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Kuwait Financial Centre “Markaz” MENA REAL ESTATE RESEARCH Research Highlights: A weekly market commentary

Real Estate Market Commentary 29-Jul-12 to 04-Aug-12

Contents Market Commentary Charts to Note Activity Monitor:  Dubai,  Kuwait,  Riyadh - KSA,  Dammam – KSA  Qatar Markaz Research is available on: Bloomberg - Type “MRKZ” <Go> Thomson Research, Reuters Knowledge ReutersRealEstate.com Nooz Zawya Investor ISI Emerging markets

Thomas K. Mathew Senior Research Analyst +965 2224 8051 tmathew@markaz.com Venkat Ramadoss ACA, CFA Manager +965 2224 8548 rvenkateshwaran@markaz.com Bassam N. Al-Othman Executive Vice President +965 2224 8011 bothman@markaz.com

Kuwait Financial Centre “Markaz” P.O. Box 23444, Safat 13095, Kuwait Tel: +965 2224 8000 Fax: +965 2242 5828 markaz.com

Kuwait: In its latest monthly release, the Central Statistical Bureau (CSB) reported a marginal 0.2% M-o-M increase in overall inflation in Jun-12, but no change in the housing component. On a Y-o-Y basis, the overall inflation rate stabilized at 2.8% in Jun-12 similar to the previous month, but was lower than the 3.3% reported in Apr-12. Housing component inflation has remained stable at 1.5% Y-o-Y since Jan-12. Dubai: According to Knight Frank’s Q2-12 Prime Global Cities Index, sales prices of prime apartments in Dubai increased 1.8% Q-o-Q, 5.6% YTD and 2.3% Y-o-Y, while Asteco reported c.6% Q-o-Q average apartment price jump at DIFC, Downtown Dubai, Dubai Marina and Palm Jumeirah. On the contrary, JLL reported that, prices of prime apartments were stable on Y-o-Y basis (up 1%). Abu Dhabi: In its market overview for Q2-12, JLL reported a decline in prices & rentals in the residential market due to rising supply, in line with Asteco’s observation. JLL also mentioned that the gap between rents quoted in non-investment and investment areas was reportedly widening. It was highlighted that sales transactions in investment areas had increased in Q2-12, primarily driven by Emirati purchases. JLL reported strong demand for high quality residential developments, evident from a rapid take up at St. Regis apartments & increased preleasing activity in Nation Towers. As reported by Asteco earlier, JLL also highlighted that landlords were offering flexible payment terms to tenants to compete in the market. Also, an upcoming supply of 11,000 apartments were indicated until 2014, while majority of 9500 villa supply were expected to be within Emirati housing communities. JLL expects new supply to exert downward pressure on apartment & villa rentals and average apartment sales prices, in line with Asteco’s outlook. In the office market, JLL reported a decline in the average Grade A rental (6% Q-o-Q), but pointed out that average Grade B rental had stabilized. Earlier, Asteco reported a 3–4% Q-o-Q dip in rentals for Grade A stock & 5–6% Q-o-Q fall for Grade B stock. According to JLL, the vacancy rate rose to c. 32%, and is expected to increase as new supply outstrips demand. It expects Grade A & Grade B rentals to decline further and the rental gap between the two to expand, as tenants are likely to upgrade to new, better quality units, in line with Asteco forecasts. Egypt: JLL in its Q2-12 Cairo market overview reported that, average prices & rentals remained broadly unchanged Q-o-Q. It was mentioned that flexible payment plans like, the 7 to10 year payment term offered by Emaar & Amer Group & the 9 year interest free quarterly payments offered by Palm Hills Development were launched to bolster demand. Furthermore, the launch of new projects such as 6 projects by Amer in Greater Cairo reportedly reflects increased confidence in the residential market. JLL anticipates a decline in average residential prices, but forecasts rentals to stabilize. For office, JLL reported that rentals for Grade A stock in Central Cairo declined 6.7% Q-o-Q, ascribed to the new supply of Grade B stock amidst low demand, while rentals for Grade B stock remained unchanged on a Q-o-Q basis. The average vacancy rate for Grade A spaces reportedly remained at c. 38%. JLL reported a rise in demand in New Cairo and Maadi & estimated demand of c. 70,000 Sqm. JLL anticipates Grade A office rents to decline & the current vacancy rate to persist, as incremental supply pushes rentals lower & landlords offer more favorable payment terms & incentives.

Developments sourced from various sources including news portals like Gulfbase, Zawya, Reuters, Bloomberg, Trade Arabia, Business 24/7, Arabian Business, The Peninsula, Gulf News, Property Wire, Khaleej Times, Saudi Gazette, KUNA etc and also from published reports of real estate brokers and investment research houses.


MENA REAL ESTATE RESEARCH Charts to note Chart 1: Abu Dhabi Residential Supply – 2012 14,000

Number of units

12,000

9,075

10,000 8,000 6,000

11,560

11,000

6,000

4,000 2,000 JLL Handed over in H1-12

Asteco Expected in H2-12

Source: JLL, Abu Dhabi report, Q2-12, Asteco, Abu Dhabi report, H1-12, Markaz Analysis

Chart 2: Abu Dhabi Expected Residential Supply – 2012-2014

Source: JLL, Abu Dhabi report, Q1-12, Q2-12, Markaz Analysis

Kuwait Financial Centre “Markaz”

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MENA REAL ESTATE RESEARCH Chart 3: Abu Dhabi Office Supply – 2012

Source: JLL, Abu Dhabi report, Q2-12, Asteco, Abu Dhabi report, H1-12, Markaz Analysis

Chart 4: Abu Dhabi Expected Office Supply – 2012-2014

Source: JLL, Abu Dhabi report, Q1-12, Q2-12, Markaz Analysis

Kuwait Financial Centre “Markaz”

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MENA REAL ESTATE RESEARCH Chart 5: Abu Dhabi Rental Trends – 2008-2012

Source: JLL, Abu Dhabi report, Q2-12, Markaz Analysis

Chart 6: Cairo Expected Residential Supply – 2012-2014

Source: JLL, Cairo report, Q1-12, Q2-12, Markaz Analysis

Kuwait Financial Centre “Markaz”

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MENA REAL ESTATE RESEARCH

Chart 7: Cairo Expected Office Supply – 2012-2014

Source: JLL, Cairo report, Q1-12, Q2-12, Markaz Analysis

Chart 8: Kuwait Consumer Price Index (CPI) and House Rents – 2011-12 154 152 150 148 146 144 142 140

Jun Jul Aug Sep Oct Nov Dec Jan Feb Mar Apr May Jun 2011 2011 2011 2011 2011 2011 2011 2012 2012 2012 2012 2012 2012 CPI

Housing Component

Source: Central Statistical Bureau, Monthly Bulletin – Jun-12, Markaz Analysis

Kuwait Financial Centre “Markaz”

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Villa

Land

Total No.

Value

No.

Value

No.

Value

W-o-W -3.0% 31.3%

2.0% 64.0%

No. -22.2% 16.7%

Value -39.3% 21.8%

14.3% 65.5%

-58.2% -54.1%

-1.5% 35.6%

-37.3% -20.8%

90 1,200

80

70 1,000

60 800

50

40 600

30 400

20

10 200

0

No. of transactions

35 160

30

140

25 120

20

100

15

80

10

60

40

5

20

-

0

No. of transactions

Kuwait Financial Centre “Markaz”

Value Transacted (AED Mn)

Transactions

Value Transacted (AED Mn)

W01-2011 W03-2011 W05-2011 W07-2011 W09-2011 W11-2011 W13-2011 W15-2011 W17-2011 W19-2011 W21-2011 W23-2011 W25-2011 W27-2011 W29-2011 W31-2011 W33-2011 W36-2011 W38-2011 W40-2011 W42-2011 W44-2011 W46-2011 W48-2011 W50-2011 W52-2011 W02-2012 W04-2012 W06-2012 W08-2012 W10-2012 W12-2012 W14-2012 W16-2012 W18-2012 W20-2012 W22-2012 W24-2012 W26-2012 W28-2012 W30-2012

No. of Transactions

Apartment

W01-2011 W03-2011 W05-2011 W07-2011 W09-2011 W11-2011 W13-2011 W15-2011 W17-2011 W19-2011 W21-2011 W23-2011 W25-2011 W27-2011 W29-2011 W31-2011 W33-2011 W36-2011 W38-2011 W40-2011 W42-2011 W44-2011 W46-2011 W48-2011 W50-2011 W52-2011 W02-2012 W04-2012 W06-2012 W08-2012 W10-2012 W12-2012 W14-2012 W16-2012 W18-2012 W20-2012 W22-2012 W24-2012 W26-2012 W28-2012 W30-2012

No. of Transactions

Activity Monitor MENA REAL ESTATE RESEARCH

Dubai Real Estate Transactions (2011 & 2012) Y-o-Y

Land Transactions

Value transacted (AED Mn)

Villa Transactions

Value transacted (AED Mn)

6


W01-2011 W03-2011 W05-2011 W07-2011 W09-2011 W11-2011 W13-2011 W15-2011 W17-2011 W19-2011 W21-2011 W23-2011 W25-2011 W27-2011 W29-2011 W31-2011 W33-2011 W36-2011 W38-2011 W40-2011 W42-2011 W44-2011 W46-2011 W48-2011 W50-2011 W52-2011 W02-2012 W04-2012 W06-2012 W08-2012 W10-2012 W12-2012 W14-2012 W16-2012 W18-2012 W20-2012 W22-2012 W24-2012 W26-2012 W28-2012 W30-2012

No. of Transactions

600 600

500 500

400 400

300 300

200 200

100 100

0

No. of transactions

Kuwait Financial Centre “Markaz”

Value Transacted (AED Mn)

MENA REAL ESTATE RESEARCH

Apartment Transactions

Value transacted (AED Mn)

Source: Dubai Land Department Note: 1) The above table/chart represents transactions as per the registration date and not the transaction date 2) Outliers identified are removed for better clarity.

7


W01-2011 W03-2011 W05-2011 W07-2011 W09-2011 W11-2011 W13-2011 W15-2011 W17-2011 W19-2011 W21-2011 W23-2011 W25-2011 W27-2011 W29-2011 W31-2011 W33-2011 W35-2011 W37-2011 W39-2011 W41-2011 W43-2011 W46-2011 W48-2011 W50-2011 W52-2011 W02-2012 W04-2012 W06-2012 W08-2012 W10-2012 W12-2012 W14-2012 W16-2012 W18-2012 W21-2012 W23-2012 W25-2012 W27-2012

No. of Transactions

Private Residential

Investment

Total No.

Value

Commercial

W-o-W

No. -24.5% 87.5%

Value -10.6% 45.0%

8.3% 44.4%

-21.4% 39.6%

No. N.A. 100.0%

Value N.A. -83.5%

No. -19.1% 78.3%

Value -13.0% 30.7%

350 180

300 160

250 140

200 120

100

150 80

100 60

50 40

20

0 0

No. of transactions

70 70

60 60

50 50

40

40

30

30

20

20

10

10

0

0

No. of transactions

Kuwait Financial Centre “Markaz”

Value Transacted (KWD Mn)

Transactions

Value Transacted (KWD Mn)

W01-2011 W03-2011 W05-2011 W07-2011 W09-2011 W11-2011 W13-2011 W15-2011 W17-2011 W19-2011 W21-2011 W23-2011 W25-2011 W27-2011 W29-2011 W31-2011 W33-2011 W35-2011 W37-2011 W39-2011 W41-2011 W43-2011 W46-2011 W48-2011 W50-2011 W52-2011 W02-2012 W04-2012 W06-2012 W08-2012 W10-2012 W12-2012 W14-2012 W16-2012 W18-2012 W21-2012 W23-2012 W25-2012 W27-2012

No. of Transactions

Kuwait Real Estate Transactions (2011 & 2012)

MENA REAL ESTATE RESEARCH

Y-o-Y

Private Residential Property transactions

Value transacted (KWD Mn)

Investment Property transactions

Value transacted (KWD Mn)

Source: MOJ, Kuwait

8


W01-2011 W03-2011 W05-2011 W07-2011 W09-2011 W11-2011 W13-2011 W15-2011 W17-2011 W19-2011 W21-2011 W23-2011 W25-2011 W27-2011 W29-2011 W31-2011 W33-2011 W36-2011 W38-2011 W40-2011 W42-2011 W44-2011 W47-2011 W49-2011 W51-2011 W01-2012 W03-2012 W05-2012 W07-2012 W09-2012 W11-2012 W13-2012 W15-2012 W17-2012 W19-2012 W21-2012 W23-2012 W25-2012 W27-2012 W29-2012 W31-2012

No. of Transactions

Residential

Commercial

Total Value

No.

Value

W-o-W

No. -27.9% -60.2%

Value -25.3% -47.9%

No. -11.7% -45.3%

11.4% -52.3%

-24.9% -57.7%

-9.6% -50.3%

3,000 3,000

2,500 2,500

2,000 2,000

1,500 1,500

1,000 1,000

500 500

0 0

No. of Transactions

450 3,500

400

350 3,000

300 2,500

250

2,000

200

150

1,500

100

1,000

50

500

0

0

No. of Transactions

Value Transacted (SAR Mn)

Source: MOJ

Kuwait Financial Centre “Markaz”

9

Value Transacted (SAR Mn)

Transactions

Value Transacted (SAR Mn)

W01-2011 W03-2011 W05-2011 W07-2011 W09-2011 W11-2011 W13-2011 W15-2011 W17-2011 W19-2011 W21-2011 W23-2011 W25-2011 W27-2011 W29-2011 W31-2011 W33-2011 W36-2011 W38-2011 W40-2011 W42-2011 W44-2011 W47-2011 W49-2011 W51-2011 W01-2012 W03-2012 W05-2012 W07-2012 W09-2012 W11-2012 W13-2012 W15-2012 W17-2012 W19-2012 W21-2012 W23-2012 W25-2012 W27-2012 W29-2012 W31-2012

No. of Transactions

MENA REAL ESTATE RESEARCH

KSA Real Estate Transactions (2011 & 2012)

Riyadh Real Estate Transactions Y-o-Y

Riyadh – Residential transactions

Value Transacted (SAR Mn)

Riyadh – Commercial transactions


W01-2011 W03-2011 W05-2011 W07-2011 W09-2011 W11-2011 W13-2011 W15-2011 W17-2011 W19-2011 W21-2011 W23-2011 W25-2011 W27-2011 W29-2011 W31-2011 W33-2011 W36-2011 W38-2011 W40-2011 W42-2011 W44-2011 W47-2011 W49-2011 W51-2011 W01-2012 W03-2012 W05-2012 W07-2012 W09-2012 W11-2012 W13-2012 W15-2012 W17-2012 W19-2012 W21-2012 W23-2012 W25-2012 W27-2012 W29-2012 W31-2012

No. of Transactions

W-o-W -1.3% -36.4%

-11.6% -35.6%

-8.1% -32.0%

52.4% 35.9%

-2.6% -35.6%

6.5% -18.2%

600 1,800

500 1,600

1,400

400 1,200

300 1,000

800

200 600

100 400

200

0 0

No. of Transactions

180 1,200

160

140 1,000

120 800

100

80

600

60

400

40

20

200

0

0

No. of Transactions

Kuwait Financial Centre “Markaz”

Value Transacted (SAR Mn)

Transactions No. Residential Value No. Commercial Value No. Total Value

Value Transacted (SAR Mn)

W01-2011 W03-2011 W05-2011 W07-2011 W09-2011 W11-2011 W13-2011 W15-2011 W17-2011 W19-2011 W21-2011 W23-2011 W25-2011 W27-2011 W29-2011 W31-2011 W33-2011 W36-2011 W38-2011 W40-2011 W42-2011 W44-2011 W47-2011 W49-2011 W51-2011 W01-2012 W03-2012 W05-2012 W07-2012 W09-2012 W11-2012 W13-2012 W15-2012 W17-2012 W19-2012 W21-2012 W23-2012 W25-2012 W27-2012 W29-2012 W31-2012

No. of Transactions

MENA REAL ESTATE RESEARCH

Dammam Real Estate Transactions Y-o-Y

Dammam – Residential transactions

Value Transacted (SAR Mn)

Dammam – Commercial transactions

Source: MOJ

Value Transacted (SAR Mn)

10


W01-2011 W03-2011 W05-2011 W09-2011 W11-2011 W13-2011 W15-2011 W17-2011 W19-2011 W21-2011 W23-2011 W25-2011 W27-2011 W29-2011 W32-2011 W34-2011 W38-2011 W40-2011 W42-2011 W44-2011 W47-2011 W49-2011 W52-2011 W02-2012 W04-2012 W06-2012 W08-2012 W10-2012 W12-2012 W15-2012 W17-2012 W19-2012 W21-2012 W23-2012 W25-2012 W27-2012

No. of Transactions

Transactions

No.

Value

W-o-W 86.00% 78.85%

-33.08% 21.26%

400 4,000

350 3,500

300 3,000

250 2,500

200 2,000

150 1,500

100 1,000

50 500

0 0

No. of transactions

Kuwait Financial Centre “Markaz”

Value Transacted (QAR Mn)

Qatar Real Estate Transactions (2011 & 2012)

MENA REAL ESTATE RESEARCH

Y-o-Y

Value transacted (QAR Mn)

Source: MOJ

11


MENA REAL ESTATE RESEARCH

Disclaimer This report has been prepared and issued by Kuwait Financial Centre S.A.K (Markaz) and its subsidiaries. Markaz is regulated by the Capital Markets Authority and the Central Bank of Kuwait. The report is owned by Markaz and its subsidiaries and is privileged and proprietary and is subject to copyrights. Sale of any copies of this report is strictly prohibited. This report cannot be quoted without the prior written consent of Markaz and its subsidiaries. Any user after obtaining Markaz and its subsidiaries permission to use this report must clearly mention the source as “Markaz and its subsidiaries “. The report is intended to be circulated for general information only and should not to be construed as an offer to buy or sell or a solicitation of an offer to buy or sell any financial instruments or to participate in any particular trading strategy in any jurisdiction. The information and statistical data herein have been obtained from sources we believe to be reliable but no representation or warranty, expressed or implied, is made that such information and data is accurate or complete, and therefore should not be relied upon as such. Opinions, estimates and projections in this report constitute the current judgment of the author as of the date of this report. They do not necessarily reflect the opinion of Markaz and its subsidiaries and are subject to change without notice. Markaz and its subsidiaries has no obligation to update, modify or amend this report or to otherwise notify a reader thereof in the event that any matter stated herein, or any opinion, projection, forecast or estimate set forth herein, changes or subsequently becomes inaccurate, or if research on the subject company is withdrawn. This report may not consider the specific investment objectives, financial situation and the particular needs of any specific person who may receive this report. Investors are urged to seek financial advice regarding the appropriateness of investing in any securities or investment strategies discussed or recommended in this report and to understand that statements regarding future prospects may not be realized. Investors should note that income from such securities, if any, may fluctuate and that each security’s price or value may rise or fall. Investors should be able and willing to accept a total or partial loss of their investment. Accordingly, investors may receive back less than originally invested. Past performance is not necessarily indicative of future performance. Kuwait Financial Centre S.A.K (Markaz) and its subsidiaries may seek to do business, including investment banking deals, with companies covered in its research reports. As a result, investors should be aware that the firm may have a conflict of interest that could affect the objectivity of this report. This report may provide the addresses of, or contain hyperlinks to, websites. Except to the extent to which the report refers to website material of Markaz and its subsidiaries, Markaz and its subsidiaries has not reviewed the linked site and takes no responsibility for the content contained therein. Such address or hyperlink (including addresses or hyperlinks to Markaz’s and its subsidiaries own website material) is provided solely for your convenience and information and the content of the linked site does not in any way form part of this document. Accessing such website or following such link through this report or Markaz’s and its subsidiaries website shall be at your own risk. For further information, please contact ‘Markaz’ at P.O. Box 23444, Safat 13095, Kuwait; Email: research@markaz.com; Tel: 00965 1804800; Fax: 00965 22450647.

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Markaz Research Offerings Economics Got a CMA: What Next? (Feb-12) How is the GCC preparing for a AA+ World? (Sept-11) MENA Unrest (Apr-11) Kuwait Development Plan (Mar-11) Kuwait Capital Market Law (Mar-10) The “Vicious Square” Monetary Policy options for Kuwait (Feb-08) To Leap or To Lag: Choices before GCC Regulators (Apr-07) GCC for Fundamentalists (Dec-06) GCC Leverage Risk (Nov-06)

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GCC Defensive Bellwether Stocks (Jan-12) KSE 15 Index (Sept-11) The Golden Portfolio (Sept-10) Persistence in Performance (Jun-10) Missing the Rally (Jun-09) This Too Shall Pass (Jan-09) Fishing in Troubled Waters (Dec-08) Down and Out: Saudi Stock Outlook (Oct-08) Mr. GCC Market-Manic Depressive (Sept-08) Global Investment Themes (June-08) To Yield or Not To Yield (May-08) China and India: Too Much Too Fast (Oct-07) A Potential USD 140b Industry: Review of Asset Management Industry in Kuwait (Sep-07) A Gulf Emerging Portfolio: And Why Not? (Jun-07) Derivatives Market in GCC (Mar-07) Managing GCC Volatility (Feb-07)

Stress Testing Kuwait Banks (May-11)

Kuwait Investment Sector (Sept-10) The New Regulations on Kuwait Investment Sector (Jun-10)

GCC Banks - Done with Provisions? (Jan-10) Shelter in a Storm (Mar-09) Banking Sweet spots (Apr-08) Oil & Gas

GCC Petrochemicals (2012)* Diworsification: The GCC Oil Stranglehold (Jan-09) Monthly Regional Petroleum Projects Commentary Daily Oil & Gas Bulletin

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