- Sluggish job market and a shrinkage in the oil and gas sector continue to place pressure on the Abu Dhabi real estate market;
- Apartment sales prices down 1% and villas down 9%; apartment and villa rents down 3%
Average apartment sales prices in Abu Dhabi fell by 1% in Q1 2017 while villa prices dropped by 9% amid public and private sector downsizing, a byproduct of the static oil and gas sector, according to the Abu Dhabi Residential Market Q1 2017 report from leading international property agency Chestertons MENA.
“Sales prices are expected to further decline due to redundancies attributed to the shrinkage of the oil and gas sector. We believe the trend of downsizing or moving to more affordable areas will continue until 2018, when an expected increase in government spending could improve market sentiment,” said Robin Teh, UAE Country Manager/Director Valuations & Advisory UAE, Chestertons MENA.
On average, villa sales prices fell by 9% in the first three months of the year. Al Ghadeer, Al Reef and Khalifa City witnessed the largest percentage drop resulting in prices falling to AED915/sqft, AED897/sqft and AED747/sqft respectively. Al Raha Gardens also witnessed a sales decrease, although less severe, of just under 6% to AED931/sqft.
Apartment sales prices, on average, declined by 1% in the first quarter of the year. Areas bucking the trend included Al Reef Downtown, which saw an increase of 1% to AED948/sqft, Al Reem Island remained flat at AED1,362/sqft. Al Gadeer witnessed a 3% decrease to AED1,009/sqft, while Al Raha Beach fared slightly better with a decline of just under 1% to AED1,601/sqft.
Ivana Gazivoda Vucinic, Head of Advisory & Research, Chestertons MENA, said: “Sales figures, particularly in the villa market, have been sliding gradually since Q4 2014 further underscoring the quiet sales market in Abu Dhabi. Housing benefit packages have been impacted by cost cutting moves in many companies which may have had a knock-on effect on the villa market.
“Sales prices are likely to continue to ease throughout the remainder of 2017 and into 2018, however we do expect the market to rebound with reinvigorated activity.
Apartment rents declined by an average of 3% in Q1 compared to the previous quarter, Al Raha Beach witnessed no change, while Al Ghadeer fell on average by 1%. Al Reef Downtown fell by an average of 6% and Al Reem by 4.5%.
“Apartment rents have declined across the board as the trend for more affordable accommodation continues. A two-bedroom apartment in Al Raha Beach is now available for AED155,000 annually; while in Al Reef Downtown and Al Reem Island prices for a two-bedroom start at AED92,000 and AED125,000 respectively,” added Gazivoda Vucinic.
Similar to the apartment rental market, Villas also witnessed softening across the board by 3%. Villas in Al Reef, Al Raha Gardens and Khalifa City saw rental decreases of between 1% and 7%.
According to Gazivoda Vucinic new supply will hinder the market further. “An additional 4,000 apartments and villas by the end of 2017 will add further pressure to the much-maligned rental market in Abu Dhabi.”