Wednesday, Jul 29, 2015

Dubai: Affordable is not a term that is figuring prominently as Abu Dhabi developers line up their next round of launches. In fact, as sales transactions slow down sharply, developers are sticking to projects at the premium end of the market.

‘There appears to be a renewed focus on the development of high-end residences, particularly within the ‘Investment Zone’ areas, with less focus on much needed affordable homes,’ says a CBRE report tracking activity in the second quarter.

‘This underlines a potential challenge for the wider market, with a continued mismatch between demographic trends and housing development.’

For the developers, this is the logical step to take. Based on recent market data, ‘premium properties recorded notably higher growth as luxury residences continued to outperform the wider market amid more limited supply,’ the CBRE report said.

Rentals for one- and two-bedroom apartments at a branded property commands an average of Dh147,500 and Dh207,500 respectively.

On the mainland, Al Reef Downtown has seen an average of 3 per cent rental growth, ‘significantly higher than the 1 per cent increase in the wider market from the preceding quarter’.

During the second quarter, two-bedroom units there were available from Dh85,000 — Dh105,000 while a three-bed would set the tenant back by over Dh115,000.

All of which explains developers’ fascination with keeping things at the high-end.

Average launch prices for the off-plan launches at Cityscape Abu Dhabi earlier this year were around Dh14,530 a square metre (1 square metre being equal to 10.76 square feet).

In this, the situation in the emirate is quite at odds with what has been happening in Dubai during the first six months of the year. A wave of new developments targeting budget-conscious end-users came to market and with supporting features such as extended payment terms, direct payment facilities from developers, etc. This was key to holding up transaction levels and compensating for the drop in demand recorded for high-end properties.

In the short-term, much depends on how the situation pans out in the global oil markets. ‘The real estate sector is still somewhat vulnerable to the current oil price situation, particularly its potential impact on major occupiers in the government and oil and gas, and other related industries,’ the CBRE report notes.

By Manoj Nair Associate Editor

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