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Abu Dhabi ... residential sales prices remain stable.

Abu Dhabi property market stable despite low oil prices

ABU DHABI, October 13, 2015

The real estate market in Abu Dhabi, UAE, remained stable in the third quarter, despite a slowdown in government spending and weaker sentiment owing to lower oil revenues, said a report.

While the residential sales prices remained unchanged during the period, the decline in investor sentiment has impacted transaction volumes and this trend is set to continue, stated property expert JLL.

The residential rents across the UAE capital too remained stable in the third quarter, it added.

According to JLL, the third quarter saw limited change to real estate market indicators but increased signs of caution.

The expected slowdown in domestic government spending has become more apparent this quarter, in response to lower oil revenues and reallocation of funds to regional priorities, it stated.

This has impacted investor sentiment and transaction volumes and is expected to impact GDP and employment growth going forward. On the positive side, supply remains under control and the new real estate regulations are expected to further slow down supply growth.

While the demand for housing has been relatively flat, supply remains in balance with minimal vacancies in high quality, well-located schemes, said the report.

David Dudley, the international director and head of Abu Dhabi office at JLL Mena, said: "The general trend for the third quarter and indeed the first three quarters of 2015 has been stability, with value performance of most sectors remaining flat, and a slight increase in hospitality performance."
 
"While the market has remained relatively stable there are increased signs of caution - with a slow-down in government domestic spending and a reduction in transaction volumes and investor sentiment," he noted.
 
"In Q2 we had reported that the market was at a ‘tipping point’ with its future direction being dependent on the extent to which government maintained domestic spending in the current period of reduced oil prices. During the third quarter it has become clear that the level of domestic government spending will reduce in the short-term, as the government remains cautious and re-allocates funds to regional priorities," observed Dudley.

"Job cuts have occurred in the oil and gas and government sectors and some of Abu Dhabi’s mega projects are expected to be delayed further and phased over a longer timeframe. On the positive side however, supply remains under control," he added.

On the office sector, JLL said the average Grade A rents have remained stable this quarter although some rental growth has been recorded in the Grade A buildings which had limited vacancies.

"Demand for office space remains suppressed given spending cuts within oil and gas companies and government entities. While we expect Grade A rents to be upheld, Grade B rentals may soften as further Grade B space enters the market over the next 12 months," said the property expert in its report.

On the retail scenario, JLL said the rents remained stable and are expected to remain so over the next 12-18 months. While significant retail space is set to enter the market from 2018, the development pipeline has reduced and demand growth remains positive, particularly linked to hospitality growth.

On the hospitality market, the property expert said it continued to outperform compared to the same period in 2014.

The ADRs ( average daily rates) increased by three per cent in the year-to-August, while hotel occupancies also registered a marginal increase, reaching approximately 72 per cent, the report added.

"Following a two year bull-run where residential price growth at 25 per cent per annum outstripped GDP growth of 3 to 5 per cent per annum, a period of stabilisation is not a bad thing - allowing market dynamics to catch up with sentiment.
 
The UAE government announced that it plans to cut spending by 4.2 per cent this year, following the decline in oil prices, the first such cut in spending for 13 years and all indications are that this trend will continue.

"We still expect demand growth to continue, but at a slower pace. Demand growth will continue to be sustained from projects commenced while oil prices were high – with projects such as the airport and Etihad expansion having an economic multiplier effect – but there will be greater scrutiny of new projects, which will be phased outwards," he added.-TradeArabia News Service




Tags: abu dhabi | real estate | market |

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