The impact of a subdued oil market on economic growth in Abu Dhabi is showing in the emirate’s real estate market as job cuts and lower government spending feed through to rent and sale prices, two consultancies said on Monday.
Like some other Gulf states, the oil-rich capital of the United Arab Emirates is laying off thousands at state-linked companies.
That has drastically impacted demand levels, even with supply of new properties at an all-time low in the emirate, with just 400 units handed over to owners in the second quarter according to JLL.
After 18 months of relatively stable conditions, initial signs of price declines were evident in the three months to June 30, the consultancy said.
That was particularly notable at the top end of the market, previously a staple for oil sector employees, with average prime sale prices down 5 per cent on the first quarter.
The rental market was also impacted, with a nominal decrease of around 2 per cent during the second quarter – the first decline in three years, according to David Dudley, international director & head of JLL’s Abu Dhabi office.
The fall was likely to be bigger in the third quarter as families who left at the end of the school year in late-June either move into smaller properties or fail to return altogether, JLL’s report added.
Consultancy CBRE also reported declines at the high end of the market, while rental and sales prices for more affordable property remained steady as there was still a large body of expatriate workers within this income segment.
In the commercial office space, CBRE said rents outside the central business district fell 2 per cent from the first quarter, taking year-on-year declines at end-June to 13 per cent.
It forecast “a sustained period of deflationary pressures for secondary office rentals” as the majority of new supply was in non-core locations.
The total supply increase would be around 22 per cent by 2018 from the current stock of 3.85 million square metres.
Average prime office rental prices were flat in the second quarter, CBRE said.