Abu Dhabi residential rents down 6pc
Abu Dhabi, November 12, 2012
Abu Dhabi has witnessed a six per cent drop in its average residential rents in the third quarter compared to the previous one mainly due to a rapidly increasing housing inventory across the emirate, according to a report.
As residential rental rates continue to fall in the emirate, location and age-specific factors are becoming increasingly important for occupiers in determining fair rental value, said the CBRE in its Q3 market review for Abu Dhabi.
During the second quarter, a total of 1,516 buildings were completed in the emirate, with 68 per cent situated in and around Abu Dhabi itself, and the remaining completions split between Al Gharbia (23 per cent) and Al Ain (9 per cent), .
This is resulting in an ever-growing disparity between primary and secondary locations and between new and ageing properties, the report added.
A recent report from the Abu Dhabi Statistics Centre (ADSC) highlighted a growing number of development completions in the emirate with the majority incorporating residential products (75 per cent).
The ADSC report also indicated that 3,302 residential units were completed in the second quarter, up 17 per cent from 2,816 in the first quarter, reflecting a significant residential development pipeline.
The rapidly increasing housing inventory is creating greater affordability for residents as average rental rates remain fixed on a downward track. This is also having a knock-on effect on inflation, which has been maintained at low levels for much of the past year, the CBRE pointed out in the report.
Newly-delivered luxury properties such as Etihad Towers, Eastern Mangrove Residences and St. Regis Residences continue to achieve impressive rental rates, with solid occupancy and strong corporate demand helping to underpin rates, despite notable downside across the majority of housing projects.
"However, as the market awaits further delivery of high-end offers from World Trade Center Residences, Nation Towers and Landmark Tower, we may expect to some gradual softening of rents as competition increases."
"This will provide a good indication of the sustainability of the luxury market, which has historically been an undersupplied segment of the housing inventory in Abu Dhabi," said the report.
Overall, average residential rents have dropped 6 per cent from the previous quarter. It is apparent that a highly fragmented landscape exists with selected areas and developments outperforming the wider market.
"This is reflected strongly in our analysis of rental performance, with some properties seeing static rents, whilst others have experienced declines of between 3 – 9 per cent. At this point in the development cycle we see no immediate end to this trend with better quality inventory entering the market, adding pressure to ageing and/or inferior units," said the expert.
Despite improving conditions in Dubai and the general reduction in rental rates in Abu Dhabi, the capital’s properties are still found to be slightly more expensive than in Dubai.
For instance, the average annual rent for a studio in Dubai is now slightly under Dh40,000($10,887) per unit as compared to Dh45,000 ($12,248) for a similar property on the main island of Abu Dhabi.
Residential villas have been slightly less impacted by the downturn in rents, with quarterly declines typically ranging from 2-5 per cent. Well managed projects in core locations with quality facilities and amenities continue to attract the strongest demand and are consequently also receiving the highest rents.
A steady supply of new villas on the main island is helping to maintain established rental levels, although for secondary locations this is leading to a reduction in rents.
Most of the upcoming villa supply in Abu Dhabi is expected at the Emirati Housing Community developments such as Watani, Al Falah and Yas Island Housing.
Although these are mainly distributed to Emirati Nationals there will still be increased competition in the leasing market.
On the commercial leasing scenario, CBRE said after a sluggish start to the year some modest improvement had been noted in the sector.
This trend is expected to continue over the next 12 months as previously hesitant occupiers slowly start to capitalise on favourable market conditions and ever-growing quality office stock to secure accommodation at attractive rates, the real estate expert said.
Smaller office spaces will remain the most sought after, with many occupiers still reluctant to commit to larger spaces while global economic uncertainty continues to prevail. However, a number of larger office requirements that have been active in the market over the past year are anticipated to finally complete during 2013, it stated.
Despite a widening price differential and increasing availability of residential offerings in newly-created communities and off-island locations, key districts on the main island have maintained their popularity.
Accessibility remains a key driver for tenants opting to remain in city centre locations as opposed to relocating to
more affordable secondary areas, said the report.
The recently-announced requirement for government employees to reside locally in the emirate, raises a potential argument for more affordable developments in the capital, the expert said in the Abu Dhabi review.
Inerestingly, the report pointed out that despite significant new supply currently being delivered and in the pipeline, housing options were still limited for those who wer in the lower earnings brackets.
Currently, requirements for ‘affordable' residential units are being satisfied in off-island areas such as Khalifa City and MBZ, although transportation infrastructure supporting these locations remains somewhat limited, the report stated.
The International Monetary Fund (IMF) in its recent report had highlighted a positive economic outlook for the UAE, with GDP growth of 3.5 per cent, driven principally by improving economic conditions in Abu Dhabi and neighbouring Dubai.
According to Abu Dhabi Chamber of Commerce and Industry (ADCCI), the emirate's economy is anticipated to grow by close to 4 per cent during 2012 on the back of a solid performance in non–oil revenues recorded growth of ground 7 per cent, contributing 42 per cent to Abu Dhabi’s total GDP.
Inflation in the capital remains at historically-low levels, rising just 1.3 per cent during the first nine months of 2012, said the CBRE in its report.
The downward pressure on housing rents should help to constrain inflation levels over the remainder of the year and into 2013, it added.-TradeArabia News Service