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Mon 15 Aug 2016 01:58 PM

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Abu Dhabi apartment rents fall 2% on average in Q2

New Chestertons report also reveals 1% drop in sales prices for both apartments and villas

Abu Dhabi apartment rents fall 2% on average in Q2
Skyscrapers stand on the skyline viewed from the Central Market in Abu Dhabi, United Arab Emirates, on Wednesday, Jan. 11, 2012. Abu Dhabi, the oil-rich sheikhdom that spent 36 billion Dirhams ($9.8 billion) bailing out its biggest developer in 2011, will probably reach for its checkbook again as property companies in the United Arab Emirates face a stalled market and deadlines to repay debt. (Credit: Bloomberg News)

Apartment rents in Abu Dhabi fell by two percent on average during the second quarter of 2016, according to a new report by Chestertons MENA.

Its latest residential market report for Abu Dhabi said that following six months of a relatively flat performance in the first six months 2016, investors are still being rewarded with an average 5 percent gross yield across the city, topping out at 8.8 percent in some areas.

"Although the market has flattened further in Q2 and witnessed declines as sales and rental rates dip further, rental yields are still rewarding investors and proving that the capital is still the place to be," said Declan McNaughton, managing director UAE, Chestertons MENA.

Overall, apartments saw a 2 percent decrease in rental rates during Q2 compared to an increase in Q1 with average lower range annual leasing rates for studio and one-bedroom apartments commanding AED40,000 and AED52,000 respectively.

"On average the residential rental market has dropped by 2 percent with the luxury end of the segment bearing downward pressure due to a reduction in spending, compounded by cuts to government spending due to lower oil prices," added McNaughton.

He said the remainder of the year is likely to see marginal declines but solid yields will still prove popular with investors.

The report said that the villa rental market in the UAE capital also witnessed decreases across the board during Q2. Rental rates varied from AED105,000 for an entry level lower range three-bedroom villa up to AED145,000 and AED175,000 for four and five-bedroom villa in the same pricing category.

In terms of average sales prices, both apartment and villa prices witnessed further falls with marginal drops of 1 percent in Q2. The average sales price per square foot for apartments in the capital stood at AED1,340 in Q2, with villas selling for AED1,088 per square foot.

"We've seen a marginal decrease this quarter and once again the rate of decline variance among the communities demonstrated mixed sentiments in terms of sale price. The addition of new units delivered this past quarter and a further 3,500 expected by the end of the year will result in marginal fluctuations during this period of consolidation," said McNaughton.

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