Oversupply is driving down real estate prices and rental yields in Abu Dhabi by as much as 15% in some neighborhoods, with the most precipitous drops seen in Marina Square, Mussafah and Sas Al Nakhl. The supply glut is not expected to drop through 2012, although analysts at Asteco say investors are being lured back into the market with more affordable mortgage options and price reductions. Meanwhile, prices and rents are rising in the neighboring emirate city of Dubai, likely thanks to better positioning in terms of supply. For more on this continue reading the following article from Property Wire.
While property prices and rents are rising in Dubai, neighbouring Abu Dhabi’s residential real estate market is suffering from an oversupply.
Rental rates dropped by as much as 15% in the second quarter of 2012, as new supply flooded into the market, according to the latest property report published from real estate consultancy Asteco.
‘A total of 7,400 apartments and 1,675 villas were added to the city’s rapidly expanding real estate sector in the first half of the year, triggering a wave of internal movement as existing residents sought to upgrade to better quality and value for money accommodation,’ said Elaine Jones, chief executive officer of Asteco Property Management.
As a result of the increased supply, quarter on quarter rental rates have slumped. The biggest drop was in Marina Square, which fell by 15% followed by apartment units in Mussafah and villas in Sas Al Nakhl, which both dropped by 14%.
An additional 7,000 apartment units and 4,560 villas are due to come on stream in the second half of 2012, which will put further pressure on landlords and rental levels.
In the sales market, apartments in Shams Abu Dhabi, Marina Square and Raha Beach proved the most in demand, but the growing supply meant property prices slumped in the second half of 2012.
Most areas in Shams Abu Dhabi, Al Raha Beach and Marina Square saw prices fall by around 4%, averaging AED10,600 per square metre.
‘Investors have started to re-enter the market since rental return prospects have started to improve due to price reductions and more affordable mortgage options,’ said Jones.
‘But, sales prices are still depressed overall due to the amount of available supply and the number of distressed sellers still in the market. Increased transaction activity will continue in the second half of 2012 as more projects are handed over,’ she added.
This article was republished with permission from Property Wire.