By Staff writer
Cluttons highlights growing problem in UAE capital as average house prices rise by 34% since 2010
The lack of affordable housing in Abu Dhabi provides a major opportunity for developers to fill the gap with 'genuine affordable' housing, according to real estate consultancy Cluttons.
Its Abu Dhabi 2015/16 Winter Property Market Snapshot said the growing problem of the lack of affordable housing in Abu Dhabi is "incredibly clear", sighting a 34 percent increase in average house prices since 2010.
It added that newly planned legislation around fixed quotas for affordable homes which may help to ease access to the property market has been drafted but details are yet to be confirmed.
According to Cluttons, the idea of affordable housing has served cities such as London well, where developers are liable to provide affordable housing for developments starting with as little as ten units.
Edward Carnegy, head of Cluttons Abu Dhabi, said: "Abu Dhabi is clearly short of affordable neighbourhoods. This issue of affordability has been building for some time, initially following the introduction of the Federal Mortgage cap and doubling of property registration fees.
"These had the desired effect of cooling the market, but now many people are forced to pay premium rents, limiting their ability to become owner occupiers in the long term.
"This presents a major opportunity for developers to deliver housing that is 'genuinely affordable', while still of ahigh quality, with the potential to offer flexible access to home ownership through models such as 'rent-to-own'."
Cluttons said an average expat household aspiring to purchase a home in Abu Dhabi has to contend with an average annual rent of AED204,000 against an average household income of AED199,000.
Carnegy added: "The lower oil prices continues to impact the rate of job creation in Abu Dhabi, which has filtered through to the residential market in the form of weakening demand leading to an unsurprising slowdown."
During the third quarter, average residential capital and rental values stagnated, pushing the annual rate of change down to 1.7 percent and 2.9 percent respectively, the Cluttons report said.
The report also confirmed that the office market continues to stagnate. Headline rents Abu Dhabi's signature towers remained steady in Q3, with Abu Dhabi Global Market Square still commanding the city's highest premiums.
Carnegy said: "The stability in rents is likely to come under increased pressure over the next six months as the hydrocarbon sector, which is the dominant occupier group in the market, contracts further. This could lead to oversupply in the market, not from new space, but from consolidation by corporates returning existing space back to the market."