By Ed Attwood
Some apartments saw more than 35% decline in rents in 2010, says real estate analysts Jones Lang LaSalle
Rents and sale prices for Abu Dhabi property will continue to fall across the board during 2011 due to heavy oversupply, according to the latest research from Jones Lang LaSalle (JLL).
The property consultancy said that although there have been limited transactions for residential sales, average prices per square foot have now dropped some 45 percent since their peak in the second quarter of 2008.
Rents declined by between five to 10 percent during the last quarter.
JLL also said that some apartment rentals had dropped by more than 35 percent year-on-year during the last quarter, but that lower rents would help to boost demand.
The agency said that while 5,600 units had been completed in 2010, most of this was considered low quality. More than 23,000 residential units are expected to be delivered during the course of this year.
In addition, the report stated that the dearth of top-grade office space coming onto the market in the next three years would encourage a gap between rents for Grade A and Grade B rents.
However, the extra supply is likely to increase office vacancy rates, which currently stand at 8.4 percent.
JLL warned that although several major projects are likely to come online during 2011, many of these would face delays due to market conditions.
For retail space, JLL forecast that rents will slide once new supply comes onstream, especially given the large number of malls that are expected to open this year.
With regard to hotel space, the agency warned that there was a significant disconnect between the tourism growth predicted by the Abu Dhabi Tourism Authority (ADTA) and the amount of hospitality space coming online.
“While ADTA forecast visitor growth of 15% to 20% over the next two years, supply is expected to increase by over 40% over the same period,” the report said. “As the market consolidates, the location of hotel properties will have an increasing impact on performances.”
The only way for Abu Dhabi to solve the vacancy levels in both residential and office space, is 1) to insist that if you are employed on an Abu Dhabi work visa and sponsored by an Abu Dhabi company you must rent your accommodation in Abu Dhabi 2) If you wish to do business in Abu Dhabi your company must have a branch registered in Abu Dhabi with an office rented in Abu Dhabi.
Whilst I realise that this suggestion smacks of protectionism, other than that only when Abu Dhabi rents reach the same level as Dubai will there be any chance of filling this vacant housing stock.
Remembering that Abu Dhabi has already bailed out Dubai in 2009 by buying into $20 billion in bonds, they also continue to provide tenants for Dubai properties while their own stand empty.
The first part of your comment is outrageous -if UAE believes it has a future as a federation, no company can "force" employees and vendors alike to have residents/offices in an unrealistically inflated marketplace such as Abu Dhabi. Instead, Abu Dhabi would do better to create a more resilient, agile and aggressive market. The plain fact is, until corrections in Abu Dhabi reach to such levels as to have some kind of equilibrium with Dubai, nobody will come and stay here to pay twice as much for many times more inferior quality of living.
As long as companies like Etisalat dole out handsome housing allowances instead of providing decent accomodation to its employees, the real estate sector is not going to benefit. The expats in turn keep the allowance to themselves and do not spend the same on accomodation. I know several of senior managers getting allowance for 3/4 BR accomodation but who live on sharing or a small studios thus depriving the local economy and the real estate sector from getting its due share.
By the way, what is mentioned above is absolutely not the complete and the correct picture.
The article is applicable to any newcomer to Abu Dhabi and he or she will see this drop compared to previous year or years. BUT, for residents here that have been protected by the renting rule of +5%, what will happen if this cap rule expire? you know how much more they have to pay to land lord to remain in their flat?
Just a quick example; I am paying AED 110K as I have been in the building since 2004. My neighbour who came last year he is paying 200K. so when this cap is stopped by end of 2011, what rent I have to pay?
I am not sure many can agree with any of your proposed solutions. What you are telling is unacceptable. We are in the world of free trading and everywhere globalization is pushed. how come you want to put such kind of a rule?? there should be an open market and let people decide. Secondly, Abu Dhabi has grown very fast during the last 4 years but on the population side more than the infrastructure. I think Abu Dhabi needs to grow the current infrastucture first before even thinking to force people to live here. can you tell me how many hours you SPEND EVERYDAY to FIND a PARKING PLACE for your car AT HOME and NEAR your OFFICE? All before you ask people to live here by force, please let them find a place to park a car.
Just close the border and live in your own little world!
Abu Dhabi now bailing out its own enterprises by the way and there will be many more to come that cant survive without protectionism.
There is no "due share" from anyone's salary.
If you believe so the proper way is through income taxation.
My thoughts on this issue, is that while Abu dhabi has continued to build apartments and high rises, it does not have the laws and regulations in place to protect tenants and landlords.
This is largely responsible for depression in property rates and the massive losses announced by ALDAR, which in turn Abu dhabi government had to pick the tab up.
Therefore i would suggest.
1. property visa for properties above 1.5-2 million. This would automatically lift the prices up and give a sense of security to buyers.
2. Lower finance rates to benefit prospective buyers , who by not defaulting will reduce bad debts of banks
3. Ensure that all housing allowances paid by any government company is not a cash allowance and the allowance must be used within Abu dhabi, either to rent or to buy. No sending the money back to homeland and buying property there.
4. Companies doing and profiting in Abu dhabi have a civic duty and corporate responsibility to pump back money into the economy
All expat employees should be given a housing allowance to be used on housing only. No cash business where four managers share a studio and pocket the money and send it back to India.
The allowances are to be recycled into the economy here, not in their home country.
we have a unique situation where Abu dhabi bailed out dubai's housing estate and now Abu dhabi landlords will suffer as well mainly because of the reasons above.
I think Abu dhabi needs to act fast and also protect it's interests and it's residents.
Etihad airways has done the right thing by forcing it's employees to live in Abu dhabi, and I think all others should follow too
Agree entirely. Why would you, however, limit this to Indian expats only? In my company the British, Australian and South Africans have done the same. Yet, these groups are paid 300 to 500% more than your South Asian and South East Asian expatriates. The only fair way is to pay fair wages to EVERYBODY based on the value of their skills and let them all pay for their accommodation and other needs The inflated "allowances" are unfair and based on country of origin NOT on the value of their services. Saving your allowance to send home is not illegal is it?