Residential property market in Abu Dhabi slow in first quarter of 2016
In Abu Dhabi real there was a slight decrease in demand for higher priced residential units but sales activity was slow although relatively stable except for a handful of transactions concluding at below market rates.
A fee of 3% on home rentals was announced as a Municipality Contract Fee, which will be applied to all Abu Dhabi’s expat residents and this could affect the market, according to the latest UAE property review from Asteco.
Rental rates for prime and high quality residential apartments fell 2% compared to the fourth quarter of 2015, the report data shows. However, apartment rental rates remained, on average, 4% higher than the previous year’s rates.
Mid and low quality units, in contrast, recorded stable rates with only a slight decrease for larger units, as tenants moved to newer developments offering similar or lower rental rates.
Similar to the apartment sector, rental rates in the villa market were relatively stable in the first three months of 2016. However, there was a slight decrease in demand for the higher priced but older villas that are predominantly located on Abu Dhabi Island.
In comparison, the majority of newer prime and high end villa developments, which include the Saadiyat Island projects, Golf Gardens, and Al Raha Beach, recorded their highest rental rates.
The report suggests that a lack of quality villa communities continued to be the main factor behind the high rental rates throughout Abu Dhabi. Over the last 12 months, the prime and high quality villa projects recorded between 4% and 7% rental increases, while those for lower quality private villas decreased by more than 10% over the same period.
A breakdown of the figures show that price movement varied with rates down by 5% to 7 % over the quarter in Reem Island communities whereas Saadiyat Island and Al Raha Beach recorded growth of 2% and up to 6% respectively and the report suggest this is due to the relative small availability of stock actually for sale in the market.
The amount of upcoming supply on Reem Island, together with sales rates peaking in 2015, resulted in a large decrease in demand from buyers in the first quarter of 2016. Sales prices on Reem Island recorded an overall downward trend for the first three months of the year with rates for City of Lights dropping by approximately 10%, Sun and Sky Towers and The Gate Towers decreasing by 5% and 6% respectively, and Marina Square prices falling by 6%. The traded price at Marina Square in Q1 2016 ranged between AED 1,230 to AED 1,350 per square foot.
The report also shows that after a period of strong demand for villas throughout 2015, the first three months of 2016 recorded limited sales activity. In particular, the more affordable units in the Al Raha Gardens and Al Reef developments saw only a few transactions taking place, of which most were below market rates.
In comparison new developments on Yas Island were able to attract some demand since Aldar launched several new residential projects such as West Yas and Yas areas, which offered four and five bedroom villas for sale from around AED 4.7 million.