Real estate firm CBRE said that the ruling has lifted leasing volumes in the emirate although residential rents still fell by an average of 3% in the first quarter of 2013 compared to the previous quarter.
There is speculation that further government led rulings are likely to try to boost the emirate’s property market which is not recovering like that of neighbouring Dubai.
In the short term, CBRE expects average rents for both commercial and residential properties to fall; further as a result of the sheer volume of new units and space due to enter the market.
While relative stability is likely in the sales market during 2013, its report said an immediate pick up in transaction activity was unlikely while investors await clarification on the emirate’s real estate laws and final details on new legislation, such as the proposed mortgage cap.
‘The residential market continues to receive strong backing from the Abu Dhabi government in a concerted effort to rejuvenate the sector after a four year slide. The mandate for all government employees to reside in the emirate in order to qualify for housing allowances is one of the key initiatives in this regard, with the general feeling in the market that this ruling is slowly starting to have an effect on leasing volumes,’ the report explains.
The first quarter of 2013 saw the delivery of several high end residential complexes on the main island, including 347 units at Al Bateen Park, 348 units at Marina Bay and 350 units at Marasy.
However, the majority of the residential development pipeline for 2013 will come from off island investment zone developments such as Al Reef Downtown and Al Reem Island, and the government’s Watani housing initiative for local Emiratis.
Average annual rents for two bedroom and three bedroom apartments in the city centre range between AED50,000 AED120,000 per annum and AED70,000 AED150,000 per annum respectively, the report said.
It added that the relatively stable supply picture in the city centre has helped to maintain comparatively strong rents and occupancy rates, despite declines in other locations.
The impact of sustained growth in overall housing stock is reflected in the continued decline of lease rates and reduced tenant loyalty amidst abundant and more affordable options in the market, the report added.
With an estimated 17,000 new units to be delivered during 2013, residential stock in Abu Dhabi is set for a period of sustained growth, with inevitable consequences for both occupancy and rental rates, it concluded.
