Dubai
Ongoing economic uncertainty coupled with oversupply in the housing market continued to put pressure on Abu Dhabi’s residential property sector, where apartment rental rates fell 3 per cent.
According to the latest report from property company Chestertons Middle East and North Africa (Mena), rents and sales prices are expected to remain under pressure during the rest of the year due to flat economic sentiment.
The lack of investor confidence as well as the launch of several new residential projects is adding further pressure.
“The sluggish economic growth of the emirate (of Abu Dhabi) is expected to have a detrimental impact on government spending, which in turn could lead to a drop in property prices because of high vacancy rates caused by job losses,” said Ivana Vucinic, head of advisory and research at Chestertons Mena.
In the sales market, average prices fell 3 per cent for apartments during the second quarter of 2017 while average villa prices fell 4 per cent. Apartments on Al Reem Island saw the greatest decline of 7 per cent as prices fell to Dh1,273.
In the rental market, average apartment and villa rents fell 3 per cent and 2 per cent respectively. Apartment rates only rose in Al Raha Beach area, where rental rates inched up 1 per cent and average prices for a two-bedroom apartment reached Dh158,000 per year, Chestertons said.
Two-bedroom apartments saw a 2 per cent decline in rental rates in Al Ghadeer to reach Dh70,000 per annum. Meanwhile, rates in Al Reef Downtown and Al Reem Island declined by 2.5 per cent and 3.5 per cent to Dh90,000 and Dh120,000 respectively.
“We expect to see residents continue to downsize their accommodation and move to more affordable areas as companies cut back on accommodation allowances,” Vucinic said.
She added, “Sales prices and rents are expected to remain under pressure during 2017 as the market witnesses decreased demand. When government spending begins to increase, we could see a certain element of confidence returning as more public-sector jobs are created. However, this is not likely to happen in 2017.”
The report on Sunday mirrors analysis by most property consultants that noted depressed appetite for investment and a flight by tenants to smaller, more affordable units.
A report by Asteco last week said that limited public spending, job cuts, and a reduction in staff allowances resulted in an 8 per cent decline in apartment rental rates over the last 12 months.
Chestertons said it expected the supply of quality properties in attractive location to be alleviated through developments by Aldar Properties, Eshraq Properties, and the Tourism Development and Investment Company (TDIC). Up to 4,000 units will be launched into the market in 2017, most of which will located near Reem Island and the Corniche.
