While this month’s opening of the UAE’s newest icon, Louvre Abu Dhabi, is expected to add vigour to the country’s tourism efforts, stakeholders in real estate are hoping the positive sentiment will have a knock-on effect on property. It is still too early to tell how rents and prices in the Saadiyat neighbourhood will react to the Louvre’s opening, but real estate consultants expect a boost, in the same way landmark projects such as the Burj Khalifa pushed demand for nearby properties.
But comparing the Louvre to the Burj Khalifa would be a bit like comparing apples to oranges. “Comparing the two areas really isn’t fair as they cater to different segments of the population and offer very unique and different lifestyles,” says Faisal Durrani, head of research at Cluttons.
Saadiyat offers a suburban beach lifestyle and Downtown Burj Khalifa a buzzing city lifestyle. But will the Louvre attract buyers as what the Burj Khalifa, Dubai Opera and Dubai Mall have done in Downtown Dubai?
“The Burj Khalifa is the world’s tallest building, it has an established infrastructure and is anchored by the world’s largest shopping centre. Emaar has done a spectacular job in branding and marketing it as the ‘centre of now’ and it is also an exceptionally desired part of the city because of its connectivity to both old and new Dubai,” elaborates Durrani. “The two sub-markets are very different from each other, and whether the Louvre will drive property prices and rents up depends on what else is planned for Saadiyat Island in terms of its infrastructure, both for transport and the community, and the creation of a desirable place to live.”
Nonetheless, Durrani says finding buyers is generally not a big hurdle for big-name projects from reputed developers, citing the response to the Emaar’s Dubai Creek Harbour, where Emaar is creating another major destination from scratch.
“We have seen that people are willing to pay a premium for a view of something iconic,” says Durrani. “Sales prices have varied between Dh1,600 and Dh1,800 per square foot at Dubai Creek Harbour, which is cheaper than Downtown, but still reasonably high for off-plan property.”
He adds: “It would be interesting to see if property buyers in Abu Dhabi think similarly when looking to own a home in the vicinity of the Louvre.”
Manika Dhama, senior consultant, strategic consulting and research, at Cavendish Maxwell, also points out that there are other factors affecting prices in Downtown Dubai, such as the Dubai Mall and its central location close to key business districts such as the Dubai International Financial Centre.
“The area commands among the highest rents and prices in the UAE as a result of having a concentration of multiple premium factors within a limited area,” says Dhama. “By contrast, Saadiyat Island is a spread-out cultural district with beachfront properties, including Saadiyat Beach Residences and Villas. The addition of the Louvre to Saadiyat is expected to help maintain a superior profile for this area. However, direct impact on prices and rents remains to be seen.”
Matthew Green, director and head of research and consulting, UAE strategic advisory, at CBRE, has no doubt the Louvre will gradually elevate prices and make Saadiyat an even more compelling investment destination.
“However, for now Abu Dhabi’s residential market continues to be affected by the soft economic conditions, which has driven widespread deflation of both sales and rental rates over the past two years,” says Green. “As a result there is a growing price gap emerging between the two emirates, with rates falling far quicker in Abu Dhabi, while values in Dubai have only seen modest declines during the same period.”
Cluttons’ research has shown buyers paying premiums of between 30 per cent and 40 per cent to get a view of the Burj Khalifa in Downtown Dubai, with residential values around the Burj Khalifa hovering between Dh1,800 and Dh2,000 per square foot. The Burj Khalifa itself commands values in excess of Dh2,500 per square foot.
CBRE has recorded average sales rates in the Downtown Dubai area close to Dh1,700 per square foot. “However, sales rates in the Burj Khalifa tower and the various serviced apartment offerings in the wider master plan command significantly higher values,” says Green.
According to the Property Monitor Index, two-bedroom apartment prices in Downtown range from Dh1,650-Dh2,800 per square foot on average, and Dh1,480 per square foot for a similar unit on Saadiyat.
“Prices in both locations vary by project and development under consideration,” says Dhama.
In Abu Dhabi, the most sought-after locations are those along the coast, such as the Corniche area, which is extremely desirable because of its proximity to iconic developments such as Etihad Towers and Emirates Palace, according to Durrani.
“The Louvre could potentially cater to people who want to live in more suburban locations, offering bigger plots with individual houses and villas, which may lend itself to becoming a more attractive living destination in the years to come,” says Durrani. “Average residential capital values here stand at roughly Dh1,450 per square foot, so about Dh500-Dh600 cheaper than Downtown Dubai.”
Pointing to a Cluttons report, Durrani says Abu Dhabi’s economy is intrinsically linked to the hydrocarbon sector, which has been a critical engine of growth for a range of supporting and related economic segments, each of which play a key role in creating fresh demand for both residential and commercial property in the emirate.
“The first six months had seen the continued lacklustre performance of residential values in Abu Dhabi’s main residential investment areas, with values overall dropping by 0.9 per cent during the second quarter,” says Durrani. “The seemingly slower rate of decline improved the annual change to 6.3 per cent in the 12 months to the end of June, from 7.5 per cent at the end of the first quarter. This latest change now leaves average residential values standing at just over Dh1,150 per square foot.”
CBRE sets the average price of apartments in Saadiyat at around Dh1,400 per square foot. In other words, Saadiyat already clearly trumps average pricing in Abu Dhabi.
“In terms of rents, two-bedroom apartments in Downtown range from Dh100-Dh140 per square foot per year, while in Saadiyat rents for two-bedders average Dh95 per square foot per year,” says Dhama.
Durrani points out that rental prices for apartments in Downtown are more expensive than those in Saadiyat. “That said, the nearest communities to the Louvre include the beach residences and villas, which tend to attract the highest property prices in Abu Dhabi,” he says.
“Both locations are prime areas and this profile is expected to be maintained going into 2018,” says Dhama. “Downtown Dubai has been among the top locations for off-plan transactions this year and is expected to remain a popular choice for buyers going forward.”
On the other hand, Green reckons that the gap between the two markets is likely to widen. “The two emirates are seeing varying performances at this time, with Abu Dhabi forecast to see further downside to rentals and prices during the course of 2018,” he explains.
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