ‘06 – Till Date)

1022

5542

6621

3038

1522

0

1000

2000

3000

4000

5000

6000

7000

Studios 1 Bed 2 Bed 3 Bed 4 Bed+

Villa Mortgages (Jan ‘06 – Till Date)

The above chart depicts the total number of mortgages in monitored areas by unit type in apartments and villas from 2006. As we can see that 2 bedrooms is the most popular choice for end-‐users in the apartment segment, whereas home-‐occupiers prefer larger units (3 bedrooms and more) in the villa segment. This is the strongest indicator of the home ownership hypothesis as the market matures and gravitates towards more developed markets in terms of buying paUerns.

811

2694

2301

1760

283

0

500

1000

1500

2000

2500

3000

2 Bedroom 3 Bedroom 4 Bedroom 5 Bedroom 6+ Bedroom

Reidin.com Reidin.com

13

The Cross Over of the 4+ bedroom Segment from Apartments to Villas for Homeownership

0

100

200

300

400

500

600

Jan-‐06

Apr-‐06

Jul-‐0

6

Oct-‐06

Jan-‐07

Apr-‐07

Jul-‐0

7

Oct-‐07

Jan-‐08

Apr-‐08

Jul-‐0

8

Oct-‐08

Jan-‐09

Apr-‐09

Jul-‐0

9

Oct-‐09

Jan-‐10

Apr-‐10

Jul-‐1

0

Oct-‐10

Jan-‐11

Apr-‐11

Jul-‐1

1

Oct-‐11

Jan-‐12

Apr-‐12

Jul-‐1

2

Oct-‐12

Jan-‐13

Apr-‐13

Jul-‐1

3

Oct-‐13

Jan-‐14

Apr-‐14

Jul-‐1

4

4+ Bedroom Apartments

4+ Bedroom Villas

There is a clearly a higher demand for four bedroom villas compared to apartments as a desSnaSon for end-‐user occupiers. A Sme series analysis shows that 4 bedrooms villas have conSnued to trend upwards over the last 8 years, where as apartment have remained flat-‐lined. This highlights the buying astude of the end-‐user demographics of Dubai, skewing them towards horizontal living in this space.

Reidin.com

14

“A people without the knowledge of their past history, origin and culture is like a tree without roots” -‐ Marcus Garvey

Unit-‐wise Price Analysis

15

40

60

80

100

120

140

160

180

200

220

240

2006 2007 2008 2009 2010 2011 2012 2013 2014

Studios

1 Bedrooms

2 Bedroom

3 Bedroom

4 Bedroom

80

100

120

140

160

180

200

2010 2011 2012 2013 2014

2 Bedroom

3 Bedroom

4 Bedroom

Studios

1 Bedrooms

One-‐Bedrooms and Studios Best Performer in Apartments

Price Index (2006 – Till Date) Price Index (2010 – Till Date)

A city-‐wide price analysis segmented by unit type, shows that 1 bedrooms have appreciated the most followed by three bedrooms over an 8 year horizon. This is coherent with transacSonal acSvity as One bedrooms has had the highest frequency of transacSons with this Sme period. However, over a four year Sme period this trend has shi`ed, where studios and four bedrooms have out-‐performed the market. However, the graph also reveals a shi` in the buying paUerns as end users start to dominate, moving towards the two bedroom space. In this sense, the mortgage acSvity in the 2 bedroom and higher space is an indicator of increased price outperform in this segment going forward as the structure of the market changes.


16

0

50

100

150

200

250

300

350

400

2006 2007 2008 2009 2010 2011 2012 2013 2014

2 Bedroom

3 Bedroom

4 Bedroom

5 Bedroom

50

70

90

110

130

150

170

190

210

230

250

2010 2011 2012 2013 2014

2 Bedroom

3 Bedroom

4 Bedroom

5 Bedroom

While Five-‐Bedrooms are the Best Performer in the Villa Segment

Price Index (2006 – Till Date) Price Index (2010 – Till Date)

In the villa segment 5 bedrooms have out-‐performed the market consistently in the last 8 years, giving credence to the trophy buying phenomena within this asset class. CommuniSes such as Palm Jumeirah Villas, Emirates Hills have historically appreciated fasted than any other community.


17

When monthly rent payments are less than the total carrying costs for owning a home, then it is more economical to rent than to own

Rent Convergence

18

38%

34%

39%

56% 53%

0%

10%

20%

30%

40%

50%

60%

Studio 1 bed 2 bed 3 bed 4 bed

The Convergence of Rents

Rental Comparison – Unit Wise (Oct 2010 – Today)

The above table shows a comparison of the average RERA Index from Oct 2010 to date. We can see that the three bedroom space has incurred the highest growth rate followed by four bedrooms. This highlight the need for larger units as family become a core demand driver, also explaining the upward trend in mortgage acSvity within this segment.

Source: RERA

% Change of RERA Index (OCT 2010 -‐ TODAY)

Studio 1 bed 2 bed 3 bed 4 bed Average

Greens 33% 23% 33% 40% -‐ 33%

Marina 32% 45% 63% 54% 57% 50%

International City 44% 23% 18% -‐ -‐ 28%

Palm Jumeirah -‐ 41% 43% 44% -‐ 43%

JLT 63% 38% 59% 69% 63% 58%

Discovery Gardens 31% 20% 6% -‐ -‐ 19%

DSO 36% 38% 35% -‐ -‐ 36%

IMPZ 8% 24% 17% -‐ -‐ 16%

JVC 60% 69% 72% 74% 64% 68%

Motor City 33% 23% 43% 44% -‐ 36%

Average 38% 34% 39% 54% 61%

19

The Rental Index Comparison

A community wise comparison shows that the largest rental increase has been in JVC (68%) followed by JLT (58%) and Marina (50%). These rapid increases in rents are leading buyers to mortgage rather than rent as it indicates paucity in supply, further validaSng the trend seen of higher mortgage acSvity in the 2 bedroom+ space in apartments and the 4 bedroom+ space in villas.

Source: RERA

Conclusions TransacSonal AcSvity The Crossover

Rent Convergence Price Trends

In the villa segment, five bedrooms have out-‐performed the market consistently in the last 8 years, giving credence to the trophy buying phenomena within this asset class.

An YoY analysis of transacSonal acSvity, shows a 50% fall from the peak indicaSng a decline in speculaSve acSvity. However, mortgages conSnue to trend higher, implying a stronger owner-‐occupier base. A city-‐wide analysis shows that within apartment cash transacSons studios, one and two bedrooms are most popular. Where as for villas three, four and five bedrooms are the most cash bought properSes.

A unit-‐wise mortgage analysis shows that in the last 8 years, two bedrooms have had the highest number of mortgages in the apartment segment, while 4 bedroom plus in villas A comparison between the mortgages of four bedroom units between villas and apartments shows a clear preference by end-‐user for villas. Mortgages for 4 bedroom+ villas have doubled in the last 4 years, while the same unit in apartments have remained flat.

A unit-‐wise price analysis shows that within villas 5 bedrooms have consistently outperformed other unit types over an 8 year horizon. We expect this trend to conSnue as mortgages for this niche ratchet higher Whereas in the apartment segment, historically 1 bedrooms have outperformed, but in the last four year we have seen studio with the highest price growth. With higher levels of mortgage acSvity in the 2 bedroom space we expect these units to outperform in the medium term

A comparison of the Rera Index from Aug 2010 Sll date, shows the largest increase has been in the four and five bedrooms segment. This validates the latent demand that is present in the market for larger spaced accommodaSon. Recent rent rises reinforce the trend of renters becoming owner-‐occupiers

There is a clearly a higher demand for four+ bedroom villas compared to apartments as a des@na@on for end-‐user occupiers

REIDIN.com is the leading real estate informaSon company focusing on emerging markets. REIDIN.com offers intelligent and user-‐friendly online informaSon soluSons helping professionals access relevant data and informaSon in a Smely and cost effecSve basis. Reidin is the data provider for these research reports Concord Tower, No: 2304, Dubai Media City, PO Box 333929 Dubai, United Arab Emirates Tel. +971 4 433 13 98 Fax. +971 4 360 47 88 www.reidin.com [email protected]

GCP believes in in-‐depth planning and discipline as a mechanism to idenSfy and exploit market discrepancy and capitalize on diversified revenue streams. Our purpose is to manage, direct, and create wealth for our clients. GCP is the author for these research reports

Indigo Icon, 1708 Jumeirah Lake Towers, PO Box 500231 Dubai, United Arab Emirates Tel. +971 4 447 72 20 Fax. +9714 447 72 21 www.globalcappartners.com info@gcp-‐properSes.com

17

Our AspiraSon and MoUo

“No barrier can withstand the strength of purpose” HH General Sheikh Mohammed Bin Rashid Al Maktoum The Ruler of Dubai and Prime Minister of UAE

Unitas’Consultancy’(A’GLOBAL’CAPITAL’PARTNERS’GROUP ... · 6 0% 10% 20% 30% 40% 50% 60%...

Documents

Transcript of Unitas’Consultancy’(A’GLOBAL’CAPITAL’PARTNERS’GROUP ... · 6 0% 10% 20% 30% 40% 50% 60%...