Apartment rental rates across Abu Dhabi in Q3 2016 continued to decline, following the same trend set in the first half, according to real estate consultancy Asteco.
Declining demand for large apartments and villas in Abu Dhabi, against a backdrop of macroeconomic uncertainty, is putting rental rates under increasing pressure Asteco said in its Abu Dhabi Property Review Q3 2016.
The report said tenants in Abu Dhabi were continuing to look for more affordable rental rates or downsizing during the quarter.
Those most affected were the larger units, with villa rents down, on average, by 2% from the previous quarter. The highest drop was in Al Raha Gardens (6%) followed by Al Raha Beach Villas (4%).
Demand for older villas inside Abu Dhabi City has also dampened down with premium units most affected, with an average decline of 10% since the same period last year.
“The ongoing redundancies across various industry sectors and the reduction of staff housing allowances continues to negatively affect demand in Abu Dhabi with a number of tenants opting to downsize and-or move to more affordable developments,” said John Stevens, managing director, Asteco.
Asteoco said Saadiyat Beach Villas were the only exception with rates remaining stable since the beginning of the year, recording a 7% increase compared with the same period last year.
Rental rates for prime apartment projects on Saadiyat Island remained stable and close to full occupancy during Q3, while other prime and high quality apartments recorded a 1% decline compared with Q2 2016 falling by an average of 6% since Q3 2015.
High end units in the Corniche saw rates drop by 9% from the same period last year.
“The majority of vacant apartments, which were offered at reduced rates in Q2, have now been leased, especially the smaller unit types,” said Stevens. “This indicates that there is demand in the market, but value for money is the most important factor.
“In comparison, rental rates for larger and more expensive three and four bedroom duplexes and townhouses have fallen by 10% since the last quarter, with a high percentage remaining vacant for over six months.”
The report revealed the rental gap for high-end apartments between Dubai and Abu Dhabi reduced significantly over the last quarter as Abu Dhabi recorded further declines, coming more in line with Dubai.
In Q1 2016, the price difference for one and two bedroom apartments between the two emirates was typically AED20,000 per annum and this has narrowed to AED 10,000.
In the affordable and mid-range residential segments, Abu Dhabi’s rates have reduced moderately, by AED 5,000 on average, since Q1 2016, whereas Dubai’s rates were marginally down by AED 1,000.
Office rental rates are currently at their lowest point since market peak in late 2008, with rates, on average, 72% lower.
Rents in prime office buildings are now close to AED 1,600 per square metre, representing a 4% decrease over the last three months.
“Large corporate and government entities often form the main tenants of prime office space, and with uncertain economic conditions and low oil prices, demand from these organisations has weakened considerably,” said Stevens.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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