Further corrections expected as Chestertons finds overall fall of 3% in rents with sales prices dropping 1-2%
The Abu Dhabi real estate market softened further in the first three months of 2018, with sales prices and rents for both apartments and villas still in decline throughout the UAE capital, according to the latest report by Chestertons.
The property consultancy’s report found a 3% year-on-year fall in apartment and villa rents, while their sales prices dropped by 1 and 2% respectively. The prospect of improvement in the short to medium term are small, the report added.
Ivana Gazivoda Vucinic, head of consulting and valuations and advisory operations, Chestertons MENA, said: “Sales prices and rents are expected to face further correction during the rest of this year due to increasing supply encountering weakening demand.
“Overall, the tough macroeconomic conditions and sluggish population growth have both impacted the Abu Dhabi property market over the last few years. However, even with rising oil prices, other major economic triggers and increased government spending, might still be required to underpin the recovery of the real estate market in the UAE capital.”
On average sales prices for apartments decreased 1% compared to Q4 2017. The highest decline was recorded in the Al Reef Community, where prices fell as much as 7% to $251.3 per sqft, followed by Al Reem Island which fell by 3% to $313.6 per sqft.
“The only area to witness an increase in apartment sales prices was Saadiyat Island, which was up 7% to $407.6 per sqft, justifying the decision by Al Fahid to launch their latest development, one of the few areas to buck the current downward price trend,” added Vucinic.
Villa sales prices fell on average by 2%, although several communities remained resilient, recording no change or negligible declines. Al Raha Beach witnessed the largest decline with a quarter-on-quarter decrease of 10% to $313.1. Khalifa City remained stable at $243.7per sqft as did Al Ghadeer at $235.5 per sqft. Al Raha Gardens experienced a nominal increase in Q1 to $218.3 per sqft.
In the rental market, apartments and villas both fell 3% on average. For apartments, the highest recorded decline was on Corniche Road, which declined 9% across studio, one-, two- and three-bedroom apartments. Mohammed bin Zayed City was the only area to show an average increase in price, predominantly attributed to a 10% hike in studio rents to $8,713 per annum.
In comparison, a studio apartment in Al Raha Beach is available for $22,328 per annum, while in Al Reef, Sadiyat Island and Khalifa City, the rents are $13,342, $28,590 and $13,614 respectively.
“Studio apartments are expected to become more resilient to negative trends as residents continue to downsize to more affordable accommodation. Therefore, due to smaller units returning greater yields, there could be opportunities for investors going forward. This should be tempered, however, by the fact that more choice is available to residents and this will likely be detrimental to apartment prices in secondary areas,” added Vucinic.
The villa rental market witnessed softening across the board. Only the Al Ghadeer community showed resilience to the downward trend, with a three-bedroom villa remaining at $32,675 per annum.
Mohammed bin Zayed City witnessed the largest average decrease across three, four and five-bedroom villas, at 8%. Prices for each unit size vary from $33.219 for a three-bedroom, $38,665 for a four-bedroom and $43,022 for a five-bedroom. All other communities witnessed softening of between 2% and 4%.