Rents in capital turn affordable for tenants

dubai — Slackening demand, oversupply and the ongoing economic uncertainty are weighing on Abu Dhabi’s residential real estate market. This has sent residential sale prices tumbling in Abu Dhabi and rents have also declined in most districts, making the UAE’s capital more affordable.

Abu Dhabi is home to the country’s oil industry, which dominates the emirate’s economy. The sustained slump in crude prices since mid-2014 led to big cuts in oil sector investment and the knockon effects for the real estate sector show little sign of abating.

Ivana Gazivoda Vucinic, head of advisory and research, Chestertons Mena, said: “We are expecting prices to remain under pressure throughout the rest of the year due to the flat economic sentiment and the launch of several new residential projects compounded by a lack of investor confidence. The sluggish economic growth of the emirate is expected to have a detrimental impact on government spending which, in turn, could lead to a drop in property prices because of high vacancy rates caused by job losses.”

According to Chestertons Mena, apartments sales prices on average decreased by three per cent during the second quarter of the year. Apartments on Al Reem Island witnessed the greatest decline of seven per cent. Properties in Al Ghadeer were the only bright spot, rising by four per cent.

Average villa sales prices fell by four per cent in Q2, with Khalifa City recording the largest drop at 10 per cent. Al Ghadeer and Al Reef witnessed declines of just two per cent. Al Raha Gardens fell three per cent.

We are expecting prices to remain under pressure throughout the rest of the year Ivana Gazivoda Vucinic, Head of advisory and research, Chestertons Mena

Saadiyat Island remains the most expensive neighbourhood despite a 5.2 per cent decline, a Propertyfinder report adds.

It was a similar story in the rental market. Average apartment rents fell by three per cent, with only Al Raha Beach area showing a marginal one per cent increase. Al Ghadeer two-bedroom apartments witnessed a decline of two per cent. Al Reef Downtown and Al Reem Island declined by 2.5 per cent and 3.5 per cent respectively.

Average villa rents also saw a slide of two per cent, with properties in Al Reef witnessing a drop of 3.5 per cent. Al Raha and Khalifa villa decreases were more subdued at 0.5 per cent and one per cent respectively.

Gazivoda Vucinic said: “We expect to see residents continuing to downsize their accommodation and moving to more affordable areas as companies cut back on accommodation allowances. When government spending begins to increase, we can see confidence returning as more public sector jobs are created.”