Cluttons says weak economic conditions, rising inflation, and high costs of living continue to curb demand
Weak economic conditions, rising inflation, and high costs of living continue to curb demand in Abu Dhabi’s real estate market, according to a new report.
Cluttons said in its Abu Dhabi Property Market Outlook for Spring 2017 that the city is seeing high vacancy rates in both the residential and commercial markets, where landlords have started to offer more flexible deals to attract occupiers.
The report forecast that rents will slide further by up to 7 percent this year while sales values could slump by as much as 10 percent.
The report indicated that 2016 saw capital values across Abu Dhabi’s residential investment areas decrease by 6 percent on average, with sea view villas on Saadiyat registering a 19 percent downward adjustment during the year.
It added that the general weakness in the sales market has persisted into 2017, with a further 1.9 percent drop being registered during Q1, which has dragged the annual rate of change to 7.6 percent.
According to the report, wide ranging redundancy programmes in both the private and public sectors stemming from the weaker economic conditions, are adversely impacting overall buyer demand levels.
Edward Carnegy, head of Cluttons Abu Dhabi, said: “Anecdotal evidence shows that organisations continue to trim senior level executive positions, which are a key source of requirements for high end homes. In other cases, companies are removing housing allowances to cope with the financial pressures, which is making it harder for potential buyers to purchase a property. That’s why this segment of the market is currently experiencing the most significant price corrections.”
Cluttons said the weaker economic conditions are also affecting the residential rental market, with 2016 registering a 12.6 percent fall in average rents across Abu Dhabi’s residential investment areas.
The downward pressure has lingered into 2017, with average rents dropping by a further 2.3 percent during Q1, which leaves rents 15 percent lower than this time last year.
Faisal Durrani, head of research at Cluttons, forecast that average rents are likely to end the year 5-7 percent down on 2016 with the top end of the market expected to register more substantial declines.
Durrani added: “As for the residential sales market we also forecast that it will deteriorate further throughout 2017, with values on average likely to fall by between 8-10 percent. Like the rental market, it is the top end of the market that will likely register steeper capital value drops.”