OBSERVER Abu Dhabi Market Report Q2 / 218
Services Report Highlights Valuations Mortgage and Secured Lending Portfolio Valuations The ongoing decline of both sales and rents in Abu Dhabi can be attributed to the delivery of new supply during a period of muted market sentiment and restrained economic growth. Approximately 1,6 units were delivered to the market in Q1, including Ansam on Yas Island, Al Hadeel at Al Raha Beach and Muhaimat Tower on Reem Island. And with a further 6, units expected to be available by the end of the year, the supply pipeline will continue to have a softening effect on the residential market for the rest of 218. Advisory and Research Financial Feasibilities Highest and Best Use Studies Market Research Conceptual Advisory and Project Positioning Studies Project Redevelopment/Repositioning Advisory Investment Strategies Acquisition and Disposal Sales and Leasing Commercial Industrial Residential Retail Property/Facilities Management Commercial Mixed-Use Residential International Properties London Off-Plan Residential International Homes and Investments International Relocations Sales Prices Downward price corrections witnessed in Q1, continued through to Q2. Average sales prices are down 3% for apartments and 4% for villas from the Generally, buyers are more cautious and waiting to see if stability returns to the market. Rental Prices The downward adjustment in rents continues in Q2 with average rental rates down 3% for apartments and 1% for villas from the Due to additional stock being available and limited new demand, landlords are having to compete on price (and incentives) which is adding pressure to rents. Furthermore, the recent increase in property tax will undoubtedly affect landlords, who were already struggling under challenging market conditions, by encouraging many tenants to buy as opposed to continue renting. Market Outlook Despite the continued weakening of sales and rents, there are some positive changes on the horizon which may help boost economic growth, creating a knock-on effect to the real estate sector. These include the roll out of the AED 5 billion Abu Dhabi Government stimulus package as well as Abu Dhabi National Oil Company s decision to invest over AED 4 billion in its gas downstream growth strategy over the next five years. Both of these initiatives could filter down to Abu Dhabi s real estate market in the form of fresh demand for residential property. However, until the effects of such initiatives has been realised, it is likely buyers and tenants will remain cautious. Residential Market Q2 218 Snapshot Price Movements QoQ Rental Movements QoQ The Observer - Dubai Residential Q2 218 1
Buyers take a cautious approach due to uncertain market conditions. Residential Sales Prices and Quarterly Change 1,4 1,2 Downward price corrections witnessed in Q1, continued through to Q2. Average sales prices are down 3% for apartments and 4% for villas from the Some of the biggest declines for apartments have been seen in Saadiyat Island with prices falling 6% from Q1, from AED 1,497 per sq ft to AED 1,412 per sqft; and in Al Ghadeer a drop of 4% from AED 962 per sqft to AED 923 per sqft as compared to Q1. in communities such as Al Reef and Al Raha Beach have seen the smallest price declines, dropping 1% from the Residential Sales Prices and Quarterly Change Al Reef is currently the only affordable residential community in the Capital with good facilities and quick commute times into Abu Dhabi City which may account for its long-standing appeal to buyers. Al Ghadeer villa sales prices saw a 7% decline from Q1; whilst areas such as Al Reef and Khalifa City fared better with a decline of 2% for Al Reef and Khalifa City prices remained unchanged from the Generally, buyers are cautious and are waiting to see if stability returns to the market. They understand there is enough supply and can afford to wait for the right property at the right time and price. AED SALES PRICES 1, 8 6 4 2 865 89 Figures in AED/sq.ft. 75 692 82 HOT TOPIC An AED 5 billion stimulus package for Abu Dhabi has recently been announced by Sheikh Mohammed, with the aim of accelerating the economy over the next three years. A new body, to be called Ghadan (Arabic for tomorrow), will seek out new technologies and investments that will speed up economic diversification both locally and in the region. The introduction of initiatives and incentives to facilitate new business and the creation of new jobs in the Capital could all have a positive knock-on effect to the real estate market. 768-7% Al Ghadeer Al Reef Al Raha Gardens Khalifa City Al Raha Beach Area 895 895 1,15 Q1 218 Q2 218 QoQ Change 1,81 1,6 AED SALES PRICES 1,4 1,2 1, 8 6 4 2 1,516 1,54 962 923 923 91 1,152 1,114 1 497 1,412 Al Raha Beach Area Al Ghadeer Al Reef Al Reem Island Saadiyat Island Figures in AED/sq.ft. Q1 218 Q2 218 QoQ Change The Observer - Dubai Residential Q2 218 2 The Observer - Dubai Residential Q2 218 3
Landlords need to be competitive to attract and retain tenants. The downward adjustment in rental rates from Q1, continues in Q2. Average rental rates are down 3% for apartments and 1% for villas from the The biggest declines for apartments were seen in Al Raha Beach and Khalifa City with 7% and 6% declines respectively. A 3 bedroom apartment in Al Raha Beach rented for AED 178, per annum in Q2, down from AED 183, in Q1, with studio apartments witnessing the biggest declines of 13% from the The most resilient location for apartment rents was Saadiyat Island which only dropped 1% from Q1 with studio and 1 bedroom rents remaining unchanged at AED 118, per annum. Residential Market Rent and Quarterly Change For villa rents, a few locations remained unchanged from Q1; these include Mohammed Bin Zayed City, Al Ghadeer and Reem Island. The biggest villa rental declines were in Al Reef and Khalifa City, both witnessing a 3% drop from Q1. Due to the additional stock being available and limited new demand, landlords are having to compete on price (and incentives) which is adding pressure to rents. As households are relocating to make savings, landlords are offering incentives such as multiple rent cheques to retain tenants and limit void periods. In a bid to attract new tenants, landlords have been seen to cover the cost of agency fees. Residential Market Rent and Quarterly Change AED RENTAL 4, 35, 3, 25, 2, 15, 1, 5, Figures in AED p.a Al Ghadeer Al Reef Al Raha Gardens Khalifa City Al Reem Island 3BR 4BR 5BR QoQ Change Al Khalidiya HOT TOPIC Abu Dhabi Municipality announced back in February 218 an increase in the Property tax fee with charges being implemented from May 218. The tax rate increased from 3% to 5% for apartments, with villas being subject to a 7.5% charge. This increased tax will undoubtedly add further pressure to landlords, who were already struggling under challenging market conditions, by encouraging many tenants to buy, as opposed to continue renting. MBZ 2, AED RENTAL 18, 16, 14, 12, 1, 8, 6, 4, 2, -7% Al Raha Beach Area Al Ghadeer Al Reef Al Reem Island Saadiyat Island Khalifa City Al Khalidiya MBZ Corniche Road Muroor Area -8% Figures in AED p.a Studio 1BR 2BR 3BR QoQ Change The Observer - Dubai Residential Q2 218 4 The Observer - Dubai Residential Q2 218 5
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