Dubai
Residential property values in Abu Dhabi, especially at some upscale locations, could be on the verge of bottoming out — if so, this could well prompt more developers to get back into the ring.
At some locations, albeit prime ones, property values are showing increased stability. For instance, the sea-facing villas on Saadiyat Island — the most expensive residential property type in Abu Dhabi at Dh1,700 a square foot — have seen “no movement in prices for two consecutive quarters”, states a new market update from Cluttons.
“This trend is likely to help tempt buyers back into the market … especially as we feel the stability is likely to persist,” said Edward Carnegy, Head of Cluttons Abu Dhabi. “We have noted a marginal uptick in demand from Emirati buyers predominantly, looking for second homes or expanding their buy-to-let investment portfolios on Saadiyat Island.”
Of the 13 communities/residential locations Cluttons monitors in Abu Dhabi, sea-view villas on Saadiyat had experienced the biggest price decline since 2015, dropping an average of 26.1 per cent.
What of the rest of the residential marketplace? Rents remain under pressure, dipping 2.3 per cent on average during the first quarter of 2018, according to Cluttons. That follows a 4.3 per cent decline during the last three months of 2017. On an annualised basis, rents are down 11.5 per cent.
Where possible, tenants are trying to renegotiate lower rents for themselves. The introduction of VAT (value-added tax) and a general upward creep in inflation “has left many household budgets under tremendous pressure”, the report states.
“Landlords are increasingly receptive to meeting the expectations of tenants by agreeing to close deals below asking rates, and they are offering flexible rental payments in multiple cheques to attract tenants as well as other incentives such as zero commission payable and rent-free,” Carnegy said. (Landlords, at least some, are now offering 13-month contracts for the price of 12, Cluttons’ report adds.)
They will have other reasons to keep their existing tenants for longer. More homes will be delivered on Yas Island and Al Raha Beach, which will keep the pressure on rentals.
Cluttons is forecasting a further decline by 5-7 per cent through the rest of the year “largely as supply and demand will likely remain out of kilter for a while yet”.
But it’s not all gloom — bulk corporate leases are starting to make a comeback for some firms trying to secure better lease terms.
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Over the last 12 months, high-end apartments on Al Raha Beach have recorded the steepest rental drops, falling 27.4 per cent to about Dh142,000. Then comes Hydra Village, where average rents are now 17.9 per cent lower to Dh80,000.
The only sub-market to actually see a rental rise during the first quarter of this year was on Al Reem Island, where “mid-range apartments posted a 3.8 per cent gain pushing them to close to Dh92,000. It is worth noting that over the last 12 months, mid-range apartments on Reem Island (down 15.4 per cent) experienced the third largest rental contraction in the city. The rental drops here appear to be approaching a tipping point and rents are now perceived to be good value, which is likely to help support greater stability moving forward,” Carnegy said.
-M. N.
