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Abu Dhabi property market softens over global flux

ABU DHABI, December 5, 2016

The recent global economic uncertainties have induced a ‘wait and see’ attitude in potential property buyers in Abu Dhabi and as a result real estate prices are softening in the emirate, a report said.

The Abu Dhabi real estate market has experienced further softening in both the residential and office markets, said global real estate services company Cluttons in its Abu Dhabi Property Market Snapshot for Winter 16/17.

Faisal Durrani, head of research for Cluttons said, “We have seen a notable acceleration in the residential market correction as a result of increasing global economic uncertainty and the protracted oil and gas sector's decline, building during Q3 and being further exacerbated as we wait to understand the full impact of Mr. Trump's election as President of the United States of America.”

“This, combined with continued market softening across residential and office markets has led to nervousness amongst investors, with many reluctant to commit to purchases until they see signs of stabilisation.

“As a result, we have left our forecasts unchanged with a 10 per cent fall in villa values this year likely to be followed by a decline of around 7 per cent in 2017. Apartments will likely be less severely impacted with a decrease of 4 per cent this year and a further 2 per cent to 3 per cent fall in 2017. The villa rental market will continue to bear the brunt of the widespread slowdown in the creation of senior level jobs, with a 20 per cent drop this year likely to be followed by a 7 per cent to 8 per cent drop next year,” he added.

Residential market

Abu Dhabi’s residential market continued to soften during the third quarter with the fall in capital values (-2.4 per cent) outpacing rental declines (-1.0 per cent). On a year to date basis however, rents across the city’s residential investment areas are down by 9.4 per cent, while home values have fallen by 5.2 per cent.

Edward Carnegy, head of Cluttons Abu Dhabi, said: “Demand has continued to wane over the course of the year, with the primary driver of requirements, the oil and gas sector, still shrinking, and widespread redundancies continuing. Undoubtedly this has undermined demand for property, both for purchase and rent. These factors, combined with the ‘wait and see’ approach of investors, has been most felt by the top end of the villa market.”

Sea view villas on Saadiyat Island (Dh1,850 per sq ft ($503)) for instance, have decreased in value by nearly 18 per cent over the first 9 months of 2016, positioning it as the weakest performing market this year, behind mid-range apartments on Reem Island, which are down -11.1 per cent.

For Abu Dhabi’s rental market, the top end of the villa market has borne the brunt of a diminishing rate of creation of senior level positions in the capital, while housing allowances have also continued to slip across the board.

Like the sales market, high end villas on Saadiyat Island have on average registered a near 25 per cent drop in rental rates between January and September, but early indications from Q4 suggest the rental declines are persisting, which will push the rental falls in this affluent submarket lower still.

More positively for landlords, areas such as Al Reef Downtown, which is perceived to be more affordable than other areas in the city, posted a 16.1 per cent rise in average rents, leaving them at a little over Dh108,000 per annum and bringing them in line with average rents at Hydra Village (Dh105,000 per annum). Although it was last year’s stand out performer, driven mainly by its affordability, Hydra Village rents have decreased by nearly 11 per cent between January and September.

 Office market

After holding steady for over a year, prime (Dh1,900 per sq m) and secondary (Dh1,100 per sq m) office rents in the city slipped by 5 per cent and 8.3 per cent respectively during Q3 of 2016. Receding demand and a growing amount of secondary space on the market has undermined rents. In fact, rates in some of Abu Dhabi’s prime office buildings have also buckled under the market’s weakness, with asking rents declining by up to 20 per cent in some Grade A buildings.

 Carnegy concluded: “Unfortunately, what we have seen in the Abu Dhabi office market is an offset as both supply increases and demand recedes. Real estate availability will need to fall into line with the market conditions set by the continued weakness of the global oil sector, and its effect on the local economy, before any stabilization can be established.” – TradeArabia News Service




Tags: abu dhabi | Cluttons | residential | property market |

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