OBSERVER Abu Dhabi Market Report Q2 / 2019
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OBSERVER Abu Dhabi Market Report Q2 / 2019
Transcript of OBSERVER Abu Dhabi Market Report Q2 / 2019
OBSERVERAbu Dhabi Market ReportQ2 / 2019
Report HighlightsServices
Sales Prices
The downward price corrections witnessed in Q1 2019, have continued in Q2, with average sales prices for apartments and villas down 5% and 3% respectively from the previous quarter. That said, the Abu Dhabi Government has recently changed its real estate laws to allow foreign nationals to own freehold property in designated investment zones; a privilege previously enjoyed only by UAE and Gulf Cooperation Council (GCC) nationals. This is expected to have a marked impact on the Capital’s real estate market. Rental Rates
The downward adjustment in rental rates continued across Abu Dhabi’s residential sector in Q2 2019. Average rental rates were down 6% for apartments and 3% for villas from the previous quarter. Abu Dhabi’s rental market continues to be hampered by new supply entering the market and reduced demand, as a result of ongoing redundancies and companies providing lower rental allowances.
Market Outlook
Whilst short term price and rental declines are unavoidable due to restrained economic conditions and oversupply issues, there is a more positive outlook for the Capital’s residential real estate market in the medium to long term. The new freehold law is expected to significantly bolster foreign direct investment and coupled with initiatives such as the 10 year residency visa, people will have the ability to put down roots in the country, which in turn will benefit many areas of the economy, particularly the real estate sector.
ValuationsMortgage and Secured LendingPortfolio Valuations
Advisory and ResearchFinancial FeasibilitiesHighest and Best Use StudiesMarket ResearchConceptual Advisory and Project Positioning Studies Project Redevelopment/Repositioning Advisory Investment Strategies – Acquisition and Disposal
Sales and LeasingCommercialIndustrialResidentialRetail
Property/Facilities Management CommercialMixed-UseResidential
International Properties London Off-Plan ResidentialInternational Homes and Investments International Relocations
The Observer - Abu Dhabi Residential Q2 2019 1
Price Movements
Apartments
Apartments
Villas
Villas
Rental Movements
Abu Dhabi Residential Market Q2 2019 Snapshot
QoQ -5%
QoQ -6%
QoQ -3%
QoQ -3%
Change in real estate law could be a game changer for the Capital’s residential sales market
The downward price corrections witnessed in Q1 2019, continued in Q2, with average sales prices for apartments and villas down 5% and 3% respectively from the previous quarter.
One of the biggest challenges facing the Capital’s residential sales market, continues to be oversupply. With over 11,000 units expected to be delivered in 2019, the market is likely to continue to soften throughout the year as the market remains highly competitive.
The Abu Dhabi Government has, however, recently changed its real estate laws to allow foreign nationals to own freehold property in designated investment zones; a privilege previously enjoyed only by UAE and Gulf Cooperation Council (GCC) nationals. This is expected to have a marked impact on the Capital’s real estate market (more included on this below).
With regards to current trends in the Abu Dhabi residential market, we have seen a shift towards affordability and competitive pricing, in the form of flexible payment plans to entice investors. This now appears to have become the norm.
Looking to the future, developers must differentiate their product to succeed. We predict that innovative living solutions will become more prevalent in Abu Dhabi, as their popularity grows in Dubai. This trend is already starting to emerge with co-working and co-living concepts such as Cocohub.
Apartment: Quarter-on-Quarter movement: (-5%)
In contrast to the previous quarter, Saadiyat Island witnessed the biggest price adjustment in Q2 with an 8% decrease from Q1. Average apartment prices dropped from AED 1,526 per sqft to AED 1,400 per sqft.
Al Reef witnessed the smallest price adjustment in Q2 with a 1% decrease from Q1 2019, having witnessed the largest price decline in the previous quarter. Prices dropped from AED 820 per sqft in Q1 to AED 814 per sqft in Q2.
Al Raha Beach and Al Ghadeer were the other locations which saw the second highest price adjustments, both decreasing by 6% over the previous quarter with prices declining from AED 1,382 per sqft to AED 1,300 per sqft and from AED 798 per sqft to AED 750 per sqft respectively.
Villas: Quarter-on-Quarter movement: (-3%)
There were further villa price declines in Q2, with an average 3% drop from Q1 2019. The biggest downward price adjustments were witnessed at Al Raha Beach and Al Ghadeer, which dropped 5% from the previous quarter from AED 1,227 per sqft to AED 1,160 per sqft and AED 734 per sqft to AED 700 per sqft respectively.
Khalifa City was the only villa location which remained resilient with no price movement in Q2 when compared with Q1 2019. Prices remained stable at AED 872 per sqft.
Al Reef witnessed a further 3% drop in average sales prices from AED 645 per sqft in Q1 to AED 628 per sqft in Q2.
The Observer - Abu Dhabi Residential Q2 2019 2The Observer - Abu Dhabi Residential Q1 2019 3
HOT TOPIC The new residential freehold law which has recently been announced by the Abu Dhabi Government is expected to greatly impact overall market sentiment in the Capital’s real estate sector. Foreign property investors in Abu Dhabi were previously only granted leasehold ownership with a maximum 99-year term. This new initiative will have the positive knock on effect of encouraging longer-term residency, which will in turn help bolster the economy. This is expected to work hand-in-hand with other recent Government initiatives such as the 10-year residency visa also aimed at tying expatriates into the market for longer periods of time.
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Apartments and Villas − Residential Sales Prices and Quarterly Change
Apartment Sales Q1 2019 Apartment Sales Q2 2019Villa Sales Q1 2019 Villa Sales Q2 2019 QoQ MovementFigures in AED/Sq FtSource: REIDIN & Chestertons
Dubai
AL RAHABEACH
AED1,382
AL RAHA BEACHAED1,300
-6%Q-o-Q
Movement
Al RahaBeach
Yas Island
Al Reef
Abu DhabiInternational
Airport
Al RahaGardens
Al Ghadeer
AL GHADEERAED798
AL GHADEERAED750
-6%Q-o-Q
Movement
AL REEFAED820
AL REEFAED814
-1%Q-o-Q
Movement
SaadiyatIsland
SAADIYATISLAND
AED1,526 SAADIYATISLAND
AED1,400
-8%Q-o-Q
MovementAL REEMISLAND
AED 1,021AL REEMISLAND
AED975
-4%Q-o-Q
Movement
AL GHADEERAED734
AL GHADEERAED700
-5%Q-o-Q
Movement
AL REEFAED645
AL REEFAED628
-3%Q-o-Q
Movement
AL RAHAGARDENS
AED729
AL RAHAGARDENS
AED700
-4%Q-o-Q
Movement
Khalifa City
Masdar City
KHALIFACITY
AED872
KHALIFACITY
AED872 0%Q-o-Q
Movement
AL RAHABEACH
AED1,227
AL RAHABEACH
AED1,160
-5%Q-o-Q
Movement
Al ReemIsland
Ba AlGhaylam
Island
SamaliyahIsland
Al JubailIsland
ZayedSports
City
Ras GhurabIsland
Al WeheilIsland
Al AryamQassabi
Al Rafiq
Halat AlBahrani
Al Futaisi
ICAD II
Umm YifenahIsland
Tenants focused on affordable rentalopportunities and attractive incentives The downward adjustment in rental rates continued across Abu Dhabi’s residential sector in Q2 2019. Average rental rates were down 6% for apartments and 3% for villas from the previous quarter.
Abu Dhabi’s rental market continues to be hampered by new supply entering the market and reduced demand, as a result of ongoing redundancies and companies providing lower rental allowances.
We have, however, seen consistent demand for affordable rental opportunities in locations which are accessible to major routes and offer good community facilities such as shops and parks etc. Although, in these locations, landlords are still having to offer incentives such as multiple rent cheques and rent free periods in order to remain competitive.
Apartments: Quarter-on-Quarter movement: (-6%)
The highest average rental declines for apartments were seen in Mohammed Bin Zayed City and Al Muroor, with rents decreasing 10% from the previous quarter in both locations. A typical 2 bedroom apartment in Mohammed Bin Zayed City rented for AED 53,000 per annum in Q1 2019, decreasing to AED 50,000 in Q2 2019, reflecting a 6% decline. In Muroor, a typical 2 bedroom apartment rented for AED 75,000 per annum in Q1 2019, decreasing to AED 65,000 per annum in Q2 2019, representing a 13% decline.
The most resilient location for apartment rents was Al Reef with an average 2% decline from the previous quarter. A typical 2 bedroom apartment in Q1 was AED 73,000 per annum dropping to AED 71,000 per annum in Q2.
Other locations which witnessed modest declines in average apartment rents were Corniche Road and Al Reem Island where there was a 5% decline from Q1 2019. In Q2, a typical 3 bedroom apartment rented for AED 155,000 per annum on the Corniche Road and AED 130,000 per annum on Al Reem Island.
Villas: Quarter-on-Quarter movement: (-3%)
The Capital’s villa market appeared to fare better than the apartment sector in Q2 in terms of rental declines. The most resilient villa locations in Q2 were Al Khalidya and Al Reef, which witnessed a 1% decline in rents from Q1 2019.
The biggest villa rental declines in Q2 were in Al Reem Island and Al Raha Gardens with a 5% average drop from the previous quarter. It was Al Reem Island’s 4 and 5 bedroom villas which experienced the largest declines at 8% and 7% decreases, respectively. A typical 5 bedroom villa rented for AED 295,000 per annum in Q1, dropping to AED 275,000 in Q2.
On the whole, the market for 3 bedroom villas saw the smallest average rental declines dropping 2% from the previous quarter.
HOT TOPIC Abu Dhabi is witnessing a continuing demand for more affordable rental options as tenants look to downsize their accommodation to reduce living costs. This is evidenced by the highest rental declines being seen across higher-end residential units. Incentives such as multiple cheques and rent-free periods have become standard for mid-market properties, which are making them more attractive. Vacancy levels in many prime buildings have increased, as the incentives offered were insufficient to ensure tenant retention.
-12%
-10%
-8%
-6%
-2%
-4%
0%
0
20,000
40,000
60,000
80,000
100,000
120,000
140,000
160,000
180,000
Studio 1BR 2BR 3BR QoQ ChangeFigures in AED ‘000 p.aSource: Propertyfinder and Chestertons
Al Raha Beach Area Al Ghadeer Al Reef Al Reem Island Saadiyat Island Khalifa City Al Khalidiya MBZ Corniche Road Muroor Area
PERCENTAG
E CHAN
GE
AED
REN
TAL
-6%
-5%
-4%
-3%
-2%
-1%
0%
0
50,000
100,000
150,000
200,000
250,000
300,000
350,000
Al Ghadeer Al Reef Al RahaGardens
Khalifa City Al ReemIsland
Al Khalidiya MBZ
3BR 4BR 5BR QoQ Change
PERCENTAG
E CHAN
GE
AED
REN
TAL
Figures in AED ‘000 p.aSource: Propertyfinder and Chestertons
-12%
-10%
-8%
-6%
-2%
-4%
0%
0
20,000
40,000
60,000
80,000
100,000
120,000
140,000
160,000
180,000
Studio 1BR 2BR 3BR QoQ ChangeFigures in AED ‘000 p.aSource: Propertyfinder and Chestertons
Al Raha Beach Area Al Ghadeer Al Reef Al Reem Island Saadiyat Island Khalifa City Al Khalidiya MBZ Corniche Road Muroor Area
PERCENTAG
E CHAN
GE
AED
REN
TAL
-6%
-5%
-4%
-3%
-2%
-1%
0%
0
50,000
100,000
150,000
200,000
250,000
300,000
350,000
Al Ghadeer Al Reef Al RahaGardens
Khalifa City Al ReemIsland
Al Khalidiya MBZ
3BR 4BR 5BR QoQ Change
PERCENTAG
E CHAN
GE
AED
REN
TAL
Figures in AED ‘000 p.aSource: Propertyfinder and Chestertons
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Apartments − Residential Market Rent and Quarterly Change
Villas − Residential Market Rent and Quarterly Change
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Disclaimer:All articles and data presented herein is intended for information purposes and has been compiled from sources deemed reliable including the Valu-ations and Research Department of Chestertons, sales and leasing staff, published data, and secondary sources. Though information is believed to be correct, materials presented is subject to errors, omissions, changes, or withdrawal without notice.
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