Abu Dhabi ruling boosts real estate market
Abu Dhabi, September 1, 2013
Abu Dhabi’s real estate sector has posted solid growth in the first half, thanks to the government requirement for public sector staff to reside in the emirate and the Dh330 billion ($90 billion) investment over the next five years, said a report.
The massive investment is expected to act as a catalyst not only for growth within the emirate, but the broader UAE as well, with the nation’s FDI appeal expected to receive a further boost, according to property expert Cluttons.
The residential sector is seeing a further boost to demand through the government’s requirement for Abu Dhabi public sector staff to relocate to the capital by today, September 1, 2013, Cluttons said in its latest market analysis 'The Property Report (Summer 2013).'
This annual publication is timed to fall between the two existing bi-annual reports and takes stock of the year thus far, looking at the residential and commercial sectors in Abu Dhabi, providing insightful view on the key drivers behind the figures and offering expert opinion for the year ahead.
On the Abu Dhabi ruling, Steven Morgan, the head of Cluttons Middle East said: "This requirement has certainly contributed to the rising tenant demand that we have been recording. We expect that the ruling, which comes into force today for 20,000 public sector workers and their families, will continue to place downward pressure on vacancy levels."
At the same time, this will bolster residential rental and capital value growth rates, particularly in submarkets that provide easy access to Abu Dhabi Island and the lifestyle offered by Dubai, he added.
"Al Raha Beach is a prime example of this and we have already seen rents rise by close to 15 per cent during the second quarter. This rise has been fuelled in part by tenants wishing to secure suitable accommodation ahead of today's deadline and also by new job starters moving to the capital, particularly in the education, healthcare and hospitality sectors," he added.
The upturn in employment, coupled with the government’s relocation requirement is expected to continue to reduce the oversupply of residential stock and push up prices, the Cluttons stated in its report.
Rising levels of housing demand have already been evidenced by a 13.2 per cent rise in average capital values for apartments in the first half of 2013, it stated.
Furthermore, increases of 15.9 per cent in average prices for high-end apartments on Reem Island during first half were also recorded; this is more than double the overall 7.3 per cent growth rate across the capital over the same period, it added.
This is in marked contrast to last year, when high-end apartment values contract by -3.3 per cent on Reem Island, whist apartment prices slipped by -4.4 per cent across Abu Dhabi, said the top property expert.
"Villas have registered capital value rises of 22 per cent during first half, underpinned by the strong performance of submarkets such as Sadiyat Island. Al Reef Villas emerged as the strongest performing villa submarket in the six months to June, registering strong growth of 15.1 per cent, due to its family appeal and desirable location, adjacent to Sheikh Zayed Road," it added.
On the office scenario, Cluttons said the sector remained subdued. "However, whilst office supply continues to lag occupier demand, prime grade-A rents are holding steady at between Dh1,700 and Dh1,800 psm, while more secondary offices, in locations perceived to be inferior, are still experiencing rent reductions, dipping to just below Dh1,000 psm," it stated.
However, the retail scene in the capital offered a more positive outlook, with a circa 200,000 sq m still expected to come online this year at Deerfields Mall, Emporium Mall at the Central Market and the recently opened Galleria Mall at Sowwah Square.
With 600,000 sqm of additional retail space projected to come to market from 2014 to 2017, we expect the malls in the capital to follow a similar strategy to those in Dubai, acting as anchors for future residential and commercial development, said Steven Morgan.
Malls such as Dubai Mall (Downtown Dubai) and Mall of the Emirates (Barsha) have been the catalysts for housing and office demand in their respective submarkets and Abu Dhabi’s new mega malls are likely to act as the foundation blocks for similar future growth, he added.-TradeArabia News Service