House prices, rents under pressure in Abu Dhabi
Declines most pronounced among apartments on Al Reem Island and Al Raha Garden villas
High-profile mergers of government-backed entities and sluggish business activity in Abu Dhabi have impacted jobs and placed downward pressure on housing demand in 2017, says consultancy Cavendish Maxwell.
According to the Property Monitor Index, apartment prices in Abu Dhabi investment zones registered 12-month declines of 1.8 per cent while villa/townhouse prices declined by 2.4 per cent over the same period in 2017.
Apartments in Saadiyat Beach Residences and villas/townhouses in Al Raha Gardens, Saadiyat island and Al Reef experienced average annual declines of more than 2 per cent as of December 2017.
Job losses as well as readjustment of employee benefit packages such as housing allowances have been the primary drivers of price declines in 2017.
There was limited transaction activity in the secondary market for residential properties in investment zones. Developers continued to drive off-plan sales through attractive payment plans.
House rents across Abu Dhabi investment zones declined by an average of 3.3 per cent for apartments and 3.7 per cent for villas/townhouses.
The declines were most pronounced among apartments on Al Reem Island and Al Raha Garden villas. Larger units are facing more occupancy pressure.
There were limited handovers in Abu Dhabi investment zones during 2017, amounting to 2,200 apartments and 200 villas/townhouses. Upcoming supply for 2018 is 9,200 apartments and 3,400 villas/townhouses.
Of the upcoming supply in 2018, over 4,600 apartments are expected to be handed over on Al Reem Island and around 1,100 villas are under-construction on Yas Island. Developers have staggered their launch and handover plans in response to subdued transaction activity and declining prices and rents. This phased delivery of projects is expected to continue in 2018 as developers will align completions more closely with market dynamics to avoid high vacancy levels in completed properties.
Ben Crompton, managing partner, Crompton Partners, said: "For 2018, in the near term, the trends from 2017 will continue in terms of downward pressure on rents and sale prices. Green shoots can, however, already be seen in the economy as the IMF predicts a 3 per cent increase in growth in Abu Dhabi [from 0.3 per cent in 2017 to 3.2 per cent in 2018] and 2 per cent increase in growth in the UAE overall [from 1.3 per cent in 2017 to 3.4 per cent in 2018]. Increased economic growth should lead to job creation and increase in population, which will lead to more demand for real estate."
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