Developer discounts key to home buying
2018 and probably into 2019. Abu Dhabi’s investment zones have seen marginal price declines in Q1 2018. There has been downward pressure on sales prices due to increasing supply. However, stabilising oil prices and increasing government expenditure could improve market sentiment going forward.
“The Abu Dhabi residential market is still softening — with prices falling 14 per cent YoY and rents down by 9 per cent. Further falls in prices and rentals are likely to continue over the rest of 2018,” adds Stebbings.
Apartment and villa/townhouse rents have continued to decline in Q1 2018, albeit at a slower pace than 2017. According to the Property Monitor Index, villa/townhouse rents in Abu Dhabi investment zones have registered 12-month declines of 3.8 per cent on average.
“Larger unit sizes continue to be pressured by rising vacancy levels. Tenants are choosing to move out of outlying areas of Abu Dhabi to central locations on the main island, taking advantage of the declining rents, the incentives offered by landlords and shorter commute time to key office locations.
existing owners who bought properties at the peak are becoming reluctant landlords David Godchaux, Group CEO of Core Savills
Tenants are also in a better position to negotiate terms with existing landlords,” explains Manika Dhama, senior consultant at Cavendish Maxwell.
Leasing incentives are in abundance in Abu Dhabi, ranging from monthly cheques by some developers (Abu Dhabi was a 1-cheque emirate for a long time), no agency fee payable by tenants to rent-free periods. Individual landlords are very responsive to these incentives to ensure occupancy is retained and an income is generated from their investment.
Most sales activity in Abu Dhabi
larger unit sizes continue to be pressured by rising vacancy levels Manika Dhama, senior consultant at Cavendish Maxwell
is concentrated in the off-plan segment where attractive deals are to be found. The secondary sales market continues to be muted as potential buyers remain on the sidelines waiting for the market to fall further.
“Existing owners who bought properties at the peak are becoming reluctant landlords, looking to rent to an already limited tenant pool, rather than selling much below the acquisition prices. This gap in unrealised expectation vs market reality is causing the secondary sales market to see long transaction timelines and fewer concluded transactions,” observes David Godchaux, Group CEO of Core Savills.
According to Matthew Green, head of research and consulting, CBRE: “Secondary market transactions in particular have suffered from reduced investor sentiment. However, despite a challenging backdrop, Abu Dhabi’s residential sector continues to witness an active off-plan sales market, led by a series of launches from Aldar. In 2017, Aldar is estimated to have launched close to 1,900 homes, of which 83 per cent of the units are understood to have been sold during the course of the year.”
The choice of investment areas for expats is fewer in Abu Dhabi than in Dubai. “The market is split into 2 segments, low-end investor [studios, 1-beds] and highlevel properties for end-users. The mid-range market is slow while buyers adopt a sit-and-wait policy,” says Edward Carnegy, director — head of Abu Dhabi office, Cluttons.
However, the geographical waterfront limitations of the core islands of Saadiyat, Reem as well as Yas will potentially make these districts restricted for future growth, curtailing oversupply concerns, reckons Godchaux.