Slowdown keeps Abu Dhabi house prices in check during the fourth quarter

The property broker JLL reported that it was the first time no price increase was recorded since the first quarter of 2013, as strict mortgage caps and tumbling global oil prices prompted investors to stay away.

Abu Dhabi rents for top end properties in the market have been predicted to increase by between 10 and 20 per cent, while those at the bottom end of the market would rise by between 5 and 10 per cent. Silvia Razgova / The National
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House prices in Abu Dhabi were unchanged during the final three months of 2014 – for the first time in nearly two years – as the capital’s property market continued to slow down.

Sale prices for apartments and villas remained flat compared with the third quarter, according to two property reports released yesterday.

The property broker JLL reported that it was the first time no price increase was recorded since the first quarter of 2013, as strict mortgage caps and tumbling global oil prices prompted investors to stay away.

“Abu Dhabi’s residential sales market is strongly linked to economic growth and investor sentiment and consequently is sensitive to the recent decline in oil prices and equities markets,” said David Dudley, the regional director at JLL, Middle East and North Africa.

“The stabilisation of sales prices signifies that some of the excessive heat has now been removed from the market,” said Mr Dudley. “We do not, however, anticipate a significant decline in prime residential prices due to the relative shortage of availability of quality product.”

JLL reported that apartment prices increased by a total of 18 per cent over the year and villa prices in the capital rose by 25 per cent – most of which was achieved during the first half of 2014.

MPM Properties, the real estate consultancy arm of Abu Dhabi Islamic Bank, revealed that the number of sales purchased through mortgages in the capital had reached a 20-month low in November and December, with mortgage volumes almost halving compared with the same period the previous year.

It reported that average transaction values in the capital dropped 35 per cent during the final quarter of the year compared with the previous nine months of the year as buyers remaining in the market opted for cheaper properties.

“So far we have been witnessing a drop in volumes but we do anticipate a slight softening in sales prices this year,” said Paul Maisfield, the chief executive of MPM Properties. “During the first half of the year we believe that prices will fall slightly by between 1 and 5 per cent.”

Meanwhile, housing rents in the capital also continued to soften in the fourth quarter of 2014 and are set for single-digit growth this year owing to an expected slowdown in government spending, JLL predicted.

Prime apartment rents rose 4 per cent during the quarter, while villa rents increased by 3 per cent ,pushing up annual rent increases in the capital to 11 per cent for apartments and 12 per cent for villas.

“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,” said Mr Dudley. “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.”

MPM predicted that rents for top end properties in the market would increase by between 10 and 20 per cent, while those at the bottom end of the market would rise by between 5 and 10 per cent. Those in the mid-market, however, would rise by no more than 5 per cent, it added.

“With less than 7,000 units scheduled for completion during 2015 – 30 per cent below the average for the last four years – we believe that there will be a lack of housing both at the top and the bottom ends of the Abu Dhabi market, which will continue to push rents up for these segments,” Mr Maisfield added. “Currently residential yields in Abu Dhabi have eroded to below 5 per cent, but with house prices falling slightly and rents increasing, reversing the trend for 2014, we anticipate that the market will become more attractive to investors by the end of the year.”

lbarnard@thenational.ae

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