Abu Dhabi Real Estate Update by Property Monitor

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1. Macro-economic factors

2. Abu Dhabi Residential Update

3. Oil Price & Residential Prices Correlation

Contents

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Source: Statistics Centre Abu Dhabi

Economic recovery in Abu Dhabi linked to oil price stability and increased government spending

The emirate’s economy is expected to achieve a growth rate of between 3.5% to 3.7% in 2017, according

to the Department of Economic Development.

Infrastructure spending will lead the growth charge with projects worth $64 million being approved by the

Executive Committee as part of the Abu Dhabi plan as of March 2017.

Growth of 3.5% to 3.7% expected in 2017

Real GDP growth, Abu Dhabi

GDP

Inflation

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Rent declines and a strong dollar could balance rising consumer prices, which are expected to be pushed

higher this year as a result of rising utility and energy costs and school fees. The rise in rate of inflation is

expected to continue throughout this year with a spike next year with the VAT introduction.

Abu Dhabi - % change in Consumer Price Index

Rising utility costs and school fees to push consumer prices higher

Source: Statistics Centre Abu Dhabi

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Abu Dhabi Securities Exchange (ADX) reported that AED3.13 billion and AED2.306 billion of

investment were pumped in by international investors in January and February 2017 respectively.

The real estate sector accounted for the lion’s share of total trades on the exchange, at 42.94%

and 44.61% respectively in the first two months of the year.

Mortgage rates in the country are expected to rise in tandem with the U.S. Federal rate increases

due to the dollar peg. The first of such increases was effected by the UAE Central Bank in March

2017. Current consensus predicts two more U.S. Federal rate hikes of 0.25% each in 2017.

Positive signs at the start of the year have also come from oil prices stabilizing close to the $50 a

barrel mark after OPEC announced output cuts in November. This should have a positive impact

on the UAE federal budget as hydrocarbon revenues are still the main contributor to country’s

budget.

However concerns still remain over the demand outlook and return on investment for sectors

such as real estate, transport, tourism and retail. Economic slowdown as a result of oil price

crash and government spending cuts undertaken in 2015 and 2016 continue to put pressure on

non-oil related businesses in the emirate.

Investment climate

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Apartment price performance

Source: www.propertymonitor.ae

Price declines continue in investment zones, averaging 1.0% for apartments and villas over the

period Q1 2016 to Q1 2017.

Prices for apartments and villas in investment zones in Abu Dhabi have continued to decline through 2016

and Q1 2017. Apartments in Al Ghadeer, Al Reef Downtown and villas in Al Raha Gardens and Al Reef all

experienced annual declines of more than 1.0% on an average in Q1 2017.

Abu Dhabi price

performance – Q1 2017

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Villa price performance

Price declines continue in investment zones, averaging 1.0% for apartments and villas over the

period Q1 2016 to Q1 2017.

There is expected to be increased pressure on housing demand due to job uncertainty from more high-profile

mergers of government-backed entities. These could also result in readjustment of employee benefit

packages such as housing allowances thus softening demand and resulting in further price declines.

Source: www.propertymonitor.ae

Abu Dhabi price

performance – Q1 2017

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Apartment rents

Abu Dhabi rent

performance – Q1 2017

QoQ % change in rents averages -0.5% for apartments and -0.6% for villas in Abu Dhabi

investment zones

Apartment and villa rents in Abu Dhabi investment zones continued to decline in Q1 2017 and declines were

more pronounced among 2 bedrooms in Al Raha Beach and 4 bedroom villas in Al Raha Gardens. These

categories of units exhibited QoQ% declines of 2.2% and 3.3% respectively. Larger units are facing occupancy

pressure from weakened demand as job insecurity continues in the emirate.

Source: www.propertymonitor.ae

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QoQ % change in rents averages -0.5% for apartments and -0.6% for villas in Abu Dhabi

investment zones

The Abu Dhabi municipal fee of 3% of rent came into effect from January 2017 and is a measure for increasing

and diversifying government revenues. It mirrors the 5% charge in Dubai and the 2.5% charge in Sharjah

collected at the time of annual rental contract issuance. The overall impact on the property market is expected

to be minimal, with the only challenge for Abu Dhabi tenants being backdated lump sum payment for the

period February to December 2016.

Villa rents

Source: www.propertymonitor.ae

Abu Dhabi rent

performance – Q1 2017

Abu Dhabi residential supply

Source: Cavendish Maxwell research

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Nearly 83% of the total number of units completed in Q1 were apartments, with the majority of them located

in Saraya, Corniche area.

New project announcements during this quarter included Aldar’s mid-market housing at Reem Island and

Yas Island communities as well as Manazel’s 2,500 low-cost villas in Ghantoot, which are part of the next

phase of Al Reef development.

There are additional 7,800 units scheduled for the remainder of 2017, concentrated primarily in Abu Dhabi

City and Al Reem Island.

Approximately 1,200 residential units have been completed during Q1 2017 in investment

zones

APARTMENTS

Upcoming supply in investment zones (Q2 – Q4 2017)

6,200

VILLAS &

TOWNHOUSES

1,600

Abu Dhabi investment zones

residential supply

Note: Above supply excludes hotel apartments and mixed use developments.

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Source: Cavendish Maxwell research

Summary of upcoming supply in key areas (2017-2020)

Development trends & challenges

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Regulations and approvals

Funding and deal structures

• ADM stalled projects update

• The “new” off plan sales format

• Fire/life/safety and Green Building

Consumer demand

• Percentage of owner-occupants eclipsing 40% mark

• Serviced and hotel apartments competing with long-term units

• The value-driven luxury product

• Land leverage

• Lower risk appetite for lower returns

• Build-to-hold and longer-term return horizons

Thank you