Abu Dhabi residential market overview

Residential supply

• Approximately 4,400 residential units were delivered in Abu Dhabi during the fourth quarter. The majority of these units were within Oceanscape and Gate Tower 1 on Reem Island, Al Bustan Complex on Airport Road, the Landmark Tower on the Corniche and the Danet Building by Darwish Bin Ahmed and Sons in Danet Abu Dhabi.

• Further units were also delivered within the Saadiyat Beach Residences and Al Reef Downtown projects.

• In the villa market, Aldar has announced that the first phase of its Al Ghadeer development (near the Dubai border) is now being handed over. Musanada has announced the completion of the Watani national housing development, with villas now being handed over.

• These deliveries bring the total residential stock in areas monitored by Jones Lang LaSalle (JLL) to approximately 218,000 units, with around 11,600 units added last year.

• An additional22,000 units are scheduled to be delivered to the market this year, although many of these are likely to experience further delays. The majority of this additional supply will be located within master-planned areas such as Reem Island, Saadiyat Island, Danet and Rawdhat.

• There are also a number of units to be handed over this year within communities for UAE nationals, including the Al Falah and Watani developments.

Residential performance-sales price

• During the fourth quarter, average residential sales prices within investment areas increased by 6 per cent to reach approximately Dhl2,800 per sq m. reflecting an increase of approximately 25 per cent during the year.

• Asking prices have increased for both apartments and villas to Dh15,200 and Dh11,000 per sq m respectively.

• These increases are limited to prime buildings within investment areas and do not represent a market-wide recovery. Price growth has not been witnessed elsewhere.

• The growth in sales prices and transaction volumes in the fourth quarter and in the past year more generally can be attributed to a variety of factors including:
- Expectations of further price growth following Dubai's successful World Expo 2020 bid.
- Both Abu Dhabi and Dubai benefiting from the UAE's status as a safe haven following political unrest in the wider region.
- Limited high-grade stock available for purchase.
-The removal of the previous 5 per cent rent cap, providing an opportunity for investors to achieve higher rents.
- Greater levels of job security post and confidence.
- Continued improved sentiment across the UAE, further accentuated by the Expo 2020 announcement.

Residential performance-rents

• Average asking rents for prime two-bedroom apartments have increased 8 per cent in the quarter, to reach Dhl40,000 per annum. This continues the trend seen earlier in the year, with average prime rents achieving an annual increase ofl7 per cent.

• Demand remains strong due to a variety of factors, including:
- Government spending initiatives, such as the airport expansion, the Etihad railway and the museums on Saadiyat Island among other projects, leading to job growth.
- Government incentives to increase demand, such as the decision to limit housing allowances to those employees living in Abu Dhabi.
- Smaller rental differential between Abu Dhabi and Dubai, as rents in Dubai continue to increase.

• While high-quality developments performed well last year, secondary stock has been affected by major increases to supply, with rents continuing to decline as people move to newer developments.

• This divergence in performance is expected to continue this year, with prime developments (those that are well located, have efficient designs and quality management and provide high-quality amenities and facilities and sufficient parking) achieving a premium to the market average.

• The removal of the rent cap could potentially cause an increase in rents in the short to medium term, before rental levels normalise.

Source: Property Weekly, gulfnews.com


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