Abu Dhabi continues to experience negative growth across all property types due to the weakness in the job market and reduced housing allowances, according to leading real estate consultancy Asteco.

The average apartment rental rates dropped by three per cent over the quarter and by 10 per cent over the last 12 months, with the highest declines recorded for mid-end properties and large units within prime and high-end projects, stated Asteco in its 'Q3 Abu Dhabi Real Estate' report.

In the high-end segment, the highest year-on-year (YoY) declines were recorded at Abu Dhabi Corniche (down 15 per cent), while mid-end and low-end areas evidenced the largest declines, including Al Reef Downtown, Khalifa and MBZ City.

Sales prices for apartments fell 3 per cent quarter-on-quarter (QoQ) and 10 per cent YoY. The most significant YoY declines in sales price were recorded in Al Muneera and Reef Downtown areas, both down 12 per cent, with the highest QoQ declines reported in City of Lights, down 8 per cent, and Sun & Sky Towers, down 6 per cent.

Both Al Bandar and Saadiyat Beach Residence showed resilience, being unchanged for the quarter, said teh Asteco in its report.

Approximately 2,750 apartments have been completed across the emirate since the beginning of 2017, compared with 1,350 for the 2016 calendar year. In addition to the 800 units delivered in Q3, a further 1,500 apartments are due to handover before the end of 2017, it added.

"We are experiencing a weak labour market with reduced employment opportunities and a tightening of housing allowances. This, together with additional supply since 2016 has led to increased vacancy rates which we expect to continue into 2018," said John Stevens, the managing director, Asteco.

Landlords are discounting rents and offering flexible payment terms, (up to 12 cheques) to retain existing tenants and secure new leases, he pointed out.

On the villa sector, Asteco said the rental rates were down by 3 per cent QoQ and by 6 per cent YoY.  Al Raha Gardens, Hydra Village and the larger units within Saadiyat Beach Villas recorded a more pronounced drop with rents softening by 7 per cent, 4 per cent and 5 per cent respectively.

The highest YoY decline in villa sales was recorded in Hydra Village, at 9 per cent, with QoQ results showing a decline of 3 per cent, the same as Raha Gardens.

Only a small number of villas were delivered in 2016, however approximately 550 villas have been completed in 2017 and a further 250 villas are due for delivery before the end of Q4.

"Rising vacancy rates have been experienced in many villa communities as tenants opted to downsize to smaller or more affordable properties, whilst some even transitioned to apartment units to reduce their accommodation expenses," remarked Stevens.

Despite a marginal decrease in sales prices for completed villas, demand for prime and high-end off-plan projects, particularly those located on Yas Island and Saadiyat Islands, remained strong, he added.

On the office sector, Asteco said similar trends echoed throughout this segment due to a subdued economy, despite a modest recovery in the oil price since the start of the year.

Office accommodation is evidencing low occupancy rates with approximately 170,000 sq m of office space having been delivered over 2016 and 2017, it stated.

"Office rents were broadly unchanged over the quarter; however, evidence indicates declines of 5 to 10 per cent on contract renewals within several Grade A and B office buildings," remarked Stevens.
 
"Landlords have actively sought to reconfigure accommodation into smaller units and offer rent free incentives to retain existing tenants and secure new tenants," he added.-TradeArabia News Service