Study: Abu Dhabi real estate prices, rental rates, dropping
Abu Dhabi real estate sales prices and rental rates continued to undergo downward adjustments throughout 2018, albeit at a lesser rate towards the end of the year, indicating that in some locations pricing levels are starting to become more realistic, according to research from leading international real estate services firm, Chestertons, latest Observer: Abu Dhabi Market Report Q4 2018.
Average apartment sales and villa prices fell by 2% in Q4 compared to the previous quarter. The year-on-year performance showed that apartment prices declined, overall, by 9% and villas by 11%. In the rental market, rates continued to soften as apartments saw a further 4% decrease, with a 2% drop for villas from the previous quarter. Annually, apartment rental rates declined by 12% and 9% for villas.
“The rate of adjustment we’re now seeing is slower than previously experienced, which we believe is an indication that prices have reached more realistic levels in several areas of the capital. Prices are expected to continue to soften in 2019 as 11,000 units are estimated to be delivered, ensuring Abu Dhabi remains an even greater buyer-friendly market over the next 12 months,” said Ivana Gazivoda Vucinic, Head of Consulting, Chestertons MENA.
(Ivana Gazivoda Vucinic, Head of Consulting, Chestertons MENA)
Apartment sales prices in Al Ghadeer, for the second quarter in a row, witnessed one of the biggest price adjustments, declining 5% Q-o-Q to AED822 per sqft, a 16% decline when compared to 2017. In Al Reef, prices fell by 2% Q-o-Q to AED880 per sqft while in Al Raha Beach, apartments remained the most resilient, dropping by just 1% from the previous quarter to AED1,450 per sqft.
From an annual perspective, Al Reef (11%), Al Reem Island (11%) and Al Raha Beach (5%) all saw price declines, with only apartments on Saadiyat Island witnessing no change in average sales prices from 2017 selling at AED 1,425 per sqft in Q4 2018.
In the villa sales market, average Q-o-Q prices fell by 2%, whereas Y-o-Y the figure was more defined with average prices falling by 11%. It was Al Ghadeer, as with apartments, that witnessed the greatest decline Q-o-Q, falling by 7% to AED 716 per sqft, denoting a Y-o-Y decrease of 17%. It was only Al Raha Beach that saw a greater annual decline, with prices falling by 19% to AED 1,035 per sqft. This figure, however, remained unchanged from the previous quarter indicating prices may have bottomed out in this area.
“With oversupply continuing to hamper sales, we’re seeing developers in the capital, particularly in the off-plan market, offering a range of attractive incentives to investors and end-users in a bid to bolster the market. Service charges being waived, reduced municipality fees and favourable payment plans are all now part of the standard sales package,” added Vucinic.
With both apartment and villa rental rates witnessing a further 4% and 2% decline respectively, Q-o-Q, many tenants are continuing the flight to quality trend witnessed in Q3 and taking advantage of the opportunity to upgrade to larger units with better quality amenities in more popular areas
The highest average declines for apartment rental rates were seen in Mohammed bin Zayed City, Saadiyat Island and Al Ghadeer, falling Q-o-Q by 5% across the board with a three-bedroom apartment in Mohammed bin Zayed City now available for AED93,000. Average rental rates in Al Reem Island dropped by only 1% from the previous quarter,with three-bedroom apartment rents remaining unchanged from Q3 at AED140,000. Annually, it was the Corniche that remained most resilient, with apartment rental rates averaging a 6% decline with a three-bedroom unit available for AED 150,000 per annum as of Q4 2018.
In the villa market, average rental rates in Al Ghadeer, Khalidiya and Khalifa City, remained unchanged from Q3. A four-bedroom unit in Al Khalidiya was available for AED185,000 and AED165,000 in Khalifa City as of Q4 2018. Al Reem Island had the biggest villa rental decline, dropping 5% with a three-bedroom available for AED 200,000.
“The recent announcement of Government initiatives to stimulate the economy, as well as the introduction of the new 10-year visa for expats, could see an increase in the investor pool, resulting in an increase in demand in the residential market. However, in the short term we expect sales and rental rates to continue to soften,” said Vucinic.