2Q17 market activity across segment slows down; more in line with 2016 quarterly averages
2Q17 marked a return to the norm, in terms of overall level of activity after a stellar 1Q17, which was boosted by exceptionally strong land sales and selling of off-plan residential units. Aggregate transaction value during the quarter totalled AED31.8bn (-1.2% Y-o-Y, -29.2% Q-o-Q), of which AED15.8bn were in land transactions (-4.6% Y-o-Y, -29.9% Q-o-Q) and AED14.2bn were in residential transactions. Developers indicated that April was a very strong month, continuing the same positive 1Q17 trend, while activity slowed down in May and further in June (dragged down further by lower activity in the month of Ramadan). The drop in the sale of off-plan (yet-to-be-delivered) units was steeper Q-o-Q (48.2%) vs. the overall drop in residential sales (-30.0%). This comes in line with our estimates of prime developers’ sales of primary launches, albeit with a much more aggressive quarterly drop; we estimate Emaar to have closed 2Q17 with AED4.8bn (+3.0% Y-o-Y, -20.7% Q-o-Q) in contracted sales and AED1.8bn (+10.8% Y-o-Y, -18.8% Q-o-Q) for Damac. We forecast total contracted sales in Dubai of AED17.1bn (+18.8%) for Emaar and AED6.9bn for Damac, coming in roughly flat Y-o-Y. We estimate total market activity for off-plan residential units of AED145bn (excluding the primary launches), up 10% Y-o-Y.
 
Stable price trend holds up, still in line with our view for the year
Aggregate selling prices for the residential segment were stable overall, Y-o-Y and Q-o-Q, inching down 1.2% and 2.6% only, respectively. On a Y-o-Y basis, average selling prices for the affordable segment (43% of total) were roughly unchanged (-0.3%), while the budget segment saw the largest drop (-5.4% Y-o-Y), with pressure coming mostly from Dubai World Centre, Al-Furjan and Dubai Silicon Oasis. The stable trend in average market selling prices is in line with 1Q17 trend and our view for the year, where we expect selling price stability in 2017 and a pick-up in overall sales activity and prices to be the trend in 2018. 
 
Other trends to highlight
        Sales value for the office segment in 2Q17 was weak, coming in at AED0.6bn (-6.5% Y-o-Y, -30.0% Q-o-Q, -38.8% below eight-quarter average). That said, rental yields expanded across the board, for all segments to average 8.3% (+29bps Q-o-Q)
        Rental yields for the residential market were roughly unchanged at 7.5%

Mai Attia

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