ABU DHABI RESIDENTIAL RENTS DIP 5% IN Q2 AS MORE HOUSING UNITS ARE DELIVERED

Cavendish Maxwell report says sales price declines were less marked with landlords lowering rents to offset rise in municipality fees

Residential rents in Abu Dhabi dropped by an average of 5 per cent year-on-year in the second quarter while sales price declines were less marked at about 2 per cent, according to a new report.

“Since the beginning of the year, tenants have had increasing flexibility to either negotiate rents down during renewal or migrate between communities as lower rents and increasing vacancy levels have made historically expensive locations accessible to a wider segment,” the report by consultancy Cavendish Maxwell said on Thursday.

UAE property markets have slumped amid a three-year oil price slump. Rental and sales prices faced downward pressure from rising new supply, muted demand and tightened consumer budgets.

Prices are expected to decline for the rest of 2018, albeit at a slower rate, before starting to pick up next year as market sentiment rebounds on the back of an improved economy and higher oil prices, analysts have said.

In addition to the property market slump, Abu Dhabi municipality fees have in the past month increased to 5 per cent from 3 per cent for all premises except villas, for which the fee has been set at 5 per cent, the report noted.

This monthly charge, paid as a percentage of the annual rental contract by tenants, “is expected to put further pressure on landlords trying to rent larger units, which have already been impacted from readjusted housing allowances and job losses among senior executives” during the period of low oil prices, Cavendish Maxwell said.

“Some landlords may reduce the overall rent or absorb this additional charge to attract tenants in an already constrained rental market.”

The steepest apartment rental declines in Abu Dhabi in the second quarter were recorded in Al Raha Beach (5.9 per cent), and Al Ghadeer and Al Reem Island (5.8 per cent), the report said, using data from Cavendish Maxwell’s Property Monitor database. For villas, Al Reef experienced the sharpest drop at 6.3 per cent.

For sales, villa prices in the upscale locations of Al Raha Gardens, Al Reef and Saadiyat Beach have declined by more than 2.5 per cent over the past 12 months, while apartment sale prices remained “largely stable” with an average 1.6 per cent decline on a year earlier.

Off-plan transactions continue to dominate market activity during the quarter, and buyers preferred the mid-level price segment of Dh500,000 and below. An estimated 2,300 residential units were handed over across investment zones in Abu Dhabi , and 7,200 are estimated for delivery in the second half of 2018.

“Increased participation from a wider segment of buyers will be linked to job creation and enhanced business sentiment,” Cavendish Maxwell said. “The Dh50 billion stimulus announced for Abu Dhabi

in early June is a step in this direction.”

On a half-yearly basis, Abu Dhabi rents and sale prices also declined, according to a separate report by property portal Bayut.com.

Average apartment rental prices fell year-on-year in the first half of this year, but sales price decreases hovered around 9 to 10 per cent. The steepest rental villa price declines were for five-bedroom properties in Khalifa City B, where they fell by 16.67 per cent from a year earlier.

Apartment sales price decreases ranged from 1 to 10 per cent, the report said, with the largest decrease for studio apartments in Al Reef (10.45 per cent).

Villa sales prices were “more stable than in other sectors”, with the largest decreases recorded for five-bedroom properties in Saadiyat Island (7.3 per cent). Elsewhere in Abu Dhabi, prices fell by 1 to 5 per cent, the report said.

“We have seen a pattern of decreasing prices in our recent market analysis based on listed prices by brokers, but in some areas, the decreases were small, which may suggest that some stability is returning to the market,” said Haider Ali Khan, chief executive of Bayut.