Villa and apartment rental rates are continuing to decline across all asset classes in Abu Dhabi and Al Ain, according to the latest report on the emirate’s real estate market by property services company Asteco.
Also highlighting the current and anticipated handovers of key projects across the emirate, the Abu Dhabi Real Estate Report Q2 2018 by the company said apartment and villa rental rates decreased by 2% and 4% in the second quarter this year in Abu Dhabi, and witnessed an annual drop of 10% and 9% respectively, showing comparable patterns to last quarter. Rental declines for studios to three-bedroom apartments ranged from 1% to 5% over the quarter and 5% to 18% over the course of the year.
In terms of locations, the highest drops in the villa rental market in Abu Dhabi city since Q2 2017 were registered for Golf Gardens (14%) and Al Raha Gardens (13%).
Apartment sales prices in the secondary market, meanwhile, recorded an average annual decline of 8%. Al Raha Gardens led the softening in villa sales prices, reporting an average fall of 4% in Q2 2018 – compared to 2% in Abu Dhabi overall, added the report.
Speaking on residential sales, John Stevens, MD, Asteco, said: “Sales in Abu Dhabi remained sluggish, with noticeably low uptake of larger high-end properties. However, off-plan projects with attractive rates and flexible payment plans continued to generate interest, including the newly launched second phase of Al Ghadeer that attracted significant demand.”
Approximately 1,000 residential units were completed in Q2 2018, with the majority of the supply concentrated on Al Reem Island. By end-2018, 5,800 additional residential units are scheduled for handover, mainly in locations such as Al Reem Island, Yas Island, Saadiyat Island, Al Raha Beach and Rawdhat, as well as across mainland Abu Dhabi.
Coming to demand for office space, the report said it remained tepid with generally low levels of uptake. Certain free zone areas performed better, achieving occupancy levels of up to 95%, it added. The anticipated ADIB headquarters on Airport Road is due for handover by end-2018, while the completion of the Omega Tower on Al Reem Island has been postponed to 2019.
According to the report, villa rental rates in Al Ain fell by an average of 7% since Q1 2018 and 12% annually, with a more pronounced drop for larger four- and five-bedroom units, particularly where rates and incentives were not aligned with the market.
Rents for prime compounds, which benefitted from close-to-full occupancy rates, remained relatively stable, Asteco said, while apartment rental rates decreased by 2% on average in Q2 2018, although established communities bucked that trend.
“We are witnessing a shift among residents in Al Ain towards high-quality, self-sustained communities with supporting facilities, as they recorded high occupancy rates, in contrast to stand-alone buildings and villas that reported minimal interest and high vacancy levels. To attract and retain tenants, landlords continue to offer incentives including up to one month of free rent and flexible payment terms of up to 12 cheques,” Stevens said.
Several projects in the Town Centre and Asharej areas of Al Ain were slated for handover in Q2 2018, but have been delayed and are now expected to be completed by end-2018. According to the Asteco report, retail rental rates remained broadly stable in Q2 2018 after declining last quarter due to a drop in consumer spending. This, however, is more a result of limited demand rather than an indication of a stable market, the report observed. Headline office rents were also unchanged over the quarter owing to the limited number of newcomers to the market, it concluded.