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Following a slow first half of the year, apartment rental rates for prime buildings in Abu Dhabi are increasing, according to Asteco's Q2 2015 Abu Dhabi report. Rental rates rose 6 per cent in June as the first six months recorded ''positive overall market dynamics''.
The majority of prime and high- and mid-quality developments increased by 4-6 per cent upon contract renewal, whereas new leases were on average 8 per cent higher than the first quarter.
Some of Abu Dhabi's most popular prime developments such as the Eastern Mangroves and St Regis Residences by TDIC recorded rent renewal increases of 12 and 10 per cent respectively, with long waiting lists indicating the continued lack of supply of prime projects in the capital. However, prime apartment buildings located on the corniche recorded little or no increase in the second quarter, with rental rates already at a premium.
Better long-term yields
''This turnaround is attributable to the gradual stabilization of sales prices over the past six months, allowing for strengthened yields and positive long-term prospects for landlords,'' said Jerry Oates, General Manager of Asteco Abu Dhabi.
Sales prices for apartments and villas remained steady, continuing the trend of the past 12 months, although year-on-year figures showed average positive growth of 4 per cent in apartment sales prices. Asteco predicted an increase in rental rates for villas in high end developments over the next few months in the absence of any major handover of new stock before 2017.
However, there were a number of high-profile launches in the second quarter, including Aldar's West Yas and Mayan on Yas Island; New Horizon by Tamouh on Reem; Meera by Aldar; and Aabar's The Kite. Saadiyat Island also saw some new launches such as Bloom Properties' Park Views, which achieved sales rates between Dh1,750 and Dh1,850 per square foot.
''These launches will add in excess of 3,600 new apartment units to the market from 2018, in addition to the 1,800 units announced last year, bringing much needed new supply to Abu Dhabi's market,'' said Oates. ''This is a strong indication that developers are optimistic about market prospects, and buyers and tenants will ultimately benefit from more choice.''
Demand for high-end villas has also been positive in the second quarter, with Asteco highlighting the successful launch of TDIC's Jawaher Al Saadiyat and Hidd Al Saadiyat developments, priced at Dh5.7 million-Dh25 million and Dh7.5 million-Dh38 million respectively.
Emirati investors jumped to invest in the first phase of Aldar's master-planned Al Merief project in Khalifa City and Nareel Island located on the north-western corner of Abu Dhabi island, with plot sales reserved for UAE nationals.
The recent decree by His Highness Shaikh Khalifa Bin Zayed Al Nahyan, President of the UAE and Ruler of Abu Dhabi, aimed at regulating and improving transparency in the local real estate sector, will boost market confidence. ''This still-to-be-enacted legislation will effectively protect investor interests in uncompleted projects, as it requires that brokers and developers be fully licensed,'' explained Oates. ''When it comes into effect, it will cement the emirate's reputation as a credible long-term investment haven.''
While residential showed strong growth potential, office rental rates remained stable in the second quarter due to availability in key locations across the city, including new prime supply, which has put pressure on rates of lower-quality space. However, Asteco notes that slow but steady growth continues to be recorded for prime office space, increasing 7 per cent since February.
Abu Dhabi Global Markets (ADGM), the new international financial centre on Al Maryah Island, started accepting licence applications last month.
''This [means] the delayed leasing of two other ADGM buildings has been resumed,'' said Oates. ''The Al Hilal Bank office building handover is also anticipated in the next few months, bringing imminent new prime Grade A supply to the capital.''
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Source: Property Weekly