The ongoing decline of both sales and rents in Abu Dhabi can be attributed to the delivery of new supply during a period of muted market sentiment and restrained economic growth. Approximately 1,600 units were delivered to the market in Q1, including Ansam on Yas Island, Al Hadeel at Al Raha Beach and Muhaimat Tower on Reem Island. And with a further 6,000 units expected to be available by the end of the year, the supply pipeline will continue to have a softening effect on the residential market for the rest of 2018.
Downward price corrections witnessed in Q1, continued through to Q2. Average sales prices are down 3% for apartments and 4% for villas from the last quarter. Generally, buyers are more cautious and waiting to see if stability returns to the market.
The downward adjustment in rents continues in Q2 with average rental rates down 3% for apartments and 1% for villas from the last quarter. Due to additional stock being available and limited new demand, landlords are having to compete on price (and incentives) which is adding pressure to rents. Furthermore, the recent increase in property tax will undoubtedly affect landlords, who were already struggling under challenging market conditions, by encouraging many tenants to buy as opposed to continue renting.
Despite the continued weakening of sales and rents, there are some positive changes on the horizon which may help boost economic growth, creating a knock-on effect to the real estate sector. These include the roll out of the AED 50 billion Abu Dhabi Government stimulus package as well as Abu Dhabi National Oil Company’s decision to invest over AED 400 billion in its gas downstream growth strategy over the next five years. Both of these initiatives could filter down to Abu Dhabi’s real estate market in the form of fresh demand for residential property. However, until the effects of such initiatives has been realised, it is likely buyers and tenants will remain cautious.