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Al Awar ... market movements were steady across the UAE in Q1.

Abu Dhabi property rents, price stable in Q1

DUBAI, March 29, 2015

Property leasing and selling prices remained relatively stable in Abu Dhabi, UAE, for the first quarter of 2015, according to a report.

The trend is in anticipation of the awarding of mega projects in Abu Dhabi and Dubai which are expected to attract more professional human resources and influence a rise in demand for luxury units until the end of the first half of this year, said the latest market intelligence report from Tasweek Real Estate Development and Marketing.

Tasweek noted a number of factors currently influencing industry movements and decisions, including the growing popularity of ‘smart’ homes and real estate-related technologies, the slowing of transactions due to oil price and currency exchange fluctuations, and the emergence of a more affordable market segment offering price ranges below Dh1 million ($272,000), led by developers such as Dubai’s Nshama. Overall, Tasweek expects a ‘wait and see’ sentiment for most developers in the short term.

“Market movements were steady and deliberate across the UAE during the first quarter, with most developers adopting a ‘wait and see’ attitude that we expect to carry over in the coming couple of months,” said Masood Al Awar, CEO, Tasweek Real Estate Development and Marketing.

“There are a lot of positive indicators for growth and new opportunities though, such as the increasing popularity of the ‘smart living’ concept and the introduction of more affordable price ranges. We are optimistic that the local industry will post a strong performance this year and rise above local, regional and global challenges behind the promising trends witnessed in the first few months of 2015.”

Abu Dhabi

Tasweek predicts a correction in the price of freehold units in Abu Dhabi following Tamouh’s announcement of the start of unit sales of its ‘City of Lights’ in Al Reem Island Towers. This is the initial phase of Tamouh’s second project, which includes nine towers - two for offices and seven for residential tenants comprising 2,400 housing units.

The units are freehold and not for hire. Prior to the announcement, the units were priced less than their counterparts at rates ranging between 10 and 15 per cent.

The local residential market was stable for the first two months of 2015, although landlords kept protecting rental levels by reducing supply. Demand is still high after the removal of the rental cap along with the return of government employees to the emirate in Q3 2014. The market will continue to correct prices between old tenants and new leases until the local government issues a rental map to control the market. Overall, residential rental prices rose two per cent in Abu Dhabi Island and three per cent in freehold areas outside the mainland.

As for office rentals, transactions remained weak due to a combination of excess supply and less demand. The slump is reflected in the five per cent slide in new commercial licences issued in Abu Dhabi over the same period last year. A total of 1,760 were issued from January to February 2014, compared to 1,700 issued so far this year.

Average prices for high-end commercial units reached Dh2,200 ($599) per sq ft, down from last year’s Dh2,500 ($681), while mid-quality office space averaged Dh1,300 ($354) per sq ft from 2014’s Dh1,500 ($408).

Dubai

As projected by Tasweek in Q4 2014, the first two months of 2015 saw continued stabilisation in Dubai’s residential sales and rental markets. Transactions slowed down 20 per cent in January and 17 per cent in February compared to the same months in 2014. This indicates consumer patience and growing confidence for the future. On average, sales prices dipped slightly by two per cent from Q4 2014, while rentals were almost the same.

Based on government data showing an average daily issuance of 100 new commercial licences, Tasweek predicts that new demand will absorb existing and future supply, and that prices will remain at the same levels next quarter.

Moving forward, the volume of commercial licence issuances noted by Tasweek will drive demand for offices, with excess supply already being observed. The resulting projected three per cent increase in office space prices will most probably lead to between five and seven per cent increases in the next quarter.

“After the MIPIM real estate expo in France a few weeks ago, changes in investors’ reactions were noticed in response to an uneven global economic recovery which has affected real estate investment,” said Al Awar.

“A slow rise in real estate prices has influenced investors to look towards other alternatives that focus on either higher investment yield or capital growth. Real estate drivers mainly focused on job creation and income increases amidst mortgage interest decreases and capital growth.

“A ‘wait and see’ sentiment currently prevails across the UAE, as a relatively stable market could witness rallies as trends such as ‘smart homes’ and lower price points gain traction. Tasweek still believes that the positive momentum from Q4 2014 will result in another strong performance for UAE real estate in 2015,” concluded Al Awar. – TradeArabia News Service




Tags: Dubai | lease | property prices | Tasweek | Abu Dhabi rents |

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