Residential rents in Abu Dhabi dropped by around 14 per cent year-on-year in the fourth quarter of 2012, according to a new report by property consultancy CBRE.
Average rental rates in Q4 were also four per cent lower compared to Q3 2012, with rents of larger units with three-bed types falling five per cent and rents of studios and one-bed units declining around three per cent.
Lease rates for typical two-bed and three-bed properties stood at around Dhs125,000 and Dhs150,000 per year respectively, said the report.
However, despite a continued downward trend in average rents, the market is starting to witness isolated rental growth for select luxury assets in the certain locations, stated CBRE.
These areas include projects such as Al Raha Beach, Sa’adiyat Island and prime schemes along the Abu Dhabi Corniche.
“Recent rental growth at selected prime developments appears to indicate a current gap in the market for top quality, well-managed residential properties,” it said.
“However, elsewhere in the Abu Dhabi market, sustained rental depreciation continues to facilitate tenant movement, with individuals and families upgrading their residences in terms of size, location, quality, and or amenity offering, due to increasing affordability,” it added.
The sales market also remains subdued, with few transactions and stagnant prices, said the report.
Average sales rates for residential apartments range between Dhs9,650 – Dhs13,400/per/sqm, with the higher price points seen for completed units within ‘Investment Zone’ areas such as Al Raha Beach and Al Reem Island.
The emirate’s residential stock has seen annual growth of about four per cent over the past five years, increasing from around 180,000 units at the end of 2007 to reach 230,000 units at the of 2012.
Up to 45,000 new properties are further expected to be delivered in the next three years, mostly in master planned communities outside the existing city centre, with Reem Island seeing the majority of this activity.
“Although, these locations are becoming more accessible and attractive for occupiers, the lack of properly developed infrastructure and operational facilities remain off-putting for certain segments of the market,” said CBRE.
A highly fragmented marketplace is expected to develop over the next 12 months, with location and project specific attributes creating a distinct two-tier marketplace.
A final ruling by the central bank on the proposed mortgage cap can also influence the sales market.
“Should tighter lending limits be enforced, we are likely to see a decline in new mortgages as end-users struggle with rising deposit requirements,” the report said.
“The long-term stability of the property market can be aided by further regulation of the banking and real estate sectors, but any strategy should look to foster end-user demand rather than constraining it, with more restrictive measures required to limit the activities of speculators and the negative effects of ‘hot money’ on the market,” it added.