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Abu Dhabi real estate market softens further

|By Arabian Post Staff|The Abu Dhabi real estate market has experienced further softening in both the residential and office markets, according to findings in the Cluttons Abu Dhabi Property Market Snapshot for Winter 16/17.

Faisal Durrani, Head of research for Cluttons said there has been a notable acceleration in the residential market correction as a result of increasing global economic uncertainty and the protracted oil and gas sector’s decline.

This, combined with continued market softening across residential and office markets has led to nervousness amongst investors, with many reluctant to commit to purchases until they see signs of stabilisation.

The real estate consultancy has forecast 10% fall in villa values this year to be followed by a decline of around 7% in 2017. Apartments will likely be less severely impacted with a decrease of 4% this year and a further 2% to 3% fall in 2017. The villa rental market will continue to bear the brunt of the widespread slowdown in the creation of senior level jobs, with a 20% drop this year likely to be followed by a 7% to 8% drop next year.

Abu Dhabi’s residential market continued to soften during the third quarter with the fall in capital values (-2.4%) outpacing rental declines (-1.0%). On a year to date basis however, rents across the city’s residential investment areas are down by 9.4%, while home values have fallen by 5.2%.

Sea view villas on Saadiyat Island (AED 1,850 psf) for instance, have decreased in value by nearly 18% over the first 9 months of 2016, positioning it as the weakest performing market this year, behind mid-range apartments on Reem Island, which are down -11.1%.

For Abu Dhabi’s rental market, the top end of the villa market has borne the brunt of a diminishing rate of creation of senior level positions in the capital, while housing allowances have also continued to slip across the board. Like the sales market, high end villas on Saadiyat Island have on average registered a near 25% drop in rental rates between January and September, but early indications from Q4 suggest the rental declines are persisting, which will push the rental falls in this affluent submarket lower still.

More positively for landlords, areas such as Al Reef Downtown, which is perceived to be more affordable than other areas in the city, posted a 16.1% rise in average rents, leaving them at a little over AED 108,000 per annum and bringing them in line with average rents at Hydra Village (AED 105,000 per annum). Although it was last year’s stand out performer, driven mainly by its affordability, Hydra Village rents have decreased by nearly 11% between January and September.

Office Market

After holding steady for over a year, prime (AED 1,900 psm) and secondary (AED 1,100 psm) office rents in the city slipped by 5% and 8.3% respectively during Q3 of 2016. Receding demand and a growing amount of secondary space on the market has undermined rents. In fact, rates in some of Abu Dhabi’s prime office buildings have also buckled under the market’s weakness, with asking rents declining by up to 20% in some Grade A buildings.