Uncertainty upsets Abu Dhabi realty market, rents fall 10 per cent
* Apartment rents down 7 per cent on average, villa rents fall 10 per cent; sales flat
* Yield levels average just above 5 per cent
* Macroeconomic factors will continue to put downward pressure on real estate market
Waning economic growth and prevailing uncertainties are sending shockwaves across UAE capital Abu Dhabi’s real estate market, which, experts say, will continue to be under pressure at least in the first quarter of this year.
Muted business expansion in the private sector forced many companies to take on several cost-cutting measures, including job cuts in 2016.
As a result, average apartment rents in Abu Dhabi fell by seven per cent, while villa rental rates dropped by ten per cent last year, according to property consultancy Chestertons MENA.
“Redundancies and the shrinkage of the oil and gas sector continue to place pressure on the demand in the market,” said Robin Teh, UAE Country Manager, Chestertons MENA.
“Tenants are seeking lower rental rates as housing allowances have been reduced,” Teh added while launching the Abu Dhabi Residential Market Update Year in Review 2016 report on Sunday.
Where rents dropped
Apartment rents in the emirate declined by an average of one per cent in the fourth quarter from the previous quarter.
Al Reef Downtown marked the steepest drop in rents by an average of three per cent from Q3 and 11 per cent year-on-year (YoY) while Al Bandar, Al Zeina and Al Reem Island saw an average decrease of eight per cent YoY.
Al Ghadeer was the only area that showed no change.
Villa rentals dropped by an average of two per cent in Q4 and saw significant softening across the areas in the city in all of 2016.
Villas in Al Reef, Al Raha Gardens and Saadiyat Island witnessed average rental decreases of between 10 per cent and 12 per cent.
Where sales prices fell
On the sales front, average apartment prices dropped by one per cent in Q4 from its previous quarter, with the Al Ghadeer and Al Reef Downtown areas displaying an above average decline of two per cent.
Meanwhile, apartments in Al Ghadeer, Al Bandar and Al Muneera witnessed YoY average declines of three per cent.
On average, villa sales prices fell by two per cent from Q3 to Q4 and 6 per cent overall. Al Reef Island saw the greatest YoY drop at six per cent. Al Raha Gardens, Saadiyat Island and Khalifa City all fell by four per cent from 2015 prices due to a quiet sales market.
Meanwhile, average yields for Q4 remained stable since Q2 and stayed flat at just above five per cent.
“There is a similar situation in Dubai, with residential sales and rental prices falling and yet yields remaining fairly consistent throughout the course of 2016,” said Teh.
“We expect the pressure on rents to remain throughout the first quarter of 2017 with the continuous cost cutting measures and job instability in the current market.”
ALSO READ: Sale of apartments and villas go up in Dubai