Prime property prices in Abu Dhabi had the fifth-fastest growth rate in the world last year, according to Knight Frank’s Global Wealth Report 2015. Luxury house prices in the UAE capital rose by an annual average of 14.7 per cent in 2014 — coming in only behind New York, Aspen, Bali and Istanbul — against the collective increase of a mere 2 per cent across 100 global cities ranked in the index. This is a jump from 2013, when the survey deemed Abu Dhabi the eighth-fastest growing housing market in the world,
with a 15 per cent price rise.
The few premium properties in Abu Dhabi continue to enjoy high levels of occupancy, and the long waiting lists for limited units available on lease also imply great popularity. “As such, these properties command higher rents and resale values than the market average,” says John Stevens, Managing Director, Asteco.
The full-service real estate services firm qualifies prime properties as well-managed developments that not only offer high-quality finishes, recreational facilities and amenities, but also good views, and tend to be part of a mixed-use development including hotel, offices and/or retail outlets.
Property agency Chestertons recently expanded operations in the capital to serve investors. “The luxury segment is always in demand in the UAE, due to the high-level of affluence in the region. Abu Dhabi has now become a popular investment destination with this category of investors due to the lifestyle choices it offers today,” says Simon Gray, Managing Director, Chestertons — Middle East and North Africa.
“The luxury segment is very popular with cash buyers, who have invested significantly in these projects, particularly off-plan properties,” says Robin Teh, Country Manager, Chestertons. “Another reason for the rise in demand of luxury properties is the unrest in the Middle East and the safe haven status of the UAE. Stock for luxury properties is absorbed quickly by these investors.”
Several off-plan projects targeting the premium segment were launched during 2014-15, including Mamsha Al Saadiyat and Al Maryah Plaza. “Demand levels were good, but pricing was key in unlocking demand,” says Stevens. “Sale prices for non-branded prime properties start at Dh 1,500 per square foot — although units at those prices are rare — whereas the branded units at St Regis sell for a significant premium.”
Most of Abu Dhabi’s existing prime developments are available for lease rather than freehold ownership, with the exception of those located at Al Raha Beach (Al Bandar) and Saadiyat Island (St Regis Residences), adds Stevens. This fact makes a difference to expatriate residents and international investors, although new developments are likely to be geared for ownership similar to Dubai’s property market. But with very few additions expected this year, there seems to be a tussle for what exists. Potential rise in rentals and resale values is also a hot topic.
High rental rates in the prime property segment will continue to prevail all through this year supported by immense popularity, says Asteco in a special report. “With limited or no new prime properties expected for completion this year, rental rates in this segment are expected to remain high throughout 2015, supported by strong demand,” says Stevens.
“Some of the most-sought after developments have a waiting list and, whenever a unit does become available, it tends to command higher market rents than the average.”
“We are not sure of any high-end projects this year, but even if some launches get confirmed, there will be no new supply of units immediately,” says Ensaf Ali, Director of Leasing and Sales at property service solutions provider Khidmah. “This will increase rents for all (existing) high-end projects, because the supply will be low compared to demand. As for sales, prices are expected to increase and retain higher value.”
Ameen Al Qudsi, CEO, Nationwide Middle East Properties, agrees. “We can’t really tell until new stock is delivered into the market. There might not be any notable effect on the rent also — it might stay the same or increase. The value will go up, as there are more projects under development,” he says.
Both Ali and Al Qudsi predict changes in ownership patterns in Abu Dhabi’s prime property market. “Most international investors seek property acquisition opportunities in markets where freehold ownership is available in case they decide to liquidate their assets,” says Ali. “On the other hand, expatriate residents are looking to invest in a freehold property, where they can be assured of getting a title deed and ownership status like Dubai practises.”
Al Qudsi says, “Currently, most high-end property owners are local [Emiratis], and we will see change as new projects start emerging. It will make a difference, but only if it comes with benefits for the expatriate buyers, such as residency and investor priorities.”
Quality of lifestyle
Al Qudsi says some of the most desirable addresses to rent high-end homes are at Saadiyat Island as it is designed to suit a luxury lifestyle and has places like the Louvre Museum, and at Al Gurm, which is owned by the Emiratis but rented out to expatriates who appreciate the privacy associated with the project.
As for his recommendations for prime investments, Saadiyat Island features on the list too, besides Saraya (developed by Aabar, mainly for Emiratis) and projects under development on Al Maryah Island.
The Khidmah team that manages Al Raha Beach and Reem Island consider both as premium rental properties because of the unique facilities, fantastic sea views and great quality of lifestyle. “We look at them as the most desirable addresses in Abu Dhabi, and this is what we hear from the market too,” says Ali.
Chestertons says this growing demand for prime properties will see the Abu Dhabi realty market remaining buoyant in 2015.