Dubai seemed to bear the brunt of the recent real estate crash, but upscale projects like Palm Jumeirah have held their own while new supply is sending rents down sharply in Abu Dhabi. In both Arab emirates, commercial tenants enjoy the upper hand and upgrading is the new trend among residential buyers. See the following article from Property Wire for more on this.
Property rental rates in Abu Dhabi have been declining at a fairly fast pace as two real estate reports show that new supply is affecting the market.
Rents and leases were down as much as 7% in the fourth quarter of last year with further falls expected in 2011, according to the latest report from property management firm Asteco.
While the latest report from real estate consultants Cluttons shows that average rental prices at the lower end of the market fell 16% and those in other areas were down 8%.
Price driven demand, reduced company housing allowances and landlords being flexible with rates contributed to the decline, the report from Asteco says. Leasing rates for apartments in Abu Dhabi’s outskirts fell by an average of 7% while within the city it dropped by 6%, its report says. Rents for villas fell by 5%.
As a result buyers and tenants will have a wide range of choices in 2011, according to Elaine Jones, chief executive of Asteco. The long awaited first phases at Reem Island and new supply at Al Raha Beach are expected to come to the market soon, adding further downward pressure on resale and rental rates in Abu Dhabi, she said.
Annual rents for one bedroom apartments in areas such as Mohammed Bin Zayed City are currently around AED50,000 while those in the northern areas are around AED110,000, according to the Cluttons report. It points out that a delay in handover of units in Marina Square is doing little to boost confidence in the capital’s real estate sector.
‘The handover of hundreds of units in Marina Square is still awaited, with predictions that owners will not be able to gain access until the second quarter of 2011. These delays are hindering market confidence which waits in anticipation for the release of stock,’ said the report.
Residential property prices in Abu Dhabi have declined 30% from their peak while those in neighboring Dubai have dropped by more than half as speculators fled the market amid the recession.
Rental declines in nearby Dubai slowed in the fourth quarter with average rates falling 3.3% for apartments and 3.2% for villas, the report also shows. Capitalizing on cheaper property rents, residents continue to upgrade to higher end housing in more attractive developments.
‘Buyers now have the financial option to upgrade to a better quality unit in a more desirable location,’ the report also says.
Lifestyle developments in Dubai however, such as Old Town, Dubai Marina, Palm Jumeirah, The Meadows and Greens, have proved resilient in both sales and leasing markets.
Commercial rents in Dubai fell 9% in the fourth quarter while those in Abu Dhabi have dropped 45% from their peak in the third quarter of 2008.
With the threat of new supply on the horizon, landlords of commercial property in both emirates are being forced to offer better tenancy contracts to woo tenants including lower rents, break options and rent free periods.
This article has been republished from Property Wire. You can also view this article at Property Wire, an international real estate news site.