Abu Dhabi house prices soften

Abu Dhabi property prices fall by up to 15 per cent in recent months, after rising sharply in the early part of last year.

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Property prices have fallen in Abu Dhabi by an average of 15 per cent in recent months, but a lack of finance is stalling the market, according to industry experts. Prices in the secondary property market have softened after peaking last summer, with big falls occurring at Al Raha Beach and Al Reem Island, according to LLJ Property, a property broker based in the capital. The prices of apartments at both developments, which reached an average of Dh1,900 per square foot in September, are now worth about Dh1,600. Still, the prices are higher than they were at this time last year, according to Linda Loughnane, the managing director of LLJ Property. Apartments at Al Raha Beach and Al Reem Island were then selling for an average of Dh1,200 per sq ft, she said. "The drop is the result of a lack of confidence due to a lack of finance," she said. Villas at Al Reef - the only affordable development targeting middle incomes in Abu Dhabi, which will be ready for delivery this September - are now selling for about Dh700 per sq ft compared with Dh1,060 at its peak last year. Rene Mayer, the managing director of Hayatt Real Estate Agency, said that "while there's been a dip in the market", the company was still seeing interest from buyers - but the main issue was accessing finance. "There are buyers out there and for the first time we're seeing people who are waiting for construction to be completed and who plan to live in the properties," he said. "They have a good income and want to get good deals because the prices are softening, but they need finance and are now in an unfortunate position because liquidity has dried up." Mr Mayer said the market needed "banks to return to their old lending mentality". Sorouh Real Estate says it has taken steps to generate finance solutions for its end-user customers as well as for speculators who can no longer meet payment instalments. The company is working on finance deals with Abu Dhabi Finance and Aseel Bank, the Islamic finance arm of First Gulf Bank. "We have coupled [the defaults] with financing," said Gurjit Singh, the company's property development officer. "A lot of investors now have mortgages that are allowing them to make the necessary progress in their payment plans." Mr Singh said that part of the company's plan was to "turn speculators into end-users". "There is a clear tendency for the shorter-term investors to look at longer-term investments. The simple reason for this is that there is yield for rental in Abu Dhabi," he said. "So a very important point of differentiation for a developer now is the conversion rate of speculators into an end-user or a longer-term investor." An executive at Aldar Properties said finance deals for its customers were "in the pipeline". Liquidity will also be boosted by the mortgage provider, Abu Dhabi Finance, a joint venture between Mubadala Development, Abu Dhabi Commercial Bank, Aldar Properties, Sorouh Real Estate and the Tourism Development and Investment Company. Meanwhile, speculators who bought property in Abu Dhabi are seeking financial support from developers to help them continue with their payments. "We bought stock on Reem Island two years ago, some of which we've paid 40 per cent towards," said one investor who is part of a group of 20 from the UK. "We sold some of it last year and made a good return, but we wanted to keep the rest until completion for rental purposes, especially the commercial property. "But the problem now is we haven't got the cash to pay for the rest so we need local help. We're speaking to the finance guys to find out what they're coming up with and with the developers about moving forward." Though property prices in Dubai and Abu Dhabi have been fuelled mainly by speculation, the investor said that some developers were also to blame. "They had buyers but a shortage of stock, so they then bought the property back from us and sold it on for a great profit - this happened in a lot of cases." agiuffrida@thenational.ae ngillet@thenational.ae