Home sale and rental prices in Abu Dhabi are expected to drop further as supply outpaces demand, according to a report by property consultancy Chestertons.
A batch of 6,000 units are scheduled for delivery during the rest of the year, further pressuring prices as investors hold out for the best deals and tenants negotiate new contracts with landlords keen to maintain occupancy, the report said.
“The Abu Dhabi residential market is continuing to face tough market conditions due to increased supply," said Ivana Gazivoda Vucinic, head of consulting, valuations and advisory operations at Chestertons Mena. "The sales market is faltering as potential investors wait it out for the right property, at the right price."
Developers in the UAE are grappling with slower markets following a three-year oil price slump. Rental and sale prices in Dubai and Abu Dhabi have declined steadily, pressured by new supply entering the market, muted demand and reduced housing allowances.
In the first quarter of the year, the Abu Dhabi market had already absorbed 1,600 units, mainly on Yas Island, Al Raha Beach and Reem Island. In the second quarter, apartment and villa sale prices fell by 3 per cent and 4 per cent, respectively, quarter-on-quarter, Chestertons said. Apartment and villa rents fell 3 per cent and 1 per cent, respectively.
The steepest declines in apartment sales values in the capital were in Saadiyat Island, with a 6 per cent drop in prices to Dh1,412 per square foot in the second quarter. Al Raha Beach and Al Reef saw the smallest declines in prices.
Villa sale prices recorded a steeper decrease. Al Ghadeer dropped 7 per cent to Dh809 per sq ft quarter-on-quarter. Khalifa City was the only area where prices were unchanged at Dh895 per sq ft.
Landlords found no respite in the second quarter as all areas recorded a decline in rental rates in the second quarter, the report said.
Apartment rents in Al Raha Beach fell 7 per cent with one-bedroom apartments for Dh97,000 a year. Rents in Khalifa City declined 6 per cent to Dh48,000 for one-bedroom apartments. Saadiyat Island was the most resilient with just a 1 per cent drop in apartment rents while prices for the one-bedroom category remained unchanged.
“Landlords are having to pull out all the stops to ensure continued occupancy of their properties," Ms Vucinic said. "Incentives include reduced prices, multiple cheques and even waving agency fees."
Abu Dhabi Government plans to boost the economy with a Dh50 billion stimulus package and other initiatives for diversification could revive the emirate's real estate market, the report said.
“It is hoped these initiatives could filter down to the Abu Dhabi real estate market through the creation of new jobs, which is likely to create fresh demand for residential property,” Ms Vucinic said.