Abu Dhabi residential rents down 3pc in Q1
Abu Dhabi, April 22, 2012
The average residential rents in Abu Dhabi fell by 3.5 per cent during the first quarter compared to the previous quarter as the sheer number of newly-completed units took its toll on both rental rates and occupancy, according to a report.
The property market in the UAE capital witnessed an 18 per cent year-on-year decline and deflationary pressures were anticipated to continue across the emirate as additional stock is delivered over the next 12 months, said property expert CBRE in its latest market view on Abu Dhabi for the first quarter.
For strata developments, rental fluctuations are often found to be even more acute with the presence of multiple landlords in the same building creating fierce competition, the CBRE added.
Owners are also pushed to lease properties at lower rates in order to prevent the long void periods occurring, subsequently benefitting occupiers across the market.
The impact of the sustained growth in overall housing stock is strongly reflected in the continued decline of lease rates, which has also led to the emergence of reduced tenant loyalty amidst more abundant and affordable options in the market, it stated.
With 23,000 new units to be delivered in 2012 alone, residential inventory in the capital is set for significant growth. Despite inevitable supply and demand imbalances, overall rental fluctuations are anticipated to be more modest than observed during the onset of the market downturn.
According to CBRE, Abu Dhabi’s expanding residential offer is providing tenants with a more abundant array of new good quality products.
An increasing number of high-end residential properties are now being completed in areas along the Corniche, Sa’adiyat Island and also at Raha Beach, said the report.
The upcoming projects in the UAE capital include Nation Towers and Landmark Tower which will add to recently delivered luxury residences from Etihad Towers and St Regis Apartments.
The transactional market remained constrained during the first quarter with sales prices for freehold units on Reem Island and at Al Raha Beach starting from around Dh950/sq ft, while the sale rates for Al Reef Downtown were seen as low as Dh475/sq ft, it added.
CBRE said the prices for completed properties remained relatively stable, while those still in the early stages of construction continued to fall away amidst weak demand for riskier off-plan products.
The report stated that in the hope of creating more market interest, a number of financial intermediaries have announced reduced mortgage rates, while many developers were now offering flexible payment terms and more creative products (e.g. rent-to-own schemes) in order to attract buyers.
Market transactions, it said, were being driven predominantly by occupiers with very low investment activity being recorded.
With a significant inflow of new properties during a very short period, occupiers continue to enjoy a growing spectrum of choice across various locations and budgets.
However, the CBRE cautioned that the outlook for the capital’s landlords was not so upbeat.
Heightened competition in the marketplace means owners face a growing battle to preserve healthy occupancy rates whilst also maintaining satisfactory levels of rent, said the property expert.
Dependant on how the capital’s property stock is managed and delivered, short term oversupply situations will be inevitable, which in turn will directly impact upon sales and rental performance, it stated.
For example, the delivery of a large number of units in the Raha Beach market in the last quarter led to notable ‘localised’ rental reductions despite the area remaining a popular destination amongst tenants, it added.
Further regulatory developments are still keenly awaited, and although a number of draft laws are believed to be under review no timeframe has been identified for their implementation, said the CBRE in its review.
Given growing competition regionally, it is more imperative than ever that suitable measures are undertaken to ensure that the market remains competitive and attractive for new investment, it added.-TradeArabia News Service