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Non-oil sector boosting Abu Dhabi housing market
Abu Dhabi, April 19, 2014
Growth in key non-oil sectors such as tourism, hospitality, education and healthcare is translating into robust demand in terms of the volume and nature of property requirements in Abu Dhabi, a report said.
The non-oil sector continued to expand its share of the economy, accounting for 45 per cent of total GDP in 2013 and up from 43 per cent in the previous year, which is helping to ensure the sustainability of growth in the residential market by aiding in the long term diversification of the buyer and tenant demand base, explained the Abu Dhabi Spring 2014 Residential Market Outlook report released by Cluttons, a leading real estate consultancy.
This resurgence in demand is coupled with a market that has been depleted of new supply for a number of years and this is driving values, while also stimulating a widespread return to development.
Steven Morgan, chief executive Cluttons Middle East, said: “Abu Dhabi’s economic evolution is underpinning the long term sustainability of the residential property market.”
“The market has already seen the quarterly pace of residential value growth stabilize at close to 7 per cent over the past two quarters. Despite the moderation in the rate of acceleration, values across the City’s relatively small freehold residential landscape currently stand 47 per cent up on this time last year, highlighting the depth of buyer demand.
“This is also enhancing Abu Dhabi’s attractiveness to international investors, some of whom are keen to capitalize on rapid rebounding in values,” he added.
Highly sought freehold apartments experienced the strongest performance in the first quarter of the year (6 per cent), with Al Reef Downtown (9 per cent) showing the greatest level of growth. In the villa market, Al Reef Villas (6 per cent) was the strongest performing primarily because of its relative affordability when compared to other submarkets in the city.
The economic diversification is also positively influencing the lettings market, with corporate transactions taking entire towers for staff housing common place. The rapid removal of stock from the supply line will continue to sustain the upward pressure on rents.
“We expect this trend to persist during 2014, but the ongoing growth in rents across the city will drive larger corporations to contemplate longer term solutions for staff accommodation”, adds Morgan.
“We expect to see a sharp increase in long-term lets, which will reduce stock levels in desirable locations. As a result, we anticipate a growth in partnerships between corporations, developers and land owners, with build-to-suit options coming to the fore.”
The lettings market is however still expected to remain buoyant. The vibrancy will in part be aided by the recent removal of the Rent Cap in November 2013.
“Landlords were able to adjust rents to perceived market levels rapidly and clearly longer term tenants would have felt this the most. In fact some tenants have reported increases of up to 50 per cent at renewal. The announcement has helped to drive churn in the market as value seekers are being driven to more affordable submarkets such as Al Reef,” Morgan said.
“As these sub-markets come to life with improved infrastructure and amenities, more people will continue to be drawn to them. The market is undoubtedly meandering through a settling period following the removal of the Rent Cap, but the thickening supply pipeline may offer some respite to tenants, particularly if we see corporates begin to exit the private rental market in favour of build to suit options,” he concluded. – TradeArabia News Service