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Mon 3 Aug 2015 02:06 PM

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Abu Dhabi rents rise 3% in Q2 on limited supply

Latest ADIB/MPM Real Estate report says rental values in UAE capital are set to rise further this year

Abu Dhabi rents rise 3% in Q2 on limited supply
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)

Abu Dhabi residential rents rose on average by 3 percent during the second quarter of 2015, and are expected to rise further this year as limited new supply enters the UAE capital, according to a new report.

The latest ADIB/MPM Real Estate report, collated from transactions within its portfolio of over 23,500 units under MPM Properties’ management, said the average annual rental growth has been 10 percent.

The report said Q2 witnessed only 1,647 units entering the market, taking this year’s addition to 2,397 units with an additional 4,200 units expected to be completed by year end.

The 2015 supply represents a 2.9 percent increase in total housing stock in the capital and is the lowest level of increase for five years. The average annual growth has been around 5 percent.

The report said rents have increased by 10 percent over the same period last year.

It added that residential sale prices have declined by 1 percent quarter-on-quarter signaling a slowdown in demand.

Overall sale prices have declined 10 to 13 percent from their peak in the third quarter of 2014 with Saadiyat Beach Residence being the only exception with an 8 percent increase, the report said.

Paul Maisfield, CEO of MPM Properties, the real estate advisory subsidiary of Abu Dhabi Islamic Bank (ADIB), said: “Although there is a decrease, the off-plan market continues to witness strong investor interest with Aldar and Bloom Properties achieving high sales volume.

"This clearly highlights that a larger investor base can be attracted if lower down payment options are offered as compared to the 25 percent down payment currently required for completed units from buyers seeking mortgage.

“2015 has witnessed multiple bulk deals for outright sale and long term leases, clearly highlighting strong demand from Institutional investors and corporate tenants. Abu Dhabi’s market is maturing quickly and the ‘free-zones’ continue to attract new businesses to Abu Dhabi in addition, gross residential yields are stabilising between 6.5 to 7.5 percent, which is attractive to most investors.”

The report said that in the office segment, the market is likely to remain relatively inactive this year, due to weaker demand from the government sector and overall global economic sentiment.

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