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Fri 3 Jun 2016 12:10 AM

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Abu Dhabi rents see small Q1 growth as sales prices stabilise

New report says supply and demand move towards equilibrium in UAE capital's real estate market

Abu Dhabi rents see small Q1 growth as sales prices stabilise

Residential rents for apartments in Abu Dhabi have seen a moderate rental growth during the first quarter of 2016 as supply and demand move towards equilibrium, according to a new report.

The research by Abu Dhabi Islamic Bank and its real estate advisory subsidiary MPM Properties said capital values for completed apartments have remained broadly stable in Q1, driven by low transaction volumes, as both buyers and sellers remain unwilling to enter the market.

It also said that during Q1, approximately 1,000 new homes were delivered to the Abu Dhabi market, comprising predominantly small to medium sized developments in Al Nayhan, Muroor Road and Mohammed Bin Zayed City.

The report said that across the villa segment, weak demand resulted in limited sales in most communities, with developers countering market sentiment by offering attractive payment plans on off plan residential sales to spur demand.

An analysis of the MPM portfolio of 23,000 units in Abu Dhabi showed that 38 percent of lease renewals completed during the first quarter of this year were agreed at a zero percent increase, 61 percent achieved a modest increase and only 1 percent had a rent reduction.

Paul Maisfield, CEO of MPM Properties said: "We are seeing a shift in market dynamics as the first quarter of this year has seen a constrained new supply of homes coming into the market with the residential market expected to see less than 2 percent housing stock growth in 2016 vs an average of 4.5 percent per year over the last 7 years.

"The slowdown in new supply will counter some of the downward pressure on rents, although a marginal correction is expected in the months ahead."

The report also showed that demand for office space in Abu Dhabi, which is driven mainly by the government sector, has reduced as corporations cut spending and put expansion and relocation plans on hold.

It said approximately 350,000 sq m of new office space, mainly in the form of owner occupied space, is likely to be added to the commercial stock by the end of 2016.

Meanwhile, the city's retail sector saw no new supply coming to the market, but retail revenues have come under pressure in the first quarter of the year as consumer spending in the emirate softened, it added.

This trend is expected to continue throughout 2016 but reverse in 2017, as a rebound in oil prices and the expected launch of new government projects leads a pick-up in consumer confidence.

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