| 29 Jul 2010 |
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Rentals, sale prices dip in Abu Dhabi
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ABU DHABI -- Even though developers have scaled back many projects in Abu Dhabi, additional supply entering the property market has pushed down average rentals and sale prices in most sectors in the second quarter of this year, according to real estate market experts at Jones Lang LaSalle.
In their latest study titled 'Abu Dhabi Real Estate Market Overview- Q2 2010' they said that the market was continuing to adjust from the unsustainable levels of performance recorded during 2008 and 2009.
According to LaSalle experts market conditions in Dubai continue to have a negative impact on Abu Dhabi due to the complex inter-relationship between the two markets. "Other than selective lending, liquidity remains tight and many developers are experiencing cash-flow issues," they said in the study released here on Wednesday.
Office market vacancies continue to increase as new supply comes on stream and will continue until economic development initiatives boost new demand. This is providing additional choice for tenants, the report said.
Total office stock across the Abu Dhabi Metropolitan area is approximately two million square metres. An additional 1.2 million square metres of office supply is expected to enter the market before the end of 2012, and over 50 per cent of these units will be within large-scale mixed use projects and tower buildings.
Office vacancy rates reached eight per cent during the second quarter and are expected to increase over the coming years as new supply continues to enter the market. Office rents saw a year-on-year decline of 27 per cent and quarter-on-quarter decline of 12 per cent. Average Grade A rental level is currently at Dh2,200 per square metre while Grade B rentals are falling more rapidly and has come down below Dh 1,700 per square metre, the study said.
Limited supply has entered the residential market in the just-concluded quarter and the market continues to experience an overall under-supply situation, particularly in the lower to mid-market segments. However, average rental prices continued to decline quarter-on-quarter with few sales transactions taking place.
The total stock in the residential market was approximately 179,000 units in the second quarter. An additional 15,000 units are expected to be completed by the end of 2010 while the total stock is expected to reach 251,000 units by the end of 2013.
Rents peaked at unrealistic levels in 2008 and have subsequently declined, with apartment rentals facing a year-on-year decrease of 16 per cent. The average prices have fallen to Dh1,250 per square feet in the second quarter. Average rent for a prime two-bedroom apartment is Dh153,000 per annum while it is Dh210,000 per annum for a prime three-bedroom villa.
Despite a continued decrease in rents, stable sale prices and limited transactions, Abu Dhabi's residential market will continue to be under-supplied in overall terms for the coming years, the report said.
Supply continues to outpace demand in the hotel market. The corporate sector continues to dominate as Abu Dhabi continues to develop its tourism offerings. Hotel occupancy rates face continued pressure especially within the newly-developed areas such as Yas Island, the study said.
ByT. Ramavarman
© Khaleej Times 2010
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