By Joanna Hartley
Emirate has seen real estate prices plummet since third quarter of 2008 - report.
Property prices in Abu Dhabi have dropped by up to 25 percent since peaking in the third quarter of last year, according to a new report published on Saturday.
The Abu Dhabi Real Estate Report, launched by Landmark Advisory, which looks at the price correction unfolding in both the freehold and leasehold market shows prices in the capital are now approaching their original figures – down 15 to 25 percent on Q4 2008.
Meanwhile, the for properties being delivered later than 2011average prices were likely to fall by up to 10 percent below the original, quoted in Q2 of 2009, the report added.
This was because prices in Abu Dhabi had been benchmarked to the inflate prices seen in Dubai that meant there was little room for inflation before liquidity, according to Jesse Downs, head of research at Landmark Advisory.
“Freehold and leasehold prices spiked after CityScape Abu Dhabi in May 2008, and despite solid demand fundamentals, the market could not sustain such high prices in the short- to medium-term,” he said. “Investors and speculators saw Abu Dhabi as the ‘next big thing’ after Dubai, but by then the financial crisis had already hit the UAE. Launch prices were benchmarked against Dubai’s already inflated property values, so there was little room for appreciation even before liquidity dried up,” added Downs.
At present the emirate’s property market was in “gridlock” because buyers were looking at absolute prices, while sellers were still looking for the original price, he said. “Due to this incompatibility, sales have ground to a halt. Developers are now facing the prospect of renegotiating payments to prevent defaults and preserving enough cash flow to continue construction,” explained Downs.
The rental market had seen rents grow by 30 percent and 80 percent respectively for villas and apartments between Q4 2007 and Q4 2008, the report shows.
However, rents had now stabalised because people had taken other accommodation options such as serviced apartments, house-sharing or had moved to Dubai and Al Ain.
"... hark, the end is nigh". 25% will seem like a small amount in a few months' time. Stay tuned, as further news will emrge that will see it fall to 40-60% of current values just like its neighbouring Emirate. Cashed-up it may be.. but if no one is buying and the market confidence is shot, what next? Why would you keep building without interest and sales happening? It will be a recipe to erode further the value of the completed assets .... Too much too fast and it is all coming home to roost.
there are three important things that will detemine the prices in abu dhabi in the future. the first is how the emirate doing economically during the crisis, i think that until now it is doing ok compared to many other parts in the region. the second is the price of the units at the end of the year when the first units in alreem island are delivered. the prices at this time will be the bench mark for the prices for 2010. the third is the renting prices, if the rents stabilize then people will find that buying a unit and renting them will give them good profit so the appeitite for investing in real estate will increase but if it decreases dramatically then certainly there will be more decrease in the prices. there are more factors of course but for me these are the most important factors
If one looks at the current fiasco at Hydra Village Abu Dhabi, (see article in Arabian Business) it is hardly likely that prices will recover soon. There is no attempt to keep investors satisfied or attract new ones. Without regulation and co-operation between developers and customers, Abu Dhabi is likely to be worse than Dubai. "Build and they will come". True but the promised projects must actually be built not simply talked about.