Capital housing market consolidates
The real estate market in the Capital is down and prices will decline further this year, experts said during the real estate market exhibition Cityscape in Abu Dhabi.
According to property consultants Cluttons, the market is in depression.
Cluttons Abu Dhabi head Edward Carnegy said office rents have weakened. Taking the instance of the Capital’s Grade A property — Al Reem Island, Carnegy said: “We are seeing a 20-30 per cent drop in rental rate yearon-year at Addax Tower. There’s lot of supply and demand is relatively scarce.”
He said government activity is high and that has led to consolidation of the market. “At Al Reem Island, there’s 140,000sqm of office supply coming on stream this year, that’s over four buildings. We hear there’s one government entity that will take the entire building.”
Carnegy said the government may announce more projects this year. “This has a trickledown effect into the economy. With oil prices, retrenchment across all entities, there needs to be some stimulus.”
Office rents have dipped yearon-year. “There are pockets of vacancies opening up all over the city. Buildings with 99-100 per cent occupancy are now 10-15 per cent vacant. If you go into Grade B and C stock, there’s 1520 per cent vacancy.”
Cluttons Abu Dhabi residential sales and leasing manager Katie Burnell said residential rents are softening and the trend will continue for the rest of the year. “Al Reem Island has an oversupply of stock at the moment. Landlords need to be more flexible with their pricing and payment. Abu Dhabi was traditionally a one-cheque market but now we are finding four to be the norm. Landlords are offering other incentives like rent-free periods; some pay agency fees something that was unheard of so far.”
“Studio and one-bedroom are still in demand. The larger family villas have slowed considerably and senior executives have either relocated families out of the country and 4-5 bedroom villas aren’t their requirement anymore. High end villas on Saadiyat Island have been hit hard.”
The demand in mainland, however, continues.
On the sales market, Carnegy said: “The buyers are more cautious. People are looking to see stability in market. There’s enough supply and people know they can afford to wait. There’s also a mismatch between buyer-seller expectations.”
Resale margins are not big and owners are leasing for now. “Individual landlords are competing with offers and this is also bringing down rents.”
On the outlook for the year, they said: “Cluttons forecast 5-7 per cent further decrease in rents. There’s more softening to happen till first quarter of 2018. There’s lot of supply and landlords need to be competitive. Retaining tenants is something every landlord needs to look into this kind of market.”
Meanwhile, Ann Boothello, senior product marketing manager of property at dubizzle, said the firm along with real estate investment and advisory firm JLL had analysed the market and found decline in residential sale and rental prices in the first quarter of the year in comparison to last year. “There was a decline of 6-8 per cent in the rental market and sale market for prime commodities went down by 11 per cent.”
Affordable housing is a key trend. “People are looking to rentto-own. The focus in mid-market as yields is larger.”
Revealing a new trend she said people are increasingly looking to move out of older districts of mainland. “Tenants have more bargaining power and choices. Top searches in the website are for Khalifa City A, Gadheer Village, Al Reef downtown and Mohammed bin Zayed for one-bedrooms. For higher profiles, there’s Al Reem Island. Soon the outskirts will be the New Abu Dhabi. Mid-market segment is under the radar.”
She said a further decline in the rental and sale segment is expected in the capital, fragmented in nature, with some communities and property types to be affected more than others.
According to the dubizzle and JLL joint report, villas in the Capital have seen 5 per cent decline with Golf Gardens villas and Raha Beach villas’ prices dropping 11 per cent and 8 per cent.
Apartment sale prices dipped 5 per cent with Al Reef Downtown apartment, Al Reef villas and Al Reem Island apartments dropping by 4 per cent, 5 per cent and 7 per cent.
Rental prices for three-bedroom villas dropped by 8 per cent to 12 per cent.
Apartments for rent have declined by 6 per cent for one, two and three bedrooms.
According to JLL, average Grade A and Grade B office rents have decreased by 2 per cent and 5 per cent in third quarter of 2016 reaching approximately Dh1,760 per sqm and Dh1,030 per sqm.
JLL Abu Dhabi office head David Dudley said the Capital saw significant supply completions from 2009 to 2014 across all sectors due to major land releases following the launch of the 2030 plan and the creation of large-scale master developments across Abu Dhabi.
“This led initially to over-supply and increased vacancy rates, followed by market absorption as major government spending plans and improved sentiment fueled demand,” he added.
ashwani@khaleejtimes.com