The residential market in Abu Dhabi witnessed solid growth in the fourth quarter of 2013 with apartment sales price up 29 per cent  when compared to the previous year, said a report.

The residential rental growth in the UAE capital slowed down to 5 per cent in the fourth quarter, but it is likely to pick up in 2014 as market sentiment improves further, according to Asteco, a full service real estate services company in the region.

The apartment sales prices have witnessed strong growth, with rates up by 11 per cent in the fourth quarter, on average, compared with the previous quarter as buyers begin to factor in further growth expectations, Asteco said in its latest Q4 2013 report

“The sales price increases are due in part to the growing popularity of the newly established communities and the anticipated demand which will also drive rental rates, coupled with limited new supply entering the market in the short term," remarked Jerry Oates, the general manager for Asteco Abu Dhabi.

"These aspects, combined with improving market sentiment are making property ownership a more attractive option for both owner-occupiers and investors," he added.

Demand has been particularly pronounced for Al Raha Beach, where the average price of an apartment is now between Dh1,175 and Dh1,425 ($320 and $388) per square foot. Al Raha Beach benefits from its proximity to Dubai.

The Gate Towers in Shams Abu Dhabi, Reem Island, have also seen rates up by 15 per cent since their handover in the third quarter of 2013, due to the completion of retail outlets on the island and the offering of a community environment.

Reef Downtown, an affordable development off-island, has outperformed the market with a 50 per cent sales price growth compared with last year. Current rates at Reef Downtown start from Dh825 per square foot, said the Asteco report.

“We would expect to see price growth to continue throughout 2014, albeit at a slower pace than the previous year,” added Oates.

Villa sales prices have followed a similar upward trend to those of apartments, with Al Reef Villas witnessing the fastest pace of growth, up 38 per cent compared to the previous year.

Al Raha Gardens were up by 21 per cent and Golf Gardens by 13 per cent for the same period, where a three-bedroom villa is now priced at Dh2.85 million.

Rental rates have also grown rapidly during the first half of 2013, mainly due to demand from Dubai commuters relocating to the capital. However, in the last quarter of 2013, there has been a slowdown in rental growth, with modest rental rate increases of up to 5 per cent.

According to Asteco, the annual rental rates for a two-bedroom apartment in the investment areas of Saadiyat and Al Raha Beach now average Dh190,000 per annum, however Asteco believes that the current slow growth in rental activity is only temporary.

Only 8,500 units of supply are expected to come onto the market in 2014 (excluding Emirati Housing), therefore  Asteco expects rental rates to grow, in line with the overall positive sentiment throughout this year,” said Oates.

The developments that will continue to be in demand include the three communities at Al Raha Beach, which have become more attractive since retail outlets have opened and the communities have established themselves.

In addition, properties in prime locations on the Corniche and Saadiyat Island are likely to attract premium rates, especially with a lack of new prime developments in the pipeline.

There also continues to be demand for affordable accommodation, but to date, there is only a limited supply of purpose-built affordable housing. Residents on a budget live in old and lower quality buildings on the main island or outside the city near Al Reef, Hydra Village and MBZ / Khalifa City.

These areas are experiencing some of the fastest rental growth, as tenants are priced out of other developments. This increase may be exacerbated, as tenants will no longer be protected by the rent cap.

It now costs Dh70,000 per annum to rent an average two-bedroom apartment in central Abu Dhabi, a 7 per cent increase since the third quarter of 2013, said Asteco in its report.  

Overall rental rates in the villa market have been relatively stable, with only the most affordable properties in Al Reef, MBZ and Khalifa A witnessing some growth. At the lower end of the scale, average three-bedroom villa rents in MBZ now start at Dh120,000 per annum, whereas a similar property in Saadiyat Island will command an annual rent of Dh290,000.   

The office market supply has continued to outstrip demand over an extended period of time in Abu Dhabi, especially for Grade A & B shell and core space, stated the property expert.

As a result, rental rates for Grade A fitted office space were stable this quarter, whereas Grade A shell & core rates declined by 4 per cent, it added.-TradeArabia News Service