Abu Dhabi property prices down 25pc
Dubai, February 28, 2009
The average prices for Abu Dhabi’s master developments have fallen by 15 to 25 per cent since peaking in the third quarter of 2008 and are nearing original prices in the secondary market, said a report.
The new Abu Dhabi Real Estate Report, launched by Landmark Advisory, examines the price correction now unfolding in the freehold/leasehold market.
For properties being delivered later than 2011, average prices are likely to fall up to 10 per cent below original prices by the second quarter of 2009, it said.
“Freehold and leasehold prices spiked after CityScape Abu Dhabi in May 2008, and despite solid demand fundamentals, the market could not sustain such high prices in the short- to medium-term,” said Jesse Downs, head of research at Landmark Advisory.
“Now we’re in a state of transactional gridlock in a market wanting transparency. Going forward developers and investors need the latest research analysis based on solid supply and demand fundamental to make informed decisions.”
“Investors and speculators saw Abu Dhabi as the ‘next big thing’ after Dubai, but by then the financial crisis had already hit the UAE,” he pointed out.
'Launch prices were benchmarked against Dubai’s already inflated property values, so there was little room for appreciation even before liquidity dried up,” he opined.
'Understanding the current state of Abu Dhabi’s freehold/leasehold market requires an evaluation of buyer and seller motivations. Sellers are motivated by original prices, while buyers focus on absolute prices,” explained Downs.
'So buyers are unwilling to buy at current prices, but sellers are reluctant to sell below what they paid. Due to this incompatibility, sales have ground to a halt,' he said.
“Developers are now facing the prospect of renegotiating payments to prevent defaults and preserving enough cash flow to continue construction,” he added.
Turning to Abu Dhabi’s rental market, Landmark Advisory revealed that between the fourth quarter of 2007 and that of 2008, average villa and apartment rents grew by 35 per cent and 80 per cent, respectively.
Rent growth leveled out in the fourth quarter of 408 and has been relatively stable since, rising marginally in January and February.
“After spiking, average rents appear to have hit a ceiling due to supply-side substitutions. Residents are opting for housing alternatives like accommodation-sharing, serviced or hotel apartments, and auxiliary markets in Dubai and Al Ain,” concluded Downs. – TradeArabia News Service