Abu Dhabi: Residential rates went up three per cent on average in the second quarter of this year, compared to the first quarter, and are expected to rise further as limited new supply enters the Abu Dhabi market, according to MPM Properties.
In its latest report, issued on Monday, MPM Properties, the real estate arm of Abu Dhabi Islamic Bank, said rents have increased by 10 per cent year-on-year over the same period last year.
In Q2 2015, 1,647 units entered the market, bringing this year’s addition to 2,397 units, with another 4,200 expected to be completed by the end of the year.
The 2015 supply represents a 2.9 per cent increase in total housing stock in the capital — the lowest level of increase for five years as the average annual growth has been around five per cent.
Mathew Green, head of research at CBRE, a commercial real estate adviser, said the fall in oil prices and the resulting slowdown in hiring plans were behind lower growth rates in the market.
“During the last year, quarterly increases have generally ranged between two and three per cent, so this continues in Q2, although I think we will start to see this level of growth drop down further as we move through the rest of 2015. That’s just a reflection of the expected fallbacks in certain sectors, and a general stability within the market,” he said.
Green added that the lack of future supply would help stabilise the market in the face of slower demand.
In the residential sales sector, prices went down by one per cent quarter-on-quarter, signalling a slowdown in demand, MPM’s report said. Sales volumes were driven by institutional investors, as individual investors showed limited interest in Q2 2015.
Overall sales prices have declined by 10-13 per cent from their peak in the third quarter of 2014, with Saadiyat Beach Residence being the only exception with an eight per cent increase.
Paul Maisfield, chief executive officer of MPM Properties, said that the off-plan market has continued to witness strong investor interest, as developers like Aldar Properties and Bloom Properties recorded high sales volumes.
“[Such sales volumes] clearly highlight that a larger investor base can be attracted if lower down-payment options are offered as compared to the 25 per cent down payment currently required for completed units from buyers seeking mortgage,” Maisfield said.
He added, “Abu Dhabi’s market is maturing quickly and the free-zones continue to attract new businesses to Abu Dhabi. In addition, gross residential yields are stabilising between 6.5 to 7.5 per cent, which is attractive to most investors.”
CBRE’s Green also said that external factors such as the stronger dollar, and uncertainty in Russia and Greece were harming inward investments. He expected the next 12 months to be flat across all sectors.
In the office segment, MPM Properties said that the market was likely to remain relatively inactive this year, due to weaker demand from the government sector and overall global economic sentiment.
However, Abu Dhabi’s free-zones are attracting new entities, with Abu Dhabi Global Market expected to play a significant role in attracting select fortune 500 companies into the capital.
