Dh50b stimulus, visa rules to revive capital's realty market

Capital values of residential property prices in Abu Dhabi declined over 12 per cent since last year and 3.2 per cent since the beginning of 2019. The market is expected to soften further in the near-term, but Dh50-billion stimulus and new visa rules will ease pressure on the capital's real estate market in the medium to long term, analysts say.
According to ValuStrat data released on Tuesday, most areas lost 12 per cent in capital values on an annual basis, however, two locations were slightly less affected by the negative trend. They were apartments on Saadiyat Island and villas located in Mohamed Bin Zayed City, with capital values declining 9.3 per cent and 7.1 per cent, respectively.
The weighted average apartments value stood at Dh1,046 per sqft and Dh698 per sqft for villas. However, prices in some areas are nearly bottoming out, hence, the asking prices have started to inching up.
"Interestingly, as demand for affordable homes grows, asking sales prices for villas in Abu Dhabi saw a slight uptick of one per cent when compared to the previous quarter. However, it remains to be seen if this trend continues over the coming quarters," said Haider Tuaima, head of real estate research at ValuStrat. According to JLL's report on Abu Dhabi real estate market released on Tuesday, first-quarter 2019 saw the delivery of approximately 1,700 units, bringing the total residential stock to 259,000 units.
JLL estimated that a further 8,000 units are scheduled to enter the market by the end of 2019, mainly within major master plans.  Looking ahead, an additional 7,000 units are expected to handover in 2020 which would increase total residential supply to 274,000. However, should current market conditions and subdued levels of demand pertain, JLL expects delays in the handover of projects.
The consultancy revealed that residential sale prices for prime villas declined one per cent on a quarterly basis and 14 per cent annually, whereas prices for apartments recorded a four per cent decline in Q1 2019 and 15 per cent decline year-on-year to reach approximately Dh10,200 per square metres for both apartments and villas.
"Looking ahead, the expected delivery of 15,000 residential units over the next two years - 2019-2020 - coupled with a slowdown in demand is likely to continue exerting pressure on rents and sale prices," JLL said.
Peter Stebbings, head of Abu Dhabi office, JLL, said in the long run, demand for office space could be generated by the easing of regulations and the major stimulus package announced by the government last year. "Demand could also come from private sector businesses following the new law formalising the public-private partnership (PPP) programme," he said.
Real estate services firm Chestertons also reported on Tuesday that Abu Dhabi's Dh50-billinon stimulus package and new visa rules will ease pressure on the UAE capital's real estate market in the medium to long term.
The consultancy noted that new visa rules will encourage expatriates to stay longer in the emirate. However, the market is likely to continue to soften in the short-term. It said average apartment sales and villa prices fell by three per cent and one per cent, respectively, in first quarter of 2019 compared to the previous quarter, and with over 11,000 units expected to be delivered throughout 2019.
"The combination of the Dh50 billion government stimulus package, new visa rules designed to encourage expats to stay longer and invest in the Emirates and developers implementing lower ticket prices and flexible payment plans are all likely to have a positive impact on Abu Dhabi's real estate market," said Ivana Vucinic, head of Consulting, Chestertons Mena.
However, until the combined effects of those initiatives have been realised, Vucinic expects investors and tenants to remain cautious.
"We've seen the real estate market become increasingly effected by new supply entering the market, reduced demand, ongoing redundancies and companies providing lower housing allowances. This has, however, presented an opportunity for some residents to make cost savings by relocating to smaller units or maximising the opportunities of the sustained rental rate downtown by upgrading to larger units with better quality specifications, located in more popular areas," said Vucinic. - waheedabbas@khaleejtimes.com