Abu Dhabi rents become affordable
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dubai — Employment uncertainty and the rising cost of living are adding pressure on the residential leasing market in Abu Dhabi. Residents are now tightening their spending and gravitating towards affordable housing, according to real estate consultancy CBRE.
In Q2 2017, average house rents in Abu Dhabi declined by nearly 11 per cent year on year and three per cent quarter on quarter. However, there is a high degree of market fragmentation, with upscale properties experiencing larger drops of around 12 per cent, against more affordable properties which have declined between six to 10 per cent.
Mat Green, head of research and consulting, CBRE Middle East, said: “As vacancy rates increase, rent declines are also increasing, driven by the addition of new units in locations such as Reem Island, as well as various standalone properties across the capital. As residents become more prudent in their spending, smaller units in cheaper suburban locations are finding more favour.”
The capital city’s residential sales market is seeing declining values and low transaction volumes, with prices falling four per cent during Q2. Al Raha Beach and Reem Island remain popular investment locations, with sales rates ranging from Dh14,000 to Dh17,200/sqm. More affordable investment locations, such as Al Reef and Hydra Village, have prices ranging between Dh8,400 to Dh12,175/sqm, and remain in high demand due to their lower price point.
However, the delivery of new residential units over the next 12 months is likely to further dampen an already weak sales market, with investors deferring their buying decisions anticipating further dips in prices.
The emirate recorded 1.12 million hotel visitors during Q2, roughly 10 per cent higher than Q2 2016. However, despite the rising guest numbers, Abu Dhabi’s hospitality market continues to face challenges, amid rising new supply and a weak corporate market, which have resulted in a drop in revenue.
“With soft conditions across the traditional tourism segments, the Tourism and Culture Authority has set sights on developing the cruise industry. The emirate is hoping to welcome close to 250,000 passengers during the main cruise season, which runs from October to June,”
as vacancy rates increase, rent declines are also increasing Mat Green, head of research and consulting, CBRE Middle East
said Green. Total cruise passengers are forecasted to grow by a compound annual growth rate of 22 per cent, reaching 450,000 passengers by 2020.
According to data from STR Global, Abu Dhabi’s year-to-date occupancy rate to June 2017 reached 70 per cent, down from 72 per cent in 2016. During the same period, the average ADR dropped from Dh468/room/night in 2016 to reach Dh435/room/night in 2017, equating to a seven per cent annual decline.
Average RevPAR also fell by around 10 per cent to Dh309/ room/night in comparison to the Dh339/room/night achieved in the year-to-date to June 2016.
— business@khaleejtimes.com