Falling rents drive flight to quality in Abu Dhabi

Chestertons says Abu Dhabi real estate sales prices and rental rates are facing continued pressure in Q3
Falling rents drive flight to quality in Abu Dhabi
Abu Dhabi real estate sales prices and rental rates are facing continued pressure during Q3.
By Sam Bridge
Tue 23 Oct 2018 02:20 PM

Abu Dhabi real estate sales prices and rental rates are facing continued pressure, a result of unfavourable macroeconomic conditions compounded by further supply entering the market, according to new research.

Chestertons' Abu Dhabi Market Report Q3 2018 said that in addition to new developments entering the market, ongoing redundancies and companies offering lower rental allowances are adding further units to the market place and hampering rental rates.

As a result, average rental rates were down 3 percent for apartments and 2 percent for villas compared to the previous quarter, the report said.

“Even the more resilient apartment locations such as Saadiyat were faced with declining rates... This has, however, allowed some tenants to take advantage of the downturn by using the opportunity to upgrade to larger units with better-quality specifications, located in more popular areas,” said Ivana Gazivoda Vucinic, head of consulting, Chestertons MENA.

The biggest adjustments in the apartment rental market were seen in Al Reem Island and the Al Raha Beach area both returning 4 percent quarterly declines.

when compared to Q4 2017, the highest price point in the last year, Al Raha Beach has seen a 30 percent decrease in rental asking prices for studios, Chestertons said.

Villa rentals in Al Reem Island also observed the greatest drop at 6 percent with a four-bedroom now available for AED235,000 per year.

“The shift in market dynamics has resulted in several landlords focusing on retaining tenants rather than facing long periods without any rental income, particularly in a market where we’re seeing some tenants moving to save a few thousand dirhams a year on their rental budget,” added Vucinic.

The apartment sales market softened across the board with Al Ghadeer showing the steepest decline with a 6 percent drop while Saadiyat Island was more resilient with only a 1 percent decline.

In the villa sales market, Al Ghadeer also saw the greatest decline of 5 percent while Khalifa City fared better, with a decline of just 2 percent.

In a bid to provide some respite to the Abu Dhabi real estate market, Abu Dhabi Government has announced 50 new initiatives as part of its AED50 billion stimulus package.

“Abu Dhabi Government will play a pivotal role in the recovery of its real estate industry with initiatives such as the regional and global promotion of the Emirate expected to have a positive impact. However, until the effects of initiatives such as this are realised, the real estate sector is likely to suffer continued price adjustments into 2019,” said Vucinic.

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