Issues of oversupply and ongoing economic uncertainty continue to put pressure on Abu Dhabi’s residential real estate market, according to leading international property company Chestertons Middle East and North Africa (Mena).

The apartments rents registered a three per cent drop during the second quarter, while the villa rents fell two per cent, stated Chestertons in the latest Abu Dhabi Residential Market Q2 2017 report.

Ivana Gazivoda Vucinic, the head of advisory and research, Chestertons Mena, said: "We are expecting prices to remain under pressure throughout the rest of the year due to the flat economic sentiment and the launch of several new residential projects compounded by a lack of investor-confidence."

"The sluggish economic growth of the Emirate is expected to have a detrimental impact on government spending which in turn could lead to a drop in property prices because of high vacancy rates caused by job losses," she noted.

Sales prices on average decreased by three per cent for apartments during the second quarter of the year.

Apartments on Al Reem Island witnessed the greatest decline of seven per cent as prices slumped from Dh1,363 per sq ft to Dh1,273 per sqft. Properties in Al Ghadeer were the only bright spot, rising by four per cent to Dh1,050 per sq ft.

According to Chestertons, the average villa sales prices fell by four per cent in Q2, with Khalifa City recording the largest drop at 10 per cent from Dh832 per sq ft to Dh747 per sqft. Al Ghadeer and Al Reef witnessed declines of just 2 per cent to Dh904 per sqft, Dh708 per respectively.  Al Raha Gardens fell 3 per cent to Dh821 per sqft.

It was a similar story for Abu Dhabi’s rental market, stated Chestertons in its report.

The average apartment rents fell by three per cent, with only Al Raha Beach Area showing a marginal 1 per cent increase – where the average price for a two-bedroom property currently stands at Dh158,000 per annum, Al Ghadeer two-bedroom apartments witnessed a decline of 2 per cent to Dh70,000 per annum Al Reef Downtown and Al Reem Island declined by 2.5 per cent and 3.5 per cent to Dh90,000 and Dh120,000 respectively per annum.

Average villa rents also witnessed a slide of two per cent, with properties in Al Reef witnessing a drop of 3.5 per cent. Al Raha and Khalifa villa decreases were more subdued at 0.5 per cent and 1 per cent respectively, said the property expert.

Rental prices for a five-bedroom villa in Al Raha was Dh242,000 and in Khalifa prices for the same number of bedrooms was Dh190,000.

"We expect to see residents continuing to downsize their accommodation and moving to more affordable areas as companies cut back on accommodation allowances," observed Gazivoda Vucinic.

The supply of quality properties in attractive locations is set to be alleviated through developments by Aldar Properties, Eshraq Properties and TDIC with the release of up to 4,000 units into the market in 2017, most of which will be located near Reem Island and the Corniche, she stated.

Additionally, Mubadala Real Estate and Infrastructure recently unveiled the master plan for Arzanah, a new community development near Zayed Sports City in Abu Dhabi.

"Sales prices and rents are expected to remain under pressure during 2017 as the market witnesses decreased demand," noted Gazivoda Vucinic.

"When government spending begins to increase, we could see a certain element of confidence returning as more public-sector jobs are created, however this is not likely to happen in 2017," he added.-TradeArabia News Service