Abu Dhabi prime rentals drop on chase for value
Abu Dhabi, February 3, 2013
Residential buildings in Abu Dhabi formerly considered prime are seeing vacancy levels increasing and rates falling as tenants relocate in a flight to quality and value-for-money, a report said.
Tenants living in Abu Dhabi have been taking advantage of select new prime developments offering high quality amenities at competitive rates after 9,000 apartments and 6,000 villas were added to the property market last year, according to the latest H2 2012 report from leading UAE property management company Asteco.
Many of the quality developments have generally been able to sustain their current rental rates given strong levels of demand, the report added.
“2012 was a pivotal year for the Abu Dhabi real estate market with the delivery of significant new developments which have raised the quality of living and working standards in the capital,” said Paul Maisfield, associate director & general manager Abu Dhabi, Asteco Property Management.
“However with an additional 17,000 residential units due for delivery in 2013, the performance of the Abu Dhabi residential leasing market will be strongly influenced by the impact of restrictions placed upon public sector workers, that they should reside in Abu Dhabi in order to claim a housing allowance and that all leases should be registered in the Tawtheeq system which precludes the sharing of accommodation.”
Overall, average rental levels declined across the market by 12 per cent over the last 12 months. However the new Investment Area developments have generated strong demand, in some cases reversing losses incurred during the first half of 2012.
Prime developments such as Shams Abu Dhabi saw annual rental rates fall by 1 per cent while Marina Square was unchanged for the year. Annual leasing rates for lower quality properties on the Corniche fell 19 per cent while older stock in central Abu Dhabi, Khalidiya and Bateen fell 16 per cent year-on-year. Annual rental rates for a two-bedroom apartment in a prime location vary from Dh65,000 ($17,695) in Khalifa A&B to Dh160,000 on Al Raha Beach.
In some developments villa rental rates were relatively unchanged, with Al Raha Gardens, Saadiyat Beach and Al Raha Beach all recording drops of 3 per cent or less over the past 12 months.
Al Reef showed the largest annual fall on the new developments with 17 per cent. Annual rental rates for a typical three-bedroom villa in Al Raha Beach is Dh250,000, while a similar three-bedroom property in Al Reef costs Dh110,000.
Some lower quality villa developments suffered high annual rental rate decreases, such as those in Mussafah and Khalifa A&B that suffered declines of 9 per cent and 11 per cent respectively. Indeed, the quantity of new supply in those areas, combined with the preference of tenants to live in villa communities rather than stand alone villas or small compounds has resulted in strong vacancy levels and landlords forced to reduce their rental expectations.
Apartment sales prices in Abu Dhabi during 2012 fared slightly better than the leasing market with asking prices dropping year-on-year by 3.7 per cent in Marina Square, 7.7 per cent in Shams Abu Dhabi and 9 per cent in Al Raha Beach. An average price per square metre for an apartment in a prime development was around Dh10,600.
Transaction activity in the villa sales market in Abu Dhabi saw some improvement in 2012 driven by the delivery of Investment Area stock with Raha Beach, Reem Island and Saadiyat Island all witnessing improved sales volumes. Asking prices fell on average by 6 per cent in Al Raha Gardens and 4 per cent in Golf Gardens during the course of the year with a typical four-bedroom villa costing Dh2.3 million in Raha Gardens and Dh3.3 million in Golf Gardens.
Asteco said that commercial leasing activity was dominated by large government departments occupying substantial amounts of office space, especially in the final quarter of 2012.
The wait-and-see attitude of smaller companies, a feature of H1 2012, finally changed as SMEs began to relocate with the bulk of requirements for small (less than 500sqm), fitted space at competitive rates. – TradeArabia News Service