Abu Dhabi is seeing significant drops in residential rental prices due to increased supply and the inability of people to gain financing. Some areas are experiencing decreases as much as 5 to 10% in the second quarter, although analysts suspect prices will turn around as more people who make the commute for work from Dubai start taking advantage of the lower prices. Commercial real estate rents are also dropping and suppliers are offering incentives to attract renters, although this, too, is expected to turn around as absorption outpaces construction completion. For more on this continue reading the following article from PropertyWire.
Abu Dhabi property prices are becoming more affordable as residential real estate rents have dropped of 5 to 10% in the second quarter of 2011 compared to the first three months of the year.
According to the latest real estate analysis report covering the residential and commercial property markets in the emirate from Cluttons, average sales rates in the secondary market are between AED1,000 to AED1,300 per square foot, an average drop of 30% from the original purchase price.
Rental rates in more established areas have seen a continued drop as seen in the first quarter of the year where falls of 5 to 10% at the lower end of the market have been common. It also shows that private freehold villas are selling for an average price of between AED900 to AED1,050 per square foot.
According to the report, supply continues to exert downward pressure on rents in Abu Dhabi, and the residential apartment market has experienced some significant falls since the beginning of the year.
‘Whilst potential buyers continue to find it difficult to secure finance, which is further holding the market back, the rental market appears to be picking up, with increasing evidence and sentiment that many professionals who commute from Dubai to work in Abu Dhabi, may relocate to the capital over the summer,’ it says.
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‘Now seeing Abu Dhabi as a more affordable place to live, it’s hoped they will take advantage of the fall in apartment rental levels. Some annual rental values in new developments in Abu Dhabi are almost at parity with high end apartment buildings in Dubai Marina and Palm Jumeirah,’ it adds.
One of the key points in the report points to a welcome source of secure income from the Emirati Family Housing Programme (EFHP) formulated by the Urban Planning Council (UPC) to provide homes for Nationals. With a growing Emirati population, and the need to improve housing quality, 30,000 homes for Emiratis in the Capital are planned over the next twenty years, and it is envisaged that the properties will be gifted to Emirati families on completion.
In the commercial sector prime rents have slid from the quarter three 2008 peak of AED3,800 per square metre per annum and today stand at approximately AED1,700 square metre per annum.
Office supply is projected to increase by 400,000 square meters in 2011, taking the total stock to around three million square meters by the end of the year. Overall the report says that market fundamentals remain upbeat, as GDP growth forecast of 3.8% by the end of the year.
The upward supply of office space is expected to lower vacancy levels as absorption rates fail to keep pace with office completions.
Competing against Grade A office space, the secondary market office stock has experienced a fall in rental rates as poor quality finishes, limited natural light, lack of IT services, and above all, restricted car parking and ancillary facilities for staff and visitors have been a source of frustration, the report points out.
‘However, given the elevated level of vacancy in the market, landlords continue to compete for tenants by offering concessions and flexible lease terms which tenants are taking advantage of. At 50 to 150 square meters, most of these requirements continue to be small as companies attempt to establish a foothold in the market,’ it says.
The slowdown has forced developers to reassess their schemes, scale back more ambitious projects and plan product more aligned to the end occupier, the analysis says. ‘Breaking up floor plates to accommodate these smaller requirements is one such measure landlords have had to adopt to boost occupancy. With healthy fundamentals and an increase in the number of companies relocating to Abu Dhabi, we believe that the market will remain tenant friendly with a focus on quality in terms of real estate offering,’ it adds.
This article was republished with permission from PropertyWire.