Abu Dhabi real-estate market facing challenging conditions

Muscat: The Abu Dhabi real-estate market is facing challenging market conditions in the second quarter due to a drop in demand and increase in supply, according to a new report.
Second quarter rental prices for apartments and villas declined by 4 four per cent and 1 percent, respectively, according to a latest report from leading real-estate consultancy Asteco.
“Approximately, 600 apartments were handed over during the second quarter, and more than 2,000 additional units are expected to be delivered over the next six months, placing further pressure on rates. 2017 will continue to be a challenging year for the Abu Dhabi real-estate industry,” said John Stevens, managing director, Asteco.
Overall, Asteco research identified a 4 per cent quarterly decline in apartment rental rates in the second quarter this year. Prime, high and low-end properties recorded drops of 3 per cent, whereas mid-market properties were faced with the softening of 5 per cent decline.
High-end apartments in Central Abu Dhabi, Corniche and Khalidya/Bateen posted declines of 4 per cent, 2 per cent and 2 per cent, respectively. Declines in lower-end properties in the same locations were also recorded, with a relatively subdued 2 per cent drop.
Apartment sales values softened 4 per cent quarter-on-quarter and 8 per cent annually. Sales activity has improved marginally since the beginning of the year as developers offered more competitive rates.
Furthermore, demand for off plan developments in popular locations, such as Mamshah Al Saadiyat and The Bridges on Reem Island, achieved good transactional volumes.
A decline in sales volumes were broadly evidenced, with the exception of Marina Square, which remained flat quarter-on-quarter, although it declined 4 per cent on an annual basis. In other areas, Al Bandar and Al Zeina evidenced a 6 per cent quarter-on-quarter softening, whereas The Gate and Sun and Sky Towers saw moderate drops of 2 per cent and 3 per cent, respectively during the same period.
Annually, Hydra Avenue (City of Lights) and Saadiyat Beach Residences saw sales prices slip 13 per cent and 11 per cent, respectively, with Al Muneera and Reef Downtown both declining 10 per cent.
Villa rental rates recorded a nominal change between the first quarter and second quarter of 2017, falling just 1 per cent on average, and 5 per cent over the year. Drops were more noticeable among the mid-to-low quality products located in Abu Dhabi City and Al Reef.
Saaydiyat Island villa rents remained flat in the second quarter, as did Hydra Village and Mohamed Bin Zayed City. Other minimal changes were witnessed in Al Raha Beach, Nayhan Camp/Muroor, Al Raha Gardens and Khalifa City where 1 per cent quarterly declines were recorded.
Sales prices for completed villas decreased by 2 per cent in second quarter 2017, and by 4 per cent during the last 12 months.
“Several prime and high-end projects, such as Jawaher Al Saadiyat on Saadiyat Island and Marina Sunset Bay (behind Marina Mall), were launched and recorded good levels of demand due to the overall lack of quality villa developments in Abu Dhabi” said Stevens.
“In addition, new projects on Yas Island and Saadiyat Island continue to achieve strong demand, supported by existing and planned demand drivers, such as schools, leisure facilities and commercial hubs” he added.
Office rents fell 2 per cent over the quarter and 9 per cent, compared with second quarter 2016. Some units were reported to be discounted by up to 15 per cent below the market rate. Demand remains stronger for smaller units, which are being offering with incentives to retain tenants to negate the lack of new take-up.
Stevens said: “The decline in the office market can be attributed to limited new demand and a dearth of tenants upgrading to larger units or better locations. In an effort to adapt to current market conditions, some landlords are sub-dividing larger office tenancies to meet demand of those looking for smaller units.”