Downward corrections witnessed in Q2 2019 appear to have slowed in Q3
The downward corrections witnessed in Abu Dhabi’s real estate industry during the second quarter of 2019 appear to have slowed in Q3, which could suggest that the market could be close to bottoming out, a report by Chestertons, the international real estate services firm, has said.
Sale prices and rental rates have marginally declined during Q3 with the average apartment sales price declining 1%, while villas have shown no movement, the firm said in its Observer: Abu Dhabi Market Report Q3 2019 report.
It added that the same was true of the rental market, where average rental rates for apartments fell by 1%, while villas remained static from the previous quarter.
“There is no significant new supply expected to be delivered next year which means there could be a better balance between supply and demand, this, and a series of government initiatives including allowing foreign nationals to own freehold properties, will ultimately lead to a more stable market as we move into 2020,” said Nick Witty, managing director of Chestertons MENA.
He added that in the sales market, apartment prices remained resilient in the UAE capital, with a 1% softening from the previous quarter.
The report pointed out that Saadiyat Island saw no price adjustment in Q3, as compared to the 8% decline witnessed in the previous quarter. This indicates that the price point is now in line with market demand for this style of property at Dh1,400 ($381) per sqft.
Al Reem and Al Ghadeer dropped by 1% in Q3 to Dh965 per sqft and Dh740 per sqft respectively while Al Raha Beach and Al Reef saw the highest price declines at 2% Q-on-Q to 1,280 per sqft and Dh797 per sqft.
In the villa sales market, prices remained resilient with no price movements from Q2 2019. Al Raha Beach Area, Khalifa City and Al Raha Gardens remained at Dh1,160 per sqft, Dh872 per sqft and Dh700 per sqft respectively. Only Al Reef and Al Ghadeer showed modest declines, dropping 1% to Dh620 per sqft and 695 per sqft.
“Overall the capital’s real estate sector is showing signs of positive sentiment with a marked slowdown in sales price reductions. Developers are also recognising the need to be more creative to encourage sales and are now offering flexible payment plans and, in several instances, waiving the registration fee,” said Witty.
“We have also seen developers selling land plots to boost revenues. This type of purchase is expected to prove popular with Emiratis however, we could also see this pique the interest of other nationalities if positioned correctly,” he added.
According to Chestertons, the apartment rental rates declined 1% overall, as demand for affordable communities continued in Q3 as tenants remain price-conscious.
As a result of this trend, Corniche Road and Saadiyat Island witnessed the highest rental declines of 4% and 3% respectively.
A two-bedroom on the Corniche Road is now available for Dh115,000 per annum, denoting a 6% decrease for this unit size compared to the previous quarter, while in Saadiyat Island, one-bedroom apartments saw an average 10% decline Q-on-Q to Dh90,000 per annum, it stated.
Bucking the rental decline trend, Mohammed bin Zayed City and Al Raha Beach saw a modest increase in rental rates in Q3 of 1%. Two and three-bedroom apartments in Al Raha Beach Area increased to Dh125,000 and Dh169,000 per annum respectively. In Mohammed bin Zayed City, a one-bedroom increased by 5% to Dh40,000 per annum, stated the expert.
Several apartment locations remained static Q-on-Q, these included Muroor, Al Khalidiya, Khalifa City and Al Ghadeer. A two-bedroom apartment in each location is available per annum for Dh65,000, Dh78,000, Dh60,000 and Dh52,000 respectively.
The capital’s villa market witnessed no obvious movement in rates compared to Q2. Al Raha Gardens was the anomaly, as it was the only community to witness a decline, particularly in the four and five-bedroom category where softening of 3% and 2% was felt respectively, with rates declining to Dh160,000 per annum for the four-bedroom unit and Dh220,000 for the five bedroom, remarked Witty.
“This underscores the demand trend for more affordable rental options as tenants continue to downsize to save costs, particularly in this area,” he added.