Property market stronger in Dubai than Abu Dhabi
JLL report says prime assets seeing rental and sale price increases
Dubai’s real estate market recovery is more robust than that of neighbouring Abu Dhabi, with steady rent increases and price growth for prime assets across the hotel, retail and residential sectors, Jones Lang LaSalle (JLL) said in its Q3 report.
New regulation requiring all public sector employees and affiliates to live in Abu Dhabi is expected to positively impact real estate prices in the emirate, added the report.
“In terms of market specifics, it’s a very fragmented picture. Dubai is generally ahead of the curve as rents are finally starting to pick up whilst indicators suggest Abu Dhabi has yet to bottom out,” said Alan Robertson, CEO of JLL's MENA region.
Property prices in Abu Dhabi were less-affected when Dubai's property bubble burst in 2008, causing house prices to slump by more than 60 percent from their peak. While Dubai’s market is starting to show signs of a recovery, Abu Dhabi faces challenges as a huge supply of high-end homes is set to enter the market this year.
Abu Dhabi remains a tenant-favourable market for most asset classes, JLL said. Average asking prices for residential units in the emirate’s investment areas declined 3 percent in the third quarter to AED10,200 (US$2,700) per sqm while average rents for prime two-bedroom apartments declined 1 percent to AED 120,000 per year.
A recent circular issued by Abu Dhabi requiring its public sector employees who reside outside the emirate to relocate to the capital is expected to boost demand. “This regulation, which is planned to take affect from late 2013, could strengthen the negotiating positions of landlords and help stablise rentals in the residential market,” noted the report.
Residential sale and rental prices in Dubai are on a “clear recovery path” but major improvements remain confined to prime areas, leading to a two-tier market.
“Prime residential buildings in well-established locations continue to see improved performance, but secondary locations are still suffering from rental and price declines as tenants relocate to new high-quality projects,” it said.
Average residential prices in the emirate increased 14 percent year-on-year to August with villa sales rising 23 percent year-on-year, according to the REIDIN Residential Sale Indices. Residential rents increased 7 percent year-on-year in August, it added.
Retail rents in both emirates are starting to recover, noted the report. An estimated 200,000 sqm of gross leasable area is expected to be delivered in Abu Dhabi by mid-2013.
“Given the spending power of the local population and additional growth from increasing tourism, there remains significant demand for retail space in the Abu Dhabi market, some of which is currently serviced by Dubai. The delivery of upcoming projects will help address this unmet demand,” said JLL.
As with Dubai’s residential market, its retail sector is starting to develop into a two-tier market as demand for better performing malls, such Dubai Mall and Mall of the Emirates, increases.
“The retail market is becoming increasingly two-tier and older, less popular malls are seeing weakened demand from consumers and retailers, with mall owners having to consider new marketing techniques and product positioning,” said JLL.