Despite downward corrections and new supply entering the Abu Dhabi residential market, the medium to long-term outlook is more encouraging thanks to a AED50 billion government stimulus package and the introduction of new visa rules to encourage expats to stay longer in the Emirates, according to research from leading international real estate services firm, Chestertons, latest Observer: Abu Dhabi Market Report Q1 2019.
Average apartment sales and villa prices fell by 3% and 1% respectively in Q1 2019 compared to the previous quarter, and with over 11,000 units expected to be delivered throughout 2019, the market is likely to continue to soften in the short term. However, predictions for the medium to long-term are more positive.
“The combination of the AED50 billion government stimulus package, new visa rules designed to encourage expats to stay longer and invest in the Emirates and developers implementing lower ticket prices and flexible payment plans are all likely to have a positive impact on Abu Dhabi’s real estate market. However, until the combined effects of those initiatives have been realised, we expect investors and tenants to remain cautious,” said Ivana Vucinic, Head of Consulting, Chestertons MENA.
In the apartment sales market, which saw an overall 3% decline Q-o-Q, it was Al Reef which witnessed the greatest decrease at 7%, from AED880 per sqft in Q4 2018 to AED820 per sqft in Q1 2019. During the same period, Al Raha Beach saw a decrease of 5% with prices falling from AED1,450 per sqft to AED 1,382 per sqft.
Al Ghadeer and Al Reem Island both saw declines of 3% to AED798 per sqft and AED1,021 per sqft respectively while Saadiyat Island was the only location to remain at the same price level compared to the previous quarter at AED1,425 per sqft.
The Abu Dhabi villa sales market performed more resiliently witnessing softening of just 1% from Q4 2018. Al Reef witnessed a decline of 3%, where average sales prices dropped from AED667 per sqft in Q4 2018 to AED645 per sqft in Q1 2019. In Al Ghadeer, Al Raha Gardens, Al Raha Beach and Khalifa City prices remained the same at AED715 per sqft, AED729 per sqft, AED1,035 per sqft and AED872 per sqft respectively.
“The government has been instrumental in boosting the competitiveness of the capital’s business environment, Initiatives which are expected to inject more activity into the real estate sector include the reduction of service fees for the registration of properties, rental contracts and other transactions under the remit of Abu Dhabi Municipality by up to 50%. This is in addition to exempting all businesses issued with new licenses from paying local fees for two years,” added Vucinic.
Downward adjustments in rental rates continued into Q1 2019, with apartments down 3% and villas down 2% compared to the previous quarter as oversupply continues to hamper the residential sector.
In the apartment rental market, the largest declines were witnessed in older parts of Abu Dhabi. In Al Khalidiya and Al Muroor, a two-bedroom apartment is now available for AED85,000 and AED75,000 per annum respectively, denoting decreases of 11% and 6%.
Corniche Road and Mohammed bin Zayed City were the most resilient locations for average apartment rents with no movement from the previous quarter. Studio, one, two and three-bedroom apartments on Corniche Road are available for AED65,000, AED90,000, AED126,000 and AED150,000 per annum respectively.
Other locations which witnessed a small decline in average rents included Al Reem Island, Saadiyat Island and Khalifa City where there was an average 2% decline from Q4 2018. A three-bedroom rented for AED133,000, AED171,000, AED91,000 per annum respectively.
“We’ve seen the real estate market become increasingly effected by new supply entering the market, reduced demand, ongoing redundancies and companies providing lower housing allowances. This has, however, presented an opportunity for some residents to make cost savings by relocating to smaller units or maximising the opportunities of the sustained rental rate downtown by upgrading to larger units with better quality specifications, located in more popular areas,” said Vucinic.
