Buyers’ market as property values soften by 12% since last year

Residential rents in Abu Dhabi were down, by 6.9% year-on-year and 2.1 per cent quarter-on-quarter, finds ValuStrat

Abu Dhabi sales and rental values continued to decline in the first quarter of 2019 as a buyers' market persists. Photo: Better Homes

Asking prices for Abu Dhabi sales and rental homes are between 10 and 20 per cent higher than the value of the property as a buyers’ market persists amid rising supply and competition, real estate consultancy ValuStrat said.

"Buyers as well as tenants have an upper hand in this current market, and we estimate a 10 per cent to 20 per cent gap between an asking price and actual market value," Haider Tuaima, head of real estate research at ValuStrat, told The National.

The UAE property market has slowed in recent years on the back of a three-year oil slump that dampened demand and contracted sales and rental prices.

Increasing supply is further softening real estate values, with analysts predicting the market will continue to decline in 2019, albeit at a slower rate, before bottoming out later this year.

“There is the issue of demand-supply mismatch, as Abu Dhabi has a shortage of new affordable stock within the city to match the majority of demand,” Mr Tuaima said.

“It is likely that it would be more of the same as this year with further softening of sale prices and rents with the expectation of increased activity in the market.”

ValuStrat’s real estate market update for the first quarter found that residential capital sales values were on average 12.2 per cent lower than the same quarter last year, and 3.2 per cent lower than the previous quarter.

Residential rents were also down, by 6.9 per cent year-on-year and 2.1 per cent quarter-on-quarter.

Each of the 10 locations across the emirate monitored by ValuStrat registered single-digit quarterly declines in capital values of less than 5 per cent quarter-on-quarter, the research company said. The highest quarterly price fall was for villas in Al Raha and Hydra Village – of 4.3 per cent and 4.1 per cent, respectively.

On an annual basis, most neighbourhoods lost around 12 per cent in capital value, the report added. However, two locations were slightly less affected – apartments on Saadiyat Island and villas in Mohammed Bin Zayed City, which declined by 9.3 per cent and 7.1 per cent, respectively.

Against this backdrop, average asking prices for villas in Abu Dhabi rose by 1 per cent when compared to the previous quarter – "as demand for affordable homes continues", according to Mr Tuaima.

“Of course, the 1 per cent increase is not significant, however, if this becomes a trend over the next quarters it could represent a positive shift in asking villa prices in Abu Dhabi,” he said.

A total of 4,292 homes were completed in the capital in 2018, including 3,365 apartments and 927 villas, ValuStrat’s market update report said. A further 3,357 apartments and 2,867 villas or townhouses are expected to be delivered during this year.

Notable anticipated deliveries in 2019 include 2,315 villas on Yas Island, 2,177 apartments on Al Reem Island, and 763 apartments and 121 villas on Saadiyat Island.