Dubai: For residents renting out Abu Dhabi’s upscale apartments, there has been some partial relief. The rental gain during the third quarter was a muted 1 per cent, according to the latest update by MPM Properties, the real estate arm of Abu Dhabi Islamic Bank.
But it’s only a chimera. On an annualised basis, the rental increases within the top-tier space have been in the 7-10 per cent range, “meaning many tenants will still face sizeable increases at lease renewal”, the report notes. This despite the fact that limited new supply has been hitting the market.
“Just over 1,250 new apartments entered the rental market in the third quarter, including 900 apartments in Gate Towers that have just been released by the Abu Dhabi Government,” the report adds.
Another reason why developers should divert their gaze to possibilities in the middle ground. “MPM continues to see demand from both individual and corporate tenants outstripping supply in affordable areas such as Mussafah, which presents potentially attractive development opportunities for landowners,” the report says.
On the sales side, residential property values have more or less remained stable between July and end September, “reflecting low transaction volumes in the secondary market”.
According to MPM, “‘The only exception has been Al Reef Downtown where values have risen by up to 5 per cent for some unit types, highlighting that investor demand is weighed towards the affordable end of the market driven by attractive rental yields.
“Depressed volumes can, in part, be attributed to the summer holiday period, as well as many owners continuing to enjoy healthy rental yields and showing little inclination to sell in the current market.”
A bit of the negative investor sentiment swirling around Dubai realty also had a rub-off.
“And recent moves by banks to reduce interest rates are a further indicator of weakening demand,” the report adds. “Moreover the increase in off-plan investment opportunities offering attractive payment plan terms is also diverting some liquidity into this segment of the market.”
“In the current market environment, demand for new off-plan product is driven primarily by developers’ reputations and payment plans, followed by price, quality and location,” says Paul Maisfield, CEO of MPM Properties. “Demand has virtually dried up for developments being sold off-plan by lesser-known developers.”
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