The latest quarterly report issued by the real estate subsidiary of Abu Dhabi Islamic Bank (ADIB) – MPM Properties – shows that the real estate market in Abu Dhabi is stabilizing after 6 months of rising values, which has seen yields eroded, lower loan to value ratios and limited availability of quality apartments.
The ADIB report covers Abu Dhabi’s residential, office, retail and hospitality sectors and features the second ADIB Rental Index, which highlights the performance of its managed portfolio comprising over 12,000 residential units spread across Abu Dhabi.
The ADIB Rental Index is based on data derived from lease renewals and new leases completed during the last 3 months, and is updated on a quarterly basis. The index covers Abu Dhabi Island, which has been subdivided into eight zones and the off-island areas of Khalifa City, Mohammed Bin Zayed City and Shakbout City.
The index shows that despite the removal of the rent cap 6 months ago, the common trend is 0 – 5% increase in the last quarter.
While there have been exceptions of 20% increase or more, these are very limited and relate predominantly to rents below Dhs40,000 per annum. In the last quarter MPM Properties have renewed some 2,000 tenancy contracts and granted over 400 new leases.
For the residential sector overall, strong market confidence and investor interest has supported rising values in prime projects during the last quarter, which included a number of bulk deals and sales of land plots.
In the office sector, with a slowdown in the delivery of new speculative development indicating the possibility of a turning point in the current cycle, there has been a notable improvement in leasing of quality office space to corporate tenants.
The retail sector, meanwhile, has witnessed rising footfalls and rising occupancy levels in off-island malls.
The tourism sector continues to grow at a healthy pace, and various initiatives by TCA Abu Dhabi are expected to help sustain this growth. In addition, increases in airport passengers have positively impacted hotel revenue (up 15%) and guest arrivals into Abu Dhabi (up 34%) in the second quarter of 2014 compared to the same period in 2013.
Paul Maisfield, Chief Executive Officer of MPM Properties, said: “As the second ADIB Rental Index shows, a sense of healthy stability is now clearly evident in Abu Dhabi’s real estate market. The breadth of data on which the index is based gives us a very good basis to gauge the current state of the market based on real activity rather than assumption or projection.”
The report also highlights the strong demand seen in established locations such as Reem Island, where the phased leasing of units at Gate Towers added 1,200 units to the market in the last 3 months.
The outlook for all sectors for the remainder of 2014 and into 2015 remains positive according to ADIB’s findings. Demand drivers will include the Abu Dhabi Executive Council’s approval of Dhs12.7bn investment in housing projects, AED11.9bn for Government administration and Dhs8bn for health, education and economic development, as well as the planned opening of Yas Mall in Q4 which will attract new retail tenants to Abu Dhabi.
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