Residential rents and sales prices in Abu Dhabi dropped in the second quarter of the year even as the emirate was affected by dull economic conditions, a new report has found.
The report by JLL claimed that apartment rents have now declined by around 10 per cent over the past 12 months.
Average prime rents for two-bedroom apartments decreased by 3 per cent quarter-on-quarter in Q2 to reach approximately Dhs142,300 per annum.
“This decline is mainly due to the continued increase in vacancy rates resulting from further job losses,” the report said.
Meanwhile average sales prices for prime apartments and villas also declined by 3 per cent quarter-on-quarter (and were down 11 per cent year-on-year) to reach around Dhs13,500 per sqm, due to the decline in sentiment and reduced transaction volumes.
“Mergers, job cuts and reduced government spending have continued to negatively impact employment and population, leading to a decline in occupier demand and residential rents,” said JLL.
“The combination of increased living costs, cuts in housing allowances and less certainty in the job market have led some residents to downsize to smaller and cheaper units. Vacancy rates will therefore continue to place downward pressure on residential rents,” it added.
Additional supply at a time of weak demand is also expected to further weigh on rents over the rest of the year.
Approximately 900 units were delivered during Q2, bringing the total residential stock to approximately 250,000 units.
Deliveries included Sigma Towers on Reem Island, the C74, C75 and C76 buildings in Rawdhat on Airport Road and Bloom Gardens Phase 3 on AI Salam Street.
A further 4,000 residential units are currently scheduled to enter the market by the end of 2017, mainly within Reem Island, Saraya and on the Corniche.
“Previous trends suggest that a significant proportion of this supply will be delayed at the final stages of approval and handover,” the report said.
Looking further ahead, up to 5,000 new units are scheduled to enter the market in 2018 and 8,000 new units in 2019.
But despite reduced demand and more negative sentiment, there is an “opportunity to develop further good quality affordable housing with smaller unit sizes”, JLL stated.