Chestertons says the medium to long-term outlook for Abu Dhabi's real estate market is encouraging despite downward corrections and new supply
The medium to long-term outlook for Abu Dhabi's real estate market is encouraging despite downward corrections and new supply, according to a new report.
Chestertons said the future is brighter thanks to a AED50 billion government stimulus package and the introduction of new visa rules to encourage expats to stay longer in the UAE.
Its Observer: Abu Dhabi Market Report Q1 2019 showed that average apartment sales and villa prices fell by 3 percent and 1 percent respectively in the first quarter of 2019 compared to the previous quarter.
It added that with over 11,000 units expected to be delivered throughout 2019, the market is likely to continue to soften in the short term. However, predictions for the medium to long-term are more positive.
“The combination of the AED50 billion government stimulus package, new visa rules designed to encourage expats to stay longer and invest in the Emirates and developers implementing lower ticket prices and flexible payment plans are all likely to have a positive impact on Abu Dhabi’s real estate market. However, until the combined effects of those initiatives have been realised, we expect investors and tenants to remain cautious,” said Ivana Vucinic, head of consulting, Chestertons MENA.
In the apartment sales market, which saw an overall 3 percent quarterly decline, it was Al Reef which witnessed the greatest decrease at 7 percent, the report added.
The Abu Dhabi villa sales market performed more resiliently witnessing softening of just 1 percent from Q4 2018, with Al Reef witnessing a decline of 3 percent.
“The government has been instrumental in boosting the competitiveness of the capital’s business environment, Initiatives which are expected to inject more activity into the real estate sector include the reduction of service fees for the registration of properties, rental contracts and other transactions under the remit of Abu Dhabi Municipality by up to 50 percent. This is in addition to exempting all businesses issued with new licences from paying local fees for two years,” added Vucinic.
Downward adjustments in rental rates continued into Q1, with apartments down 3 percent and villas down 2 percent compared to the previous quarter as oversupply continues to hamper the residential sector, the report also said.
In the apartment rental market, the largest declines were witnessed in older parts of Abu Dhabi while Corniche Road and Mohammed bin Zayed City were the most resilient locations.
“We’ve seen the real estate market become increasingly effected by new supply entering the market, reduced demand, ongoing redundancies and companies providing lower housing allowances. This has, however, presented an opportunity for some residents to make cost savings by relocating to smaller units or maximising the opportunities of the sustained rental rate downtown by upgrading to larger units with better quality specifications, located in more popular areas,” said Vucinic.