Average residential rents in Abu Dhabi grew 11 per cent in 2014, down from 17 per cent in 2013, with just four per cent growth recorded in Q4 2014, according to the latest report from property consultancy JLL.
Rental growth has been driven by limited levels of new supply and rising demand caused by many factors – new job creation as the government progresses major infrastructure and economic development projects; government policies to reduce the level of commuting from Dubai; and reducing household sharing, the report said.
However, the rate of rental growth is anticipated to slow this year.
David Dudley, regional director and head of Abu Dhabi Office at JLL MENA said: “While we expect there to be a reduction in government spending this year due to the recent decline in oil prices, we expect employment creation and residential demand growth to be sustained from projects commenced while the oil price was high.
“Given a continual shortage of high quality housing, we expect rental growth to continue, but at single-digit growth rates, rather than the double-digit rates we saw in 2013 and 2014.”
Abu Dhabi’s residential sales market is also expected to record a slowdown, since it is strongly linked to economic growth and investor sentiment and consequently is sensitive to the recent decline in oil prices and equities markets, JLL said.
The emirate’s prime residential sales market grew at an average of 25 per cent in both 2013 and 2014.
However, average prices remained flat during Q4 2014 – for the first time since Q1 2013 – and are expected to remain stable during 2015.
“The stabilisation of sales prices signifies that some of the excessive heat has now been removed from the market. We do not however anticipate a significant decline in prime residential prices due to the relative shortage of availability of quality product,” said Dudley.
Around 1,600 units were added to the residential stock during Q4 2014 with the delivery of the Burj Mohammed Bin Rashid within the World Trade Centre (WTC), and various mixed-use schemes within Khalifa City A and Capital House in Capital Centre.
These deliveries bring the total residential stock to approximately 243,000 units at the end of 2014.
The medium term market outlook remains positive, driven primarily by major government-backed economic development and infrastructure projects, opined Dudley.
“Following the recent decline in oil prices, we expect that some projects may be phased outwards.
“Development opportunities remain in selective sectors and sub-sectors and there will remain two tier market performance with significant divergence between high and low quality product – in terms of quality of location, design, functionality, asset management,” he added.
Oil prices have slid almost 60 per cent since June 2014, with US crude falling close to a six-year low on Monday, mainly driven by political uncertainty, increasing supply and lower demand.
Abu Dhabi remains highly dependent on hydrocarbon revenues, and the International Monetary Fund (IMF) recently lowered its GDP growth forecasts for the emirate to three per cent in 2015.