The residential leasing market in Abu Dhabi is set to remain extremely active in the second half with demand driven by continued internal movement, thanks to an addition of 7,400 apartments and 1,675 villas into the market, said a report.

Tenants living in Abu Dhabi took full advantage of increased real estate market supply by upgrading from their existing accommodation and maximising their housing allowances as better quality became more affordable through market supply and demand dynamics, according to property expert Asteco.

Major new areas of supply include Marina Square and Raha Beach, with a combined 3,638 new homes and a number of landmark developments such as Rihan Heights also coming on stream.

The community-led developments led the trend as residents swopped old for new, said Asteco in the H1 2012 report.

The flight to quality has led to clear segmentation, with older areas and buildings that previously commanded high rental rates and occupancies – such as the Tourist Club, Khalifa City A&B and Mussafah - falling out of favour, with rates dropping between 3 and 14 since Q1, it added.

“A total of 7,400 apartments and 1,675 villas were added to the city’s rapidly expanding real estate sector in the first half of the year, triggering a wave of internal movement as existing residents sought to upgrade to better quality and value for money accommodation,” said Elaine Jones, the CEO of Asteco Property Management.

Demand for premium quality developments with mixed-use facilities also grew substantially, with a high level of leasing activity for top tier product including Etihad Towers, topping out at Dh150,000 for a one-bedroom apartment and St. Regis Residences achieving Dh261,000 for a three-bedroom unit.

Pre-leasing activity for Nation Towers was also strong, showing high levels of interest for premium waterfront product. Rates for Nation Towers reached up to Dh100,000 for one bedroom and Dh300,000 for a three-bedroom loft unit.

“Tenants are willing to pay for high quality finishes and amenities and this particular trio of developments is representative of the new Abu Dhabi lifestyle, with waterfront living in a mixed-use setting, and the appeal of new community-focused developments,” said Jones.

Asteco expects the leasing market to remain extremely active in the second half of the year with demand being driven by continued internal movement filtering through to all sub-sectors of the residential market and leading to further rental adjustments as an additional 7,000 new apartments and 4,560 villas ready for release in the next six months.

Increased residential sales transactions in H1 2012 were credited primarily to the completion of designated investment area projects and the availability of competitive mortgage interest rates and attractive selling prices.

Apartments in Shams Abu Dhabi, Marina Square and Raha Beach produced the highest volume of transactions, focused on smaller one and two-bedroom units. However most areas such as Shams Abu Dhabi, Al Raha Beach and Marina Square experienced an overall decline of around 4 per cent averaging Dh10,600 per sq m.

Meanwhile four-bedroom villas at Al Raha Gardens dipped by 7 per cent to Dh3.2 million (Q1 versus Q2) while Al Reef bucked the trend, increasing in value by 2 per cent, fetching Dh1.3 to Dh2 million for three and five-bedroom units respectively.
 
'Investors have started to re-enter the market since rental return prospects have started to improve due to price reductions and more affordable mortgage options,' said Jones.

'But, sales prices are still depressed overall due to the amount of available supply and the number of distressed sellers still in the market. Increased transaction activity will continue in H2 2012 as more projects are handed over,' she added.-TradeArabia News Service