Abu Dhabi real estate market remains subdued, says Asteco

Business Tuesday 24/October/2017 15:11 PM
By: Times News Service
Abu Dhabi real estate market remains subdued, says Asteco

Muscat: Abu Dhabi continues to experience negative growth across all property types due to weakness in the job market and reduced housing allowances, according to the third quarter Abu Dhabi Real Estate report by leading real estate consultancy Asteco.
Average apartment rental rates dropped by 3 per cent over the quarter and by 10 per cent over the last 12 months, with the highest declines recorded for mid-end properties and large units within prime and high-end projects.
In the high-end segment, the highest year-on-year (YoY) declines were recorded at Abu Dhabi Corniche (down 15 per cent), while mid-end and low-end areas evidenced the largest declines, including Al Reef Downtown, Khalifa and MBZ City.
Sales prices for apartments declined 3 per cent quarter-on-quarter (QoQ) and 10 per cent y-o-y. The most significant y-o-y declines in sales prices were recorded in Al Muneera and Reef Downtown, both down 12 per cent, with the highest quarter-on-quarter declines reported in City of Lights, down 8 per cent, and Sun & Sky Towers, down 6 per cent. Both Al Bandar and Saadiyat Beach Residence showed resilience, remaining unchanged for the quarter.
Approximately 2,750 apartments have been completed across the Emirates since the beginning of 2017, compared with 1,350 for the 2016 calendar year. In addition to the 800 units delivered in the third quarter, a further 1,500 apartments are due for handover before the end of 2017.
“We are experiencing a weak labour market with reduced employment opportunities and a tightening of housing allowances. This, together with additional supply since 2016 has led to increased vacancy rates, which we expect to continue into 2018. Landlords are discounting rents and offering flexible payment terms, (up to 12 cheques) to retain existing tenants and secure new leases,” said John Stevens, managing director, Asteco.
Villa rental rates decreased by 3 per cent quarter-on-quarter and by 6 per cent y-o-y.
Al Raha Gardens, Hydra Village and the larger units within Saadiyat Beach Villas recorded a more pronounced drop, with rents softening by 7 per cent, 4 per cent and 5 per cent, respectively.
The highest y-o-y decline in villa sales was recorded in Hydra Village, at 9 per cent, with quarter-on-quarter results showing a decline of 3 per cent, the same as Raha Gardens.
Only a small number of villas were delivered in 2016; however, approximately 550 villas have been completed in 2017 and a further 250 villas are due for delivery before the end of the fourth quarter.
Stevens said: “Rising vacancy rates have been experienced in many villa communities as tenants opted to downsize to smaller or more affordable properties, whilst some even transitioned to apartment units to reduce their accommodation expenses.”
He added: “Despite a marginal decrease in sales prices for completed villas, demand for prime and high-end off-plan projects, particularly those located on Yas Island and Saadiyat Islands, remained strong.”
Similar trends echoed throughout the office market due to a subdued economy, despite a modest recovery in the oil price since the start of the year. Office accommodation is evidencing low occupancy rates, with approximately 170,000 square metres of office space having been delivered over 2016 and 2017.
“Office rents were broadly unchanged over the quarter; however, evidence indicates declines of 5 per cent to 10 per cent on contract renewals within several Grade A and B office buildings. Landlords have actively sought to reconfigure accommodation into smaller units and offer rent free incentives to retain existing tenants and secure new tenants,” noted Stevens.