The real estate market in Abu Dhabi, UAE, has strengthened over the last two years with double-digit sales growth and is set to continue its rental growth across all sectors in an encouraging investment climate, said a report.

Investors in Abu Dhabi’s real estate sector can expect sustained rental growth and relatively stable capital values in 2015, on the back of a strong performance in 2014, stated property expert Asteco in its latest report.

The average sales rates for apartments and villas increased by 15 per cent and 16 per cent respectively in 2014 with a strong performance in H1, followed by a stable second half of the year, it stated.

Asteco said the volume of transactions also declined in the second half due to the shortage of quality stock for sale in the secondary market.

The high sales volumes experienced at the newly launched projects in Ansam, Al Hadeel and Mamsha Al Saadiyat, proved that pent up demand for quality products exists, stated the expert in its report entitled 'Abu Dhabi Property Review: 2014 Highlights & 2015 Outlook'.

Jerry Oates, the general manager for Asteco Abu Dhabi, said: "Popular master-planned developments for sale included Saadiyat Island and Al Raha Beach while Reem Island proved to be an attractive area providing more mid-market units."

"We expect apartment sales prices to remain stable this year as the market becomes more competitive due to the imminent handover of new projects," he added.

According to Asteco, the full year-on-year comparisons (2008-2014) highlight continuous apartment sales price growth since 2012, up on average by 48 per cent for all areas combined but still 26 per cent lower than 2008 market peak.  

Sales prices in Al Muneera at Al Raha Beach now stand at Dh1,425 ($388) per sq ft on average, up 21 per cent compared with last year, whereas rates at Reef Downtown also climbed 21 per cent to an average of Dh1,000 ($272) per sq ft. Marina Square saw a 17 per cent increase to an average of Dh1,375 ($374) per sq ft, stated the expert.

Villa sales prices also witnessed strong growth from their lowest level in 2012, growing 47 per cent on average for Al Raha Beach, Golf Gardens and Al Reef Villas during the period, with increases of 19 per cent during the last year alone.

The rates are, however, still 11 per cent lower than at their 2008 fourth quarter peak, it added.

According to the report, the villa sales market will remain relatively flat as there will be limited prime and high-end product available for sale in the primary and secondary markets in 2015.

Despite continuous increases of 20 per cent since their low point in 2012, rental rates for both apartments and villas are still considerably more affordable than in 2008 by over 40 per cent, indicating potential for further growth, said Asteco in the report.

Apartment rental rates were up by 10 per cent year-on-year (2013-2014) while villas rentals rose by nine per cent. A prime two-bedroom apartment currently rents for Dh175,000-180,000 ($47,634 to $48,995) per annum.

Asteco said the villa rental rates are likely to increase during 2015 due to a shortage in quality villa units with occupancy rates expected to remain high.

An average four-bedroom villa could be leased for Dh239,000 ($65,055) per annum in Q4 of 2014, whereas the average in 2011 was Dh203,000 ($55,256) and Dh433,000 ($117,862) respectively in 2008.

According to the expert, the biggest increases in rental rates in 2014 were on Saadiyat Island and Marina Square on Reem Island where recent handovers of high-end projects achieved high occupancy levels leading to rental increases as landlords capitalised on strong tenant demand. The year was also marked by a positive level of transaction activity as tenants continued their flight to quality.

New mid- to high-quality developments at still relatively affordable rents are encouraging relocation by tenants to upgraded accommodation with older properties and lower quality projects being placed under increased rental and occupancy pressure.

Since 2012 quality and recreational amenities have been a tenant priority across all areas and Asteco expects this to continue in 2015 with occupancy rates in popular developments maintaining their current high levels, stated Asteco in its report.

“The Abu Dhabi rental market in 2015 is expected to see continuous strong levels of demand. A range of new projects are due for handover in 2015 including an anticipated 13,000 apartments and villas which will come online, will have an impact on the Abu Dhabi real estate market by creating greater competition, particularly in apartment rents,” remarked Oates.

Abu Dhabi’s office market was stable in 2014, as landlords of single-owned buildings maintained their asking rates.

However, it is anticipated that as new developments such as Addax Tower on Reem Island are handed over during the year, rates for multiple-owned office space in the investment areas could come under pressure as individual landlords compete to secure tenants, stated Oates.

Since 2013, the Abu Dhabi real estate market has continued to strengthen, a trend Asteco predicts will continue throughout 2015, he added.-TradeArabia News Service