The secondary housing market fell in Q4, according to Chestertons MENA
Off-plan sales are driving the Abu Dhabi housing market as the emirate continues to feel the effects of diminished government spending and sluggish economic growth, according to a new report from international property company Chestertons MENA.
According to the report, off-plan sales activity remained high in Q4, with developers rolling out a number of incentives to attract buyers. The secondary housing market, however, saw a 2 percent decline in apartment sales prices and a 1 percent decline in villa prices, with GCC and Arab nationals dominating both markets.
“Throughout 2017, we saw the effects of a number of economic factors, including low oil prices, reduced government spending, increased stock in the secondary market, a rising cost-of-living and redundancies,” said Ivana Gazivoda Vucinic, head of consulting and research at Chesterstons MENA.
On average, apartment sale prices fell by 2 percent during Q4, with certain areas experiencing a more pronounced decline, such as Reem Island (5 percent), which Chestertons said is a reflection of waning demand.
Saadiyat Island, on the other hand, registered the steepest increase – 5 percent - in apartment sales prices for a second consecutive quarter, partly fuelled by the inauguration of the Louvre Abu Dhabi. On average, prices increased rom AED 1,362 per square-foot to AED 1,430 per square foot on the island, while Reem Island prices fell from AED 1,362 per square foot to AED 1,242 per square foot.
Additionally, average villa sales prices fell by 1 percent in Q4, with the Al Raha Beach Area falling more than 4 percent from AED 1,348 per square foot to AED 1,282 per square foot.
Abu Dhabi’s rental market demonstrated similar trends, with an overall decline in rental prices of 2 percent and 1 percent for apartments and villas, respectively, echoing results from the previous quarter.
“Shrinking company housing allowances and excess rental supply exerted downward pressure on rental prices in the emirate,” Vucinic added. “Vacancies in some locations, such as Al Raha Beach, surged over the quarter as residents downsized their accommodation or moved to more affordable communities.”
Downsizing, however, was positive news for investors, with rents for one-bedroom apartments in Al Khalidiya rising by 7 percent.
In the villa market, Al Reef and Reem Island emerged as preferred locations. In Al Reef, for example, a typical three-bedroom villa could be rented for AED 120,000 a year, with preferential leasing terms for some residents.
In overall terms, the mix of high-performing areas changed in Q4, with Saadiyat Island being the best performing area in the apartment segment and Khalifa City showing positive trends in the villa segment. Mohammed bin Zayed City registered the highest increase in villa rents at almost 2 percent, bucking the wider market trend.
“There is a likelihood of positive economic sentiment emerging from ADNOC’s recent announcement to invest $109 billion in growth strategies,” Vucinic noted. “This plan could be the turning point for Abu Dhabi’s real estate sector as it could generate new jobs and therefore renewed demand for residential property.”