Apartment prices on Saadiyat Island fell by as much as 8 percent Q-onQ
Average sales prices for apartments and villas in Abu Dhabi dropped by 5 percent and 3 percent respectively in Q2, while rents were also down 6 percent for apartments and 3 percent for villas, according to the latest report from Chestertons.
However, Nick Witty, managing director, Chestertons MENA, believes recent legislation and government action will provide a huge boost to the real estate sector in the capital, in the long-term.
He said: “Downward price corrections in this quarter are expected to continue throughout the rest of this year as over 11,000 units are scheduled to be delivered, which is creating a highly competitive market in favour of both tenants and home-buyers, to the detriment of property prices and rents.
“There is, however, reason to be optimistic. The recently announced freehold law is expected to generate a marked improvement in the capital’s real estate sector. The UAE ministry has also recently cut work permit fees by between 50 percent and 94 percent, while the 10-year residency visa should enable people to put down roots in the country and encourage them to invest in property for the long-term.”
According to Chestertons’ Observer: Abu Dhabi Market Report Q2 2019, the sales market witnessed a shift towards affordability and competitive pricing.
This was reflected in the apartment sector by an 8 percent Q-on-Q price decrease in Saadiyat Island - the largest decrease in all communities - with apartments now available for AED1,400 per sqft. This was followed closely by Al Raha Beach and Al Ghadeer, which both saw negative adjustments of 6 percent Q-on-Q to AED1,300 per sqft and AED750 per sqft respectively. Al Reef was the most resilient, witnessing a 1 percent decline to 814 per sqft in Q2.
The villa sales market witnessed further declines in Q2, with Al Raha Beach and Al Ghadeer experiencing price corrections of 5 percent to AED1,160 per sqft and AED700 per sqft respectively. Al Reef witnessed a further 3 percent drop in Q2 with average sales prices now AED628 per sqft, a result of all communities becoming more in line with market affordability and demand. While Khalifa City was the only villa location to maintain the same price as Q1, at AED872 per sqft.
“In the short term we expect prices to drop further, however, with the introduction of new laws, it is likely expatriates will have the confidence to stay in the market for a longer period of time. Flexible payment plans have also become the norm while developers appear to be at the early stages of implementing co-working and co-living concepts into developments, a trend that has been successfully implemented in Dubai and many other countries around the world. These will all provide some much-needed stability to the real estate market in the capital,” added Witty.
Rental rates in Q2 continued to be hampered by new supply entering the market, reduced demand, ongoing redundancies - potentially a further 2,000 redundancies as part of the ADCB merger - and companies providing lower rental allowances.
The greatest rental declines for apartments were in Al Muroor which has now seen a 16 percent decline since the turn of the year to AED65,000 per annum for a typical two-bedroom apartment. And Mohammed Bin Zayed City where rates fell 10 percent Q-on-Q to AED50,000 for the same size accommodation. The Corniche Road and Al Reem Island also witnessed declines; however, these were more subdued at 5 percent, with a three-bedroom apartment renting for AED155,000 and AED130,000 per annum respectively.
Average apartment rates in Al Reef fell by just 2 percent with a typical two-bedroom apartment available for AED71,000, making it the most resilient apartment location.
Underscoring the demand trend for more affordable rental options in the villa market, Al Reem Island’s four and five-bedroom villas recorded the biggest rental decline Q-on-Q of 8 percent and 7 percent respectively. A five-bedroom is now available for AED275,000 per annum.
Al Raha Gardens saw a 5 percent average drop with a four-bedroom now available for AED165,000, while Al Khalidya and Al Reef were the most resilient with a nominal 1 percent decline to AED179,000 and AED132,000 per annum respectively for a four-bedroom apartment.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.