STABLE & SLOWING

Following a two-year boom, Abu Dhabi real estate is expected to stabilise this year, but the negative impact of lower oil prices could be felt in the longer term.

FOLLOWING A RALLY in 2013 and 2014, Abu Dhabi’s real estate market is facing a cooling off period linked to weaker sentiment and lower oil prices.

Average sales prices across the capital’s freehold markets increased by just under 24 per cent in 2014, according to real estate consultants Cluttons, compared to 31 per cent in 2013. In Q1 of this year, however, the growth rate slowed to just 0.5 per cent.

It was a similar story in the rental market. In the two most recent quarters, residential rents increased by two per cent and three per cent respectively in the capital, according to CBRE, compared to 12 per cent growth in the last year.

Looking ahead, real estate researchers are expecting a stable to negative market, based on three per cent oil-volatilityimpacted economic growth expectations, and the government reigning in spending in some areas.

“We may continue to see growth for the first part of the year, but looking forward, if the economic situation isn’t improving, we may start to see some negative growth there as well,” said Matthew Green, director and head of research at CBRE Middle East.

“This economic uncertainty is not good for investors. Obviously there is a different structure and Abu Dhabi is more of an occupier market than an international investor market, but maybe we’ll see some negative growth before the end of the year,” he added, suggesting a decline of up to five per cent is possible in the long term.

STAYING IN THE GAME

Faced with low oil prices in an economy still 50 per cent dependent on hydrocarbons, and heavily reliant on government and oil and gas sector workers, real estate agents and developers are looking at alternative segments as potential bright spots.

Among them, Cluttons points to Abu Dhabi Global Market Place (ADGM), the emirate’s up and coming financial Free Zone, as addressing pent up demand for Grade A office space in the city.