Bearish market sentiment, coupled with a number of major mergers and companies downsizing, have had an unfavourable effect on real estate demand in Abu Dhabi, according to a new analysis.
As a result rents for apartments and villas have fallen by an average of 17% and 12% respectively since the end of 2015 and prices fell by 13% and 8%, says the report from real estate firm Asteco.
The analysis explained that around 5,000 units were delivered in 2016 and 2017 which put further pressure on activity. Whilst demand for completed projects declined, sales for newly launched projects offering competitive sales prices and payment plans increased.
In 2017 limited economic growth continued to translate into job cuts, reduction of staff allowances and limited new employment opportunities and along with the rise in new supply this added to the drop in sales, prices and rents.
The decline was most prominent for high and mid-quality properties. The data shows that average quarterly rents for apartments fell by between 2% and 3% during 2017, while price falls ranged from 2% to 4%.
Meanwhile, quarterly decreases in villa rents and prices were less pronounced and varied from 0% to 3% throughout the year.
Whilst transaction activity for completed properties slowed compared with previous years, newly launched off-plan quality projects with attractive payment plans and discounts continued to benefit from strong demand, the report points out.
In 2018 rents and prices are expected to follow a similar pattern as that seen in 2017 and record moderate declines as a result of the continuous delivery of new supply during a period of moderate economic and market growth.
Approximately 9,000 residential units, including 6,200 apartments and 2,800 villas and townhouses are anticipated for completion this year, predominantly within the districts of Reem Island, Al Raha Beach and Yas Island.
However, the report says that based on previous years, the delivery of some of this inventory may be delayed until 2019.
‘Off-plan quality projects offering attractive sales prices and payment plans will continue to benefit from good levels of demand and ultimately increase investment in the real estate sector,’ the report concludes.