Abu Dhabi real estate report shows signs of bottoming out

Abu Dhabi’s real estate report shows sustained period of falling capital values and declining rents.

Real estate firm Chestertons released its Observer: Abu Dhabi Market Report Q4 2019
Real estate firm Chestertons released its Observer: Abu Dhabi Market Report Q4 2019

A marginal decline in sales prices and rental rates during the fourth quarter has resulted in renewed optimism in the real estate market, with average villa sales prices declining just 1% and apartments notching a 2% decrease, said the ‘Observer: Abu Dhabi Market Report Q4 2019’ from real estate firm Chesterons.

In the rental market, villas witnessed a marginal fall of 2% and apartments decreased by 1% in Q4, Chestertons said.

“More favourable supply and demand dynamics, coupled with market reforms including new business licenses, long-term residency permits and allowing foreign nationals to own freehold property, are all contributing positively to Abu Dhabi’s real estate sector,” said Chris Hobden, head of strategic consultancy, Chestertons MENA.

“Going forward, we believe it is unlikely there will be the same prolonged period of price and rental decreases as witnessed over the past five years,” Hobden predicted.

Resilient sales prices

In the sales market, villa prices remained resilient across most communities with little or no price movements from Q3 2019, resulting in an average 1% decline.

Al Reef and Khalifa City were subject to marginal decreases of 1% from the previous quarter, with pricing now at $167 (AED 615) per sq ft and $234 (AED 860) per sq ft respectively.

Al Raha Beach witnessed a more pronounced 5% price drop from $315 (AED 1,160) per sq ft in Q3 to $302 (AED 1,100) per sq ft in Q4, said the report.

In the apartment sales market in Q4, the capital witnessed an average 2% decrease compared to the previous quarter. Similarly to the villa market, Al Reem Island and Saadiyat Island remained unchanged at $262 (AED 965) per sq ft and $381 (AED 1,400) per sq ft respectively.

Hobden said: “Attractive payment plans, such as the Aldar Properties rent-to-own scheme launched in late November 2019, are allowing customers to build equity in their homes for a three-year period. Although such schemes are not new to the UAE, we have noticed a resurgence as developers explore innovative ways to attract buyers.”

In contrast to the villa market, apartments in Al Reef witnessed a more marked decrease of 4%, declining from $216 (AED 797) in Q3 to $208 (AED 765) per sq ft in Q4. 

Al Raha Beach and Al Ghadeer both witnessed declines of 2%, dropping to $340 (AED 1,250) per sq ft and $197 (AED 725) per sq ft, respectively.

Softening rents

From a rental perspective, average apartment rates witnessed softening of one percent in Abu Dhabi, with Al Ghadeer, Al Reem Island, Khalifa City, Mohammed Bin Zayed City, and Muroor remaining unchanged with a typical two-bedroom apartment leasing for $14,100 (AED 52,000) per annum, $24,500 (AED 90,000) per annum, $16,300 (AED 60,000) per annum, $13,600 (AED 50,000) per annum and $17,600 (AED 65,000) per annum respectively.

Saadiyat Island apartment rental rates fell by 4%, with a typical two-bedroom apartment renting for $36,700 (AED 135,000) per annum in Q4. In comparison, modest decreases in rental rates were seen in Al Reef, Al Khalidiya and Corniche Road dropping by one percent.

In the villa rental market Q4, on average, decreased by 2% compared to the previous quarter. Al Raha Gardens had a 6% average drop, however, it was the larger five-bedroom units that saw the largest decline, dropping from $59,800 (AED 220,000) per annum in Q3, to $54,400 (AED 200,000) per annum in Q4, denoting a 9% decrease.

The most resilient villa locations in Q4 were Al Reef, Khalifa City, Al Khalidya and Mohammed bin Zayed City, with no rental declines.

“Attractive payment terms offered by developers, including rent-to-own schemes, could entice long-term tenants to buy units, potentially placing downward pressure on rents,” noted Hobden.

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