A view of the Abu Dhabi Corniche area. Image Credit: Hadrian Hernandez/Gulf News

Dubai: Want to upgrade to a posher location in Abu Dhabi? This could well be the time as residential rents at upscale locations such as the Corniche and Al Raha Beach record double-digit declines in the 12 months to the end of June.

And it’s not as if the rate of decline is slowing — just in the second quarter, asking rates for an address at the Corniche was down by 5 per cent compared with the first quarter of 2018. That means you could have a two-bedroom apartment for between Dh135,000-Dh175,000.

Not that pressures were being felt just by high-end properties. According to the latest updates from Asteco, a two-bedroom unit at either Khalifa City or MBZ City can be had on an annual lease of between Dh55,000-Dh70,000.

“Apartment rentals [have] softened by 2 per cent since the first quarter of 2018 and by 10 per cent compared to the same period last year,” the Asteco report says. “The most pronounced drop was in high quality and larger units predominantly located in the Corniche area.”

A similar dynamic was apparent in the villa space as well, with rentals recording quarterly and annual dips of 4 and 9 per cent, respectively. Among the communities, Golf Gardens and Al Raha Gardens registered drops of 14 and 13 per cent, respectively. (Since touching its peak in the fourth quarter of 2015, rents in Abu Dhabi have dropped an average 18 per cent. The steepest fall-off have been among the pricier locations.) On one count, landlords in Abu Dhabi can feel a sense of relief. Unlike in Dubai, where the pace of handovers are starting to pick up, Abu Dhabi hasn’t seen that kind of fast-tracking on the part of developers.

Uncertainty in the job space

In the second quarter, just 850 new homes were completed, down from 1,600 in the first. The forecasts were for just over 3,000 homes to be delivered in the first six months. If the slow pace of handovers continue, it is unlikely that new supply will have much of an impact on rents. What is happening right now is borne out of uncertainty in the job space, and most tellingly among senior executive ranks. This could explain why rents at upscale neighbourhoods and properties are seeing sharper drops.

“A significant majority [circa 80 per cent] of this supply (in the second quarter of 2018) was concentrated on Al Reem Island,” the report finds. “The volume [of 1,000 units delivered] was notable, particularly as it excludes a number of delayed projects, likely to be delivered in the latter half of the year.

“The handover of these delayed units, coupled with planned deliveries, will see the addition of 5,800 residential units before the end of 2018, albeit further delays cannot be ruled out.”

Silver lining

In property sales, ready homes hold the edge Buyer demand for high-end properties remains subdued, and the only silver lining of sorts is the level of interest shown for ready apartments in the secondary market. Even then, there was an average decline of 8 per cent in prices of such units year-on-year, according to Asteco.

“Al Raha Gardens villas led price declines, recording average falls of 4 per cent in Q2-18,” the report adds. “This compares to the average drop in villa sales prices of 2 per cent. Off-plan projects with attractive rates and flexible payment plans continued to generate interest with the recently launched Al Ghadeer, Phase 2 achieving high levels of demand.”