The residential market in Abu Dhabi, UAE,  witnessed solid growth in the third quarter driven by positive investor sentiment and population growth and potential future under-supply, said a report.

The sales prices for both apartments and villas rose slightly by six per cent to hit Dh16,000 ($4,355) per sq m, while rents for prime residential units remained stable at Dh150,000 ($40,832) per annum, stated property expert JLL in its review on Abu Dhabi's housing market for the third quarter.

The housing demand remains strong across all price points driven by population growth, it added.

According to JLL, around 1,200 units were added to the residential stock during the third quarter with the delivery of the B2 building on Reem Island and the Abu Dhabi Plaza Complex on Hamdan Street. Emirati families too received new houses within the Al Falah scheme this quarter.

These deliveries bring the total residential stock in the UAE capital to 242,000 units at the end of the third quarter of 2014, stated the real estate consultancy in its report.

JLL said a number of new residential projects have been announced in the emirate during the third quarter. These include the first residential development within the Saadiyat Cultural District, Mamsha Al Saadiyat, by Abu Dhabi's Tourism Development and Investment Company (TDIC).

This project comprises nine low-rise residential buildings including apartments and townhouses.

The construction work on the three residential buildings within Meena Plaza in Port Zayed is set to restart next month after being suspended. Elsewhere, Aldar Properties has also announced the sale of the B2 building on Reem Island to a joint venture between two Dubai-based investment companies MAG Group and Fortune 5 Investments.

However, JLL warned of a future housing shortage as near term supply deliveries were below historic averages at a time of strong demand and predicted further rental increases over the short term.

The report also provided the consultancy’s perspective on the latest trends in the office, retail and hotel sectors in Abu Dhabi.

On the office sector, JLL said the vacancy rates were expected to remain stable, with rental growth returning as existing vacancies are absorbed. "While rents have increased by six per cent in the third quarter averaging Dh1,640 ($446)/sq m from Dh1,540 ($419)/sq m in the second quarter of 2014 for prime space, secondary space rents have remained stable at Dh1,180 ($321)/sq m.

The supply completions during the third quarter were limited to the handover of the Abu Dhabi Plaza Complex mixed-use building on Hamdan Street. With no other major deliveries, the total office stock remains around 3.1 million sq m, it added.

On the retail sector, JLL said the average line store retail rents for malls on Abu Dhabi Island remained stable at Dh3,000 ($816)/ sq m per annum, while rents for malls outside Abu Dhabi have increased marginally by two per cent.

"No major deliveries took place during the third quarter, with the retail stock remaining stable at 2.2 million sq m. However, over 400,000 sq m of retail gross lease area (GLA) is expected to enter the market by the end of 2014, dominated by the delivery of Yas Mall on Yas Island together with Capital Mall within the 9712 BMC (Building Materials City)," said the report.

According to JLL, the recent announcements of new super regional malls such as Sowwah Central, Saadiyat Mall / The District and Reem Mall together with the planned Marina Mall extension will boost the emirate’s retail supply significantly by 2017-18.

On the hotel sector, the report said no hotel completions took place during the period, however, two hotel apartment buildings - Adagio Al Bustan on Airport Road and Grand Mercure Residence on Zayed the First Street - opened its doors.

JLL pointed out that there was significant demand for long-term hotel apartments, with the sector comprising a major component of the demand in areas such as Yas Island.

The market is responding to this demand with a number of additional hotel apartments expected to enter the market by the end of 2014 including Capital Centre Arjaan at Capital Centre and Danat Residences at Danat, it added.

Commenting on the report, David Dudley, the head of JLL’s Abu Dhabi office, said: "The third quarter recorded the continued growth of prices in the residential market and growth in office rents, with continued stabilization in the hospitality, retail and office sectors."

"All sectors of the Abu Dhabi market are now positioned in the recovery stage of their cycle, for the first time since 2008," he added.

Dudley pointed out that residentials remained the strongest performing sector, while the office market witnessed growth for the first time after being stable for the past two years.

"Vacancy rates are reducing due to increased market absorption and a reduction in speculative supply in the pipeline," he stated.
 
According to Dudley, the retail rents for malls on Abu Dhabi Island have remained stable this quarter. "But some units outside the island are seeing a marginal increase in rents as they witness higher footfalls," he said.

"The Abu Dhabi hotel sector continues to recover, with the year to August seeing higher occupancies (71 per cent) compared to 2013 (64 per cent). For the first time, Abu Dhabi hotels experienced higher occupancies than Dubai in July (55 per cent compared to 50 per cent),” he added.-TradeArabia News Service