Average rents in Abu Dhabi increased by just two percent in the third quarter of 2014, although the market was fragmented with some properties seeing rates unchanged, according to the latest MarketView report by CBRE.
The report said that after a "very strong" H1 during which rentals grew by an average of 12 percent, residential rents in the UAE capital have shown signs of stabilisation between July and September.
According to the report, over the past six quarters there has been a revival in the city’s residential sales market with average prices for key investment locations growing by close to 22 percent.
During quarter three, sales values increased by around three percent, with rates now typically ranging between AED13,725–AED17,760 per square metre.
Commenting on the outlook of the market, Green said: “Whilst the third quarter produced a relatively subdued performance, improvements in both sale and lease rates are likely to continue, albeit at a steadier pace than was evident during the first half of the year.
"As has been the trend, the market will remain fragmented with well-located and well positioned properties able to outperform the wider market. On the flip-side, we expect to see rental rates drop further for inferior real estate products as competition continues to rise.”
However, he added that despite the positive outlook significant challenges remain for the market as a whole, particularly in regards to solidifying the structure of real estate regulations such as ‘Escrow’, ‘Strata’ and the anticipated real estate ‘Price Index’.
With continued strong support from the government, the property market is geared towards achieving greater maturity in the coming years, Green said.
According to the CBRE report, the villa market has remained strong amid limited supply particularly on Abu Dhabi Island. The combined effects of limited available lease options and strong tenant loyalty has resulted in limited volatility of rental rates for this property type.
“During the quarter, annual rents for typical four bedroom villas on Abu Dhabi Island started from AED190,000/unit/annum, with rates going as high as AED350,000/unit/annum for luxury villa units in prime locations. Similar residential types in off-island locations are currently being rented between AED140,000-AED180,000/unit/annum,” said Green.
Abu Dhabi has seen strong demand for housing requirements emanating from major corporate clients in Q3. Bulk deals arising from the medical, educational, and hospitality sectors to house employees remains a key source of overall residential demand.
During the quarter, Aldar were reported to have signed a deal with Cleveland Clinic Abu Dhabi to lease over 600 apartments for their staff accommodation.
Green added: “The creation of more integrated mixed-use developments and the continued expansion and improvement of infrastructure facilities reflects the Government’s vision to make Abu Dhabi a more attractive destination for international guests and resident workers alike.
"However, whilst there has been significant progress in developing residential elements, many masterplan developments are still lacking planned cultural, retail and community facilities, elements that will ultimately make these locations more livable and importantly attractive to investors."
Abu Dhabi’s office market remained flat in Q3 with minimal movement in either the prime or secondary rental rates, the report said.
“With no major completions observed during the quarter, total office stock also remained steady at around 3.66 million square metres. This provided the market with a cushion, maintaining stable vacancy rates, although with the development pipeline now starting to slow we could be seeing improving occupancy rates for offices,” said Green.For all the latest real estate news from the UAE and Gulf countries, follow us on Twitter and Linkedin, like us on Facebook and subscribe to our YouTube page, which is updated daily.
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