A total of 15,000 new properties expected to be delivered in Abu Dhabi this year will push down the sale prices and rents in the UAE capital, said a report.

Landmark Advisory, a leading real estate and investment consultancy, has released its latest quarterly report, which focuses on the impact of upcoming property deliveries in Abu Dhabi and Dubai.

“In Abu Dhabi, much of the new supply expected for delivery this year will rejuvenate a market that has a low average standard of quality for existing housing supply,” said Jesse Downs, director of research and advisory services, Landmark Advisory.

“About 5,000 of these residential units will be delivered in the Investments Zones, like Marina Square, and we expect most of the handovers to be concentrated in Q3 2010, which will result in a few key trends,” she added.

In terms of the sales market, actual price declines experienced within developments are linked to the payment plan structure, the report said.

“In Marina Square, for example, payment plans are back-loaded with up to 70 per cent due near completion, which is causing prices to approach the Dh1,000 ($272) per sq ft mark,” continued Downs.

“While we expect some marginal price decline as we approach handover of developments, these recent price declines are already closing the gap between seller and buyer expectations, which will continue to attract investment, and result in more transactions.”

Turning to leasing trends in Abu Dhabi and Dubai, rents continue to decline in both cities, the report said.

The Landmark Advisory report said that rents will decline up to 20 per cent by the end of 2010, with the sharpest declines occurring in the second half of 2010, following the handover of large portions of supply in the investment zones, Downs said.

“Once these units are available in the leasing market and rents decline, relocation within the city will increase, and we predict that middle-high and high-income commuters will gradually start relocating back to the capital.”

According to Downs, Abu Dhabi and Dubai’s rental markets are interlinked through commuter patterns.

“Dubai rents are declining and will continue to decline due to increasing supply within Dubai and sluggish job growth. In 2009, rental demand in Dubai was driven by relocation, with Abu Dhabi commuters comprising a significant portion of that demand. As commuters and new residents working in Abu Dhabi move into the capital’s new developments, this will put additional downward pressure on residential rents in Dubai.”

Turning to the Dubai sales market, the report maintains that residential and office prices experienced further declines in Q1-10 with residential sale volumes decreasing due to the widespread anticipation of further price declines by potential investors.

According to the report, increasing liquidity constraints continue to restrict mortgage availability and affordability; this limits owner-occupier demand and leaves investor sentiment steering demand.

Downs continued: “The silver lining is the recent increase in commercial leasing demand stemming from corporates looking to relocate or establish operations in Dubai.

“Reduced office rents and a general reduction in costs associated with establishing and operating a business in Dubai is generating relocation interest from within Dubai, from other Emirates, and also from the broader GCC. In addition to affordability, regional companies are attracted to the high quality of infrastructure in Dubai and the improved capacity to attract and retain talent.”

“In Dubai, this is the trend to watch for forecasting demand for both the office and residential sector. Increased demand from corporates looking to relocate to or expand within Dubai will lead to job growth with expatriate job growth in particular set to bolster residential demand for the master developed communities,” concluded Downs. – TradeArabia News Service