Apartment rental prices declined by an average 9 per cent during the second quarter in Abu Dhabi as new stock continued to enter the UAE capital's housing market, a report said.

However, rents for quality villas, which are still in short supply in Abu Dhabi remained relatively stable, but additional supply will put some downward pressure on prices as the year progresses, according to Asteco’s Q2 2011 report.

Office rental rates varied significantly, but recorded an overall decline of 7 per cent in Q2, with landlords prepared to negotiate to secure tenants, it said.

The leading UAE-based property consultant said two-bedroom apartments in quality developments on the Abu Dhabi Corniche were now leasing for between Dh140,000 ($38,114) and Dh170,000, whilst apartments in Central Abu Dhabi ranged from Dh120,000 to Dh140,000.

“The downward trend is unlikely to change in the short term due to further prime stock entering the market across a number of key landmark developments in the second half of the year. This will encourage existing tenants to look for greater value-for-money in the capital, applying yet more downward pressures on rental prices,” said Elaine Jones, CEO, Asteco Property Management.

The report also pointed to some areas that are beginning to buck market trends, such as the Al Bandar development at Raha Beach. The few units that have been handed over have managed to secure moderately higher rents than what had been achieved in the previous quarter, the report said.

Prices for two-bedroom apartments are now leasing for between Dh140,000 and Dh180,000. This increase is likely to be short-lived however, given the imminent handover of Al Zeina, it said.

According to the report, demand for rented villas in the UAE capital had remained relatively strong over the quarter. At Al Reef, a shortage of available properties, particularly two-bedroom townhouses, has seen rents increase slightly over the last three months. However, the handover of the Mediterranean phase, which has now started, comprising a total of 516 new townhouses is likely to put some downward pressure on rents across the development.

Villas in the recently released Hills development, situated next to the Officers Club and consisting of 147 five-bedroom villas of high quality are also entering the leasing market. The semi-detached villas are available to rent at Dh310,000 with detached villas priced at Dh350,000.

Apartment sales during the last three months recorded low transactional activity, though the report highlighted a number of new developments that are expected to have a positive impact on future apartment sales, the report said.

The handover of apartments in Sun & Sky Towers is anticipated to bring renewed confidence to the freehold market, while Sorouh’s launch of the popular rent-to-own scheme is also hailed as a welcome innovation, with Aldar planning a similar scheme on certain properties at Al Raha Beach.

Villa sales prices in Al Raha Gardens, Al Reef and Golf Gardens, witnessed modest gains around 3 per cent overall, but sales prices for three-bedroom properties continued to decline, with falls of up to 5 per cent. At Saadiyat Island, the Saadiyat Beach Villas comprising a high-end luxury development, are selling from Dh6.5 million for a three-bedroom villa to over Dh30 million for a six-bedroom property with views over the Gary Player golf course.

“The UAE Federal Government has announced the decision to extend the property visa period from six months to three years. This can only be a positive move and is expected to improve demand among foreign investors in the emirate,” added Jones.

Asteco research also found that more than 1.3 million sq m of office space is under construction in Abu Dhabi and due to be delivered over the next three years – which will add to the 200,000 sq m of vacant space already available.

In Al Ain, there has been a decline in apartment rentals, mostly within the newer developments, where the substantial new supply is struggling to lease. The office sector remains stable as supply and demand remain balanced, the report said. – TradeArabia News Service