Landlords in Abu Dhabi are coming under increasing pressure as tenants look for more affordable rental rates against a backdrop of macroeconomic uncertainty, with large units being the most affected tranche, according to the Abu Dhabi Property Review Q3 2016 report from leading real estate consultancy, Asteco.
John Stevens, Managing Director, Asteco, said: ‘The ongoing redundancies across various industry sectors and the reduction of staff housing allowances continues to negatively affect demand in Abu Dhabi with a number of tenants opting to downsize and / or move to more affordable developments.’
In the UAE capital, villa rents were down, on average, by 2% from the previous quarter. The highest drop was in Al Raha Gardens (6%) followed by Al Raha Beach Villas (4%). Demand for older villas inside Abu Dhabi City has also dampened down with premium units most affected, with an average decline of 10% since the same period last year.
Saadiyat Beach Villas were the only exception with rates remaining stable since the beginning of the year, recording a 7% increase compared with the same period last year.
Rental rates for prime apartment projects on Saadiyat Island remained stable and close to full occupancy during Q3, while other prime and high quality apartments recorded a 1% decline compared with Q2 2016 falling by an average of 6% since Q3 2015. High end units in the Corniche saw rates drop by 9% from the same period last year.
Stevens said: ‘The majority of vacant apartments, which were offered at reduced rates in Q2, have now been leased, especially the smaller unit types (studio, one and two bedroom). This indicates that there is demand in the market, but value for money is the most important factor. In comparison, rental rates for larger and more expensive three and four bedroom duplexes and townhouses have fallen by 10% since the last quarter, with a high percentage remaining vacant for over six months.’
The report revealed the rental gap for high-end apartments between Dubai and Abu Dhabi reduced significantly over the last quarter as Abu Dhabi recorded further declines, coming more in line with Dubai ‘ in Q1 2016 the price difference for one and two bedroom apartments between the two Emirates was typically AED 20,000 per annum and this has narrowed to AED 10,000.
In the affordable and mid-range residential segments, Abu Dhabi’s rates have reduced moderately, by AED 5,000 on average, since Q1 2016, whereas Dubai’s rates were marginally down by AED 1,000.
In terms of apartment sales, there was a nominal 1% average decline during the quarter, with projects at Al Raha Beach and Saadiyat Island, as well as Al Reef, recording sales price gains of 3% to 5% respectively compared with the same period last year.
Villa sales remained quiet with a limited number of transactions mostly for completed units. Stevens said: ‘Sales prices decreased by 1% on average, since last quarter and by over 4% since Q3 2015. Sales prices for Saadiyat Beach Villas remained stable this quarter, however, prices were up by 4% compared with last year.’
Reduced oil prices continue to negatively affect Abu Dhabi’s economy. Office rental rates are currently at their lowest point since market peak in late 2008, with rates, on average, 72% lower. Rents in prime office buildings are now close to AED 1,600 per square metre, representing a 4% decrease over the last three months.
Stevens said: ‘Large corporate and government entities often form the main tenants of prime office space, and with uncertain economic conditions and low oil prices, demand from these organisations has weakened considerably.’
For more details, please visit www.asteco.com
Introducing an essential new addition to MEA Market’s roster of awards, the inaugural Middle East CEO of the Year Awards 2023!Visit our awards here
MEA Markets is proud to announce the return of the MEA Business Awards 2023, which stands as a testament to the remarkable achievements of businesses spanning the Middle East and Africa region! This prestigious awards programme returns for its seventh year and aims to recognize and laud outstanding performers across a spectrum of industries, encompassing finance, technology, energy, healthcare, and more. Through this platform, excellence, innovation, and exemplary leadership are brought to the forefront.Visit our awards here
MEA Markets is excited to announce that we are set to host the UAE Business Awards for an eighth consecutive year! The 2024 programme will look to recognise the top performing companies across the various key sectors that make up the UAE’s diverse and evolving industry market.Visit our awards here