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Prepared by Angad Rajpal, Analyst and Anthony Taylor, Fund Manager - Real Estate June 2013 Issue 6

The Key Highlights for the year to date (YTD) 2013 are:
> Dubais residential prices increased in Q1, up 16% on average Y-o-Y and as much as 23% Y-o-Y in certain locations. Rentals for residential units were up around 10% Y-o-Y. > Abu Dhabis residential prices improved during the 1st quarter and villa prices are now up 5.3% Y-o-Y. Apartments, however still remained slightly down, -1.6% Y-o-Y, due to supply being much higher than demand. Employees have to start moving to the capital before September if they work in the government or in government-related entities in order to continue to receive an accommodation allowance. This could explain why apartment rentals did well gaining 4.4% Y-o-Y. > Dubai office rents have joined the recovery with increases around 5% on average Y-o-Y. > Hotel occupancies in Dubai hit a record high averaging 87% in the first quarter of 2013. This is mainly due to the Dubai Shopping Festival, and rising demand from other MENA countries.

Dubai: Residential
Dubai residential continues to experience positive growth. Apartment prices have rallied and outperformed villa prices for a third straight quarter, up 2% in Q1 2013 and 17% Y-o-Y. Villas prices have had a strong run in 2012 and enjoyed a 0.6% Q-o-Q and 14% Y-o-Y. Rentals increased 10% in the year in both the Dubai apartment and villa markets driven by the rising demand from relocations from other emirates as well as new tenants moving to the UAE. The first quarter of 2013 witnessed impressive performance in terms of property transactions in Dubai. According to the Land Department (DLD) the Emirate registered 14,260 Property transactions, which indicates 223 sales or mortgages per day. The DLD has announced that the total value of real estate transactions in the emirate jumped 63% to 44 billion in the 1st Quarter of 2013 compared to the same period last year. Dubai Residential Prices (AED per sq ft)
1,500 1,250 1,000 750 500 250 0 Mar-13 Dec-12 Dec-07 Sep-07 Dec-08 Sep-08 Dec-09 Sep-09 Dec-10 Sep-10 Mar-12 Dec-11 Mar-07 Jun-07 Jun-08 Mar-08 Jun-09 Mar-09 Jun-10 Mar-10 Jun-11 Mar-11 Sep-11 Sep-12 Jun-12

Dubai Residential Rentals (AED per sq ft)

110 100 90 80 70 60 50 40 Nov-09 Sep-09 Mar-11 Jan-11 Nov-10 Jan-12 Nov-11 Nov-12 Mar-10 Jan-10 Mar-13 Jan-13 Jul-09 May-09 Jul-10 May-10 Jul-11 May-11 May-12 Mar-12 Sep-12 Jul-12 Mar-09 Sep-10 Sep-11





Source: March 2013

Source: March 2013

Abu Dhabi: Residential

In Abu Dhabi, villa sales prices are up 6% Y-o-Y and performed well again in Q1 2013. Although still -11% off the highs of 2009, this sector is starting to show positive signs of a recovery. Apartments performed well in Q1 2013 yet still down -1.6% Y-o-Y. Abu Dhabi Residential Prices (AED per sq ft)
3000 2500 2000 1500 1000 500
Nov-12 Sep-12 Nov-11 Jan-11 Nov-10 Jan-10 Nov-09 Jul-12 May-12 Mar-13 Jan-13 May-11 Mar-11 Sep-11 Jul-11 Mar-12 Jan-12 May-10 Mar-10 Sep-10 Jul-10 May-09 Sep-09 Jul-09 Mar-09

Abu Dhabi Residential Rentals (AED per sq ft)

1000 900 800 700 600 500 400 180 160 140 120 100 80 60 40 20 Nov-12 Sep-12 Jan-12 Nov-11 Sep-11 Jul-11 May-11 Mar-11 Jan-11 Nov-10 Sep-10 Jul-10 May-10 Mar-10 Jan-10 Nov-09 Sep-09 Jan-13 May-12 Mar-12 Jul-09 May-09 Mar-09 Jan-09 Jul-12 Mar-13

Apartments (LHS)

Villas (RHS)



Source: March 2013

Source: March 2013

UAE: Commercial
After two years of consolidation the commercial market in Dubai is showing signs of recovering and growth starting to show in welllocated assets. According to Cluttons the rental market was up on average 4.7% Y-o- Y with tertiary areas experiencing the highest growth rates, coming off their lower base rentals. Future supply may still dampen the recovery in certain areas however, positive UAE macro indicators point to future growth in this sector.

Dubai Office Lease Rates (AED per sq ft)

500 400 300 200 100 0 Mar-13 Dec-12 Sep-12 Jun-12 Mar-12 Dec-11 Sep-11 Jun-11 Mar-11 Dec-10 Sep-10 Jun-10 Mar-10 Dec-09 Sep-09 Jun-09 Mar-09 Dec-08 Sep-08 Jun-08 Mar-08 Dec-07 Sep-07 Jun-07 Mar-07 Dec-06 Sep-06 Jun-06 Mar-06 Primary Secondary Tertiary

Source: Cluttons, Bloomberg March 2013

Market News & Views

Dubai 2020 Tourism Vision With the Dubai 2020 Tourism Vision being approved by His Highness Sheikh Mohammed bin Rashid Al Maktoum, Prime Minister and Vice President of the United Arab Emirates and Ruler of Dubai, we can see that there will be more demand created for the retail and hospitality sector. We also anticipate some entertainment projects and tourist attractions will be announced; other than the ones currently in the pipeline. AIM The Annual Investment Meeting (AIM) was hosted in May 2013. The conference provides a realistic insight on foreign direct investment and an in-depth review of investment opportunities from leaders in this market. Topics relating to real estate that were discussed at the conference included: > ICD-Brookfield Dubai Real Estate Fund an USD1.8bn fund was announced and seed assets have been identified. Focus on commercial real estate and target institutional investors. Registering with the DFSA and set to open before the end of 2013. - Douglas Kirkman is the Chief Executive Officer of the ICD-Brookfield Dubai Real Estate Fund > The Dubai property market has become more mature than it was back in 2008-2009. Developers are becoming more sophisticated and regulators are taking further steps to protect investors. Developers are also seeing finance returning to certain sectors. - Hussain Sajwani is the Chairman of Damac

Fund Managers Insights

The Dubai real estate market has continued to rally in 2013 and stole the headlines by recently being rated the 2nd best performing prime residential in the market in the world during Q1 2013 according to Knight Frank research (Hong Kong narrowly beating it to the top spot). This is good news but a little concerning at the same time having been near the bottom of the list of 50 countries only 3 years ago. This level of volatility is not ideal for an illiquid asset class such as real estate. The residential rental market has experienced a resurgence in 2013. Although existing tenants benefit from the rental-caps imposed by the Real Estate Regulatory Authority (RERA), new tenants can expect to pay up to 25% more than a year ago in primary areas. This has caused a number of tenants to either downsize, or move to secondary locations which are now starting to witness improved leasing activity. Commercial real estate was the last sector to enter the recovery cycle but is now exhibiting a similar trend. The Emirates Real Estate Fund (EREF) with a significant portion of its portfolio held in commercial buildings has been benefitting from this renewed confidence for over 6 months. We are now also seeing affordable areas, such as JLT and Business Bay, experiencing healthy growth in rentals as infrastructure in these areas improve. Investment into land plot for future development is also starting to gain momentum in Dubai. Developers are realising that these plots in welllocated areas are becoming scarce and because of this the prices are starting to increase. Abu Dhabi is beginning to enjoy the early signs of a recovery within its residential sector. Hospitality has also produced some good numbers since the beginning of the year. It appears hotels in the capital have adopted a successful strategy of lowering their room rates in order to increase occupancies. This has resulted in revenue per available room (RevPAR) being up 6% Y-o-Y. This is impressive if you consider that the number of rooms are expected to increase by 10% in 2013 from the completion of new hotels. If we compare these numbers to the recovery witnessed in the Dubai market towards the end of 2011 and 2012, it was led by the hospitality and villa sectors. Commercial real estate in Abu Dhabi remains flat due to the large amount of supply in the pipeline and limited demand from new companies. Sharjah, benefiting from its close proximity to Dubai, has also joined the upturn in the real estate market with positive growth in the residential sector since the start of the year. As the property market improves there are some common old-tricks reappearing in the investment opportunities on offer in the UAE that one should be aware of and avoid when investing. Our Real Estate Advisory Service is one of the ways that investors can attempt to avoid these potential risks by utilising the experience of a professional service.

Anthony Taylor Fund Manager Real Estate Emirates NBD Asset Management

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