Abu Dhabi: Increased job cuts in both the private and public sector have taken on a toll on Abu Dhabi’s property market, which continued to face downward pressure in both rents and sales prices in the third quarter of this year.

According to the latest report by JLL, a property consultancy, average prime rents for two-bedroom apartments fell six per cent in third quarter compared to the same quarter in 2015 to reach around Dh157,000 per annum.

Average sales prices in prime locations also fell 11 per cent year-on-year to reach nearly Dh14,750 per square metre, with lower transaction volumes.

JLL said the decline came on the back of lower demand due to fewer employees, with a wave of job cuts within government, oil and gas, and financial services sectors.

In Dubai, lower spending and weaker demand have meant much sharper declines in rental rates, but that’s not the case in Abu Dhabi where developers have scaled back their supply in order to match demand. In the third quarter, 1,160 units were delivered to the market.

“While supply remains under control, increasing vacancy rates are placing downward pressure on residential rents and sales prices. Residents in Abu Dhabi are increasingly looking for cheaper and smaller options owing to further job cuts and reduction in employment allowance and benefits,” said David Dudley, international director and head of Abu Dhabi office at JLL.

He expected rents to decline further as supply is expected to increase, with another 3,000 units set to enter the market by the end of 2016. The new units will be mainly within Reem Island, Rawdhat, and Saraya, though some developments are likely to experience delays, the report said.

Edward Carnegy, director and head of Cluttons Abu Dhabi, another property consultancy, said that the job cuts did not just mean higher vacancy rates but also uncertainty for employees who do still have their jobs.

“The trend in the residential sector in the third quarter is basically similar to what we saw in previous quarters, which is the overhang of potential job losses and actual job losses. We’re seeing a flight to cheaper accommodation, and that’s sentiment-driven.

Where people are worried about job prospects, there’s a natural flight to trim your costs, so this is showing itself in the market where tenants are moving from premium locations to secondary locations that are cheaper,” he said.

This has resulted in a slight increase in rents in the lower end of the market, Carnegy said.

In the office market, demand was also weaker as many government entities are going through a period of restructuring in response to tougher economic conditions. Most prominently, the restructuring includes mergers between sovereign wealth funds (Mubadala and Ipic), banks (National Bank of Abu Dhabi and First Gulf Bank), and subsidiaries of Adnoc (Zadco and Adma), with more mergers expected.

This has placed downward pressure on rents in the office market, with rents for Grade A office supply down five per cent year-on-year in the third quarter, JLL said. Rents for Grade B office supply dropped 12 per cent year-on-year in Q3.