By Claire Valdini
Residential property prices in capital remain challenging amid new supply of high-end homes
Dubai’s real estate market recovery is more robust than that of neighbouring Abu Dhabi, with steady rent increases and price growth for prime assets across the hotel, retail and residential sectors, Jones Lang LaSalle (JLL) said in its Q3 report.
New regulation requiring all public sector employees and affiliates to live in Abu Dhabi is expected to positively impact real estate prices in the emirate, added the report.
“In terms of market specifics, it’s a very fragmented picture. Dubai is generally ahead of the curve as rents are finally starting to pick up whilst indicators suggest Abu Dhabi has yet to bottom out,” Alan Robertson, CEO of JLL, MENA said in a statement.
Property prices in Abu Dhabi were less-affected when Dubai's property bubble burst in 2008, causing house prices to slump by more than 60 percent from their peak. While Dubai’s market is starting to show signs of a recovery, Abu Dhabi faces challenges as a huge supply of high-end homes is set to enter the market this year.
Abu Dhabi remains a tenant-favourable market for most asset classes, JLL said. Average asking prices for residential units in the emirate’s investment areas declined 3 percent in the third quarter to AED10,200 (US$2,700) per sqm while average rents for prime two-bedroom apartments declined 1 percent to AED 120,000 per year.
A recent circular issued by Abu Dhabi requiring its public sector employees who reside outside the emirate to relocate to the capital is expected to boost demand. “This regulation, which is planned to take affect from late 2013, could strengthen the negotiating positions of landlords and help stablise rentals in the residential market,” noted the report.
Residential sale and rental prices in Dubai are on a “clear recovery path” but major improvements remain confined to prime areas, leading to a two-tier market.
“Prime residential buildings in well-established locations continue to see improved performance, but secondary locations are still suffering from rental and price declines as tenants relocate to new high-quality projects,” noted the report.
Average residential prices in the emirate increased 14 percent year-on-year to August with villa sales rising 23 percent year-on-year, according to the REIDIN Residential Sale Indices. Residential rents increased 7 percent year-on-year in August, it added.
Retail rents in both emirates are starting to recover, noted the report. An estimated 200,000 sqm of gross leasable area is expected to be delivered in Abu Dhabi by mid-2013.
“Given the spending power of the local population and additional growth from increasing tourism, there remains significant demand for retail space in the Abu Dhabi market, some of which is currently serviced by Dubai. The delivery of upcoming projects will help address this unmet demand,” said JLL.
As with Dubai’s residential market, its retail sector is starting to develop into a two-tier market as demand for better performing malls, such Dubai Mall and Mall of the Emirates, increases.
“The retail market is becoming increasingly two-tier and older, less popular malls are seeing weakened demand from consumers and retailers, with mall owners having to consider new marketing techniques and product positioning,” said JLL.
I feel this is just market pep talk as i don't think comparing Dubai and Abu Dhabi's real estate sectors is relevant. It would be perhaps more realistic to compare Dubai with a similar market such as Mumbai or Delhi as all three markets experienced similar levels of investment and growth.
absolutely wrong..delhi and mumbai have slums..dubai doesn't..infrastructure in india is in the stone ages, dubai's isn't ..customer income is far higher in dubai than in india...apples and oranges...
Totally agree with Martin. Don't forget the level of corruption and other social problems. Dubai and Abu Dhabi are not on Western Standards when it comes to wealth distribution, but the differences in Mumbai and Delhi are just sickening. Who would be so heartless as to live in a highrise overlooking slums where people do not even have the most basic things? India's economic growth is purely based on cheap labour, and that can only be an advantage until the next hungry country is willing to work for less. India's infrastructure is simply non-existent, even if it would it would take decades to teach people how to use it efficiently. Efficiency is also non-existent, companies miss deadlines as a rule rather than exception and the product output is of the lowest possible quality... It's all a bubble!
Even if it is peanut when it comes to infrastructure and slum front, what I sign what I get in any deal. Written contracts are valued. As you state, even legal fees are nominal in disputes....
Looking at 1.2bln, demand for any product and service is in folds even for few more decades. Bubble is Surplus not demand.
Indian bubble can be only in dream as my neibours do.... Keep dreaming....
@ Hisham , I gather that you are well knowledgeable about the conditions in India.
What you have conveniently forgotten is -We have a middle class population the size of entire population of USA.
And clearly you are ignorant of the fact that, the rich and middle class of India comprise less that 50% of the total population
Just imagine half of that population aspiring to live their dreams and in a decent residence?
Unfortunately we are dependant on cheap labour to realize our dreams, and our working conditions are so horrendous, that it attracts migrant workers from desperate neigbours.
This is contrary to the situation in the Middle East , where all the workers are pampered so well, and eventually end up owning the structures they were employed to build.
And the slums- whereas in other 'advanced countries 'the dwellers would have been evicted ,in India we all know that they have a place right in the midst of us.
We really do not feel the need to hide this from anyone.
I guess that all depends on what you consider a "Middle Class". If someone who earns $ 1.000 per year (which is the GDP per capita in India) is considered "Middle Class", then I could be mistaking. And you could say that prices are lower in India, which levels that $ 1.000 per year to Western standards, but I highly doubt that things in India cost 2% of what they cost in developed nations, where the GDP per capita is $ 45.000. Furthermore, wealth distribution is even more important. Earnings in the West are in line with the PPP, I highly doubt that is the case for 98% of Indians. If I am the one dreaming, then you will be the one getting the harsh wake up call...
@ Hisham; I think you are missing Anil's point; " experienced similar levels of investments and growth", which I think is correct from a pure investor point of view.
He is definitely not looking at infrastructure and other factors in the comparison.
From a pure investment perspective; the growth / yield curve is more important than the physical attributes (because these kind of investors e.g. hedge funds are not going to actually live in these cities).
India's economic success is not merely cheap labor; but the quality of that labor. It is definitely not easy to replace that kind of quality at the price (especially when it comes to highly skilled workers).