Abu Dhabi real estate to slow down
Abu Dhabi's property market is expected to see a noticeable slowdown in the next 12 months, compounded by a reduction in government spending and stagnant salary levels, says property advisory firm Asteco.
In its latest UAE Real Estate Report, Asteco in its outlook for 2016 said low oil prices would exert ongoing downward pressure on the market despite limited pipeline growth.
Following a slow but overall positive market performance in 2015, which saw apartment rental rates increase, on average, by five per cent, with prime projects achieving up to 10 per cent growth, and 3-4 per cent growth for apartment sales prices, Asteco expects a noticeable slowdown in the next 12 months, compounded by a reduction in government spending and stagnant salary levels. "Expatriates make up around 75 per cent of the population in the capital and are a major demand driver for residential property. So unless there is a significant shift in labour requirements, we feel that the existing supply and demand dynamic will keep the market in equilibrium in the short to medium term.
In addition, the new property law - No.3 of 2015 - should boost investor confidence with improved sector regulations across a number of key areas," said Jerry Oates, general manager, Asteco Abu Dhabi. A total of 2,000 apartments and 100 villas were delivered last year including 850 units in phase one of Reem Island's Hydra Avenue project, 160 units at Sea Side Tower, also on Reem Island, and 312 serviced apartments at Saraya's Creek Tower on the Corniche.
"The temporary removal of the rent cap also helped increase rental rates for mid to low end units in line with market rate as these were previously underpriced. We are also, expecting a slight increase in rental rates for some popular projects, as well as some older buildings inside Abu Dhabi City that didn't increase their rates in 2015," added Oates. At the top end of the market, prime two-bed apartments on Abu Dhabi Island were renting at an average of Dh191,000 in 2015, up from Dh175,000 the previous year, while high-end two-beds in Central Abu Dhabi jumped from Dh145,000 to Dh150,000 and at Al Raha Beach from Dh155,000 to Dh161,000. At the mid and lower end, Reef Downtown increased from Dh100,000 to Dh104,000 and Corniche two-beds from Dh 120,000 to Dh125,000.
Abu Dhabi will add 3,000 apartments and 850 villas to its residential supply this year, including Wave Tower with 229 units and Solaris Towers with 600 units on Reem Island, and phase one of Hidd Al Saadiyat will add 488 villas. With four per cent recorded growth in apartment sales prices, popular Raha Beach communities Al Bandar and Al Zeina moved upwards from Dh1,550 per square foot to Dh1,650 and Dh1,200 to Dh1300 respectively. For villas, zero per cent growth last year saw per square foot sales prices stuck at Dh 1,020 for Golf Gardens, Dh650 for Hydra Village and Dh1,500 for the Saadiyat Beach Villas.