More Abu Dhabi tenants switch to affordable homes
Upscale properties are experiencing bigger rent drops of around 12 per cent
Employment uncertainty and the rising cost of living are adding pressure on the residential leasing market in Abu Dhabi. Residents are now tightening their spending and gravitating towards affordable housing, according to real estate consultancy CBRE.
In Q2 2017, average house rents in Abu Dhabi declined by nearly 11 per cent year on year and three per cent quarter on quarter. However, there is a high degree of market fragmentation, with upscale properties experiencing larger drops of around 12 per cent, against more affordable properties which have declined between six to 10 per cent.
Mat Green, head of research and consulting, CBRE Middle East, said: "As vacancy rates increase, rent declines are also increasing, driven by the addition of new units in locations such as Reem Island, as well as various standalone properties across the capital. As residents become more prudent in their spending, smaller units in cheaper suburban locations are finding more favour."
The capital city's residential sales market is seeing declining values and low transaction volumes, with prices falling four per cent during Q2. Al Raha Beach and Reem Island remain popular investment locations, with sales rates ranging from Dh14,000 to Dh17,200/sqm. More affordable investment locations, such as Al Reef and Hydra Village, have prices ranging between Dh8,400 to Dh12,175/sqm, and remain in high demand due to their lower price point.
However, the delivery of new residential units over the next 12 months is likely to further dampen an already weak sales market, with investors deferring their buying decisions anticipating further dips in prices.
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