Rental rates for apartments, villas in Abu Dhabi drop

Muscat: Rental rates for both apartments and villas in Abu Dhabi have been directly impacted by the current macroeconomic challenges, witnessing declines of up to three per cent in third quarter 2016, according to the latest research report from property agency, Chestertons Mena.
Continued cost cutting and downsizing in the oil and government sectors has caused increasing economic uncertainty, job cuts and, in many cases, a drop in employment allowance, forcing residents to seek cheaper and smaller options.
“Due to the continuing instability in the job market, demand has weakened in the last few months with major demand arising from the middle and low income groups focusing largely on the affordable housing segments of the Emirate,” said Robin Teh, UAE country manager/director valuations & advisory UAE, Chestertons Mena.
“Further drops in rents are expected, in line with the trend in neighboring Dubai,” he added.
Al Bandar remains one of the most expensive areas to rent in the Emirate at Dh185,000 for an average two-bedroom apartment, despite an Dh8,000 reduction compared to second quarter 2016. While at the opposite end of the scale, similar sized apartments in Al Ghadeer are commanding an average annual rent of Dh72,000, down Dh3,000 from the previous quarter.
In terms of the villa market, there was an average drop of three per cent across the villa communities covered in the Chestertons report. Three bedroom apartments in Al Reef, Al Raha Gardens and Khalifa City declined by 3 per cent while similar sized units in Saadiyat Island declined by a marginal one per cent.
Five bedroom apartments had the highest drops reaching up to 5 per cent in both Al Reef and Al Raha Gardens. There was a marginal decline of 1% in the overall residential sales prices, with areas such as Al Ghadeer and Al Reef showing no signs of apartment price depreciation. The average sale price of apartments is Dh1,330 per square foot; and Dh1,080 per square foot for villas.
Meanwhile, Abu Dhabi still remains an attractive destination for investors, with gross rental yields reaching as high as 8.5 per cent in the apartment sector; and 7 per cent for villas.
“The capital’s position as a safe haven for investors has been consistent in recent years, offering returns of 5.5 per cent and above. This has remained true throughout 2016 with overall gross rental yields at a constant level to date within the report coverage areas,” Teh said.
“Al Ghadeer and Al Reef Downtown remain the most attractive locations for investors with yields between 8 per cent and 9 per cent. Villas in Al Reef and Al Raha Gardens provide the highest yields between 6 per cent and 7 per cent,” he added.
The report also stated there were approximately 1,000 units delivered in Abu Dhabi during third quarter and a further 3,000 units are scheduled to enter the market by the end of 2016. Some of the major developments due for completion by 2020 include: The Square – Saadiyat Island, New York University Villas, Mayan Yas Island and The Island Abu Dhabi.