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The price of affordable housing in Abu Dhabi became increasingly competitive in the first half of 2023, even as luxury properties witnessed a decline.
Findings from the Bayut H1 Property Market Report 2023 saw an eventful real estate performance over the period with rising rents contributing to a sales boom in the UAE capital. According to the report, sales prices for affordable apartments generally decreased by up to 5%, whereas villas became more expensive, rising by 3.42%. Prices in the luxury segment decreased by under 1% for villas and increased up to 4.4% for apartments.
In terms of rental yields, Al Reef recorded the highest projected ROI of 8.04% for affordable apartments in H1 2023, along with the highest ROI of 6.05% for budget-friendly villas, while Al Reem Island offered yields of 6.70% in the luxury segment.
Affordable communities
Prospective buyers seeking affordable apartments exhibited a preference for suburban areas such as Al Reef, Al Ghadeer and Masdar City.
Al Reef emerged as the most popular choice in the affordable apartments segment for investors, with the average price-per-square-foot for apartments in the community recording a decline of 2.57%, to stand at 655 dirhams ($ 178.3) in H1 2023.
Al Ghadeer also appealed to budget-conscious investors, with the average price-per-square-foot for apartments in the community increasing slightly to average at AED 715.
Apartments in Masdar City and Baniyas also drew traction from small-ticket investors. While sales-price-per-square-foot in Masdar City reported a 4.88% decline, the prices in Baniyas increased by 0.14%.
In terms of villas, those on a budget showed preference for Al Reef once again, with Khalifa City, Al Samha, Mohammed Bin Zayed City and Al Ghadeer rounding up the top five.
The average sales price-per-square-foot for villas in Al Reef experienced a slight increase of 1.52% during H1 2023, going from AED 704 in H2 2022 to AED 715 in H1 2023.
In the rental market, tenants in pursuit of affordable apartments showed a keen interest in communities such as Khalifa City, where the average rent for studios and two-bedroom apartments remained unchanged over the same period last year, whereas the cost of one-bedroom flats increased by 1.44% from H2 2022. The asking rent for studios in Khalifa City averaged AED 28,000, whereas the cost of one and two-bed flats stood at AED 42,000 and AED 61000, respectively.
Additionally, tenants preferred family-friendly neighbourhoods like Al Khalidiyah, Al Muroor, Hamdan Street and Al Shamkha, where the average rents generally increased up to 8%.
In terms of villa rentals, Mohammed Bin Zayed City emerged as the most popular area to rent affordable villas in Abu Dhabi. The average rents for three-bedroom houses in MBZ City increased by 6.15% to average AED 96,000, whereas the cost of four-bedroom villas appreciated by a minor 1.51% to average AED 128,000.
Demand for luxury
The real estate rally in Abu Dhabi in the first half of the year continues from a strong performance in 2022, which saw the value of real estate transactions rise by 8.5% over the previous year, according to figures released by the emirate’s Department of Municipalities and Transport (DMT) in March. Last year, UAE capital’s real estate market recorded 19,033 transactions, reaching a total value of AED 77.6 billion.
Yas Island topped the list in 2022 with transactions worth AED 4.2 billion in 2022 with Al Reem Island coming in at second place with transactions worth AED 3.4 billion. With AED 3.1 billion, Saadiyat Island came in third, while Al Shamkha came in fourth with AED 2.1 billion.
The trend continued in the luxury sector in 2023, with the Bayut report indicating that waterfront communities such as Al Reem Island, Yas Island and Saadiyat Island continue to gain popularity.
The average price-per-square-foot for villas on Saadiyat Island in H1 2023 recorded an appreciation of 7.3% to stand at AED 1,818. Houses on Yas Island witnessed a slight decrease of 0.53% in their average price-per-square-foot, standing at AED 1,176 in H1 2023.
In contrast, the sales price-per-square-foot for houses in Al Raha Gardens averaged AED 836, with a decline of 0.43% recorded in the first half of 2023.
In the luxury apartments segment, investors favoured waterfront and island communities, with Al Reem Island emerging as a top choice. The average price-per-square-foot for apartments in Al Reem Island reported an uptick of 0.31%, increasing from AED 1,016 in H2 2022 to AED 1,019 in H1 2023.
Alternatively, buyers were drawn to Al Raha Beach, Yas Island and Saadiyat Island when looking for luxury apartments in Abu Dhabi. The average price-per-square-foot for these areas increased by 0.5% to 4.4% during Q1 2023.
“Six months into 2023, it’s pretty clear that the market is at one of its best stages ever. The much-discussed millionaire migration is a very real factor, with HNWIs [High Net Worth Individuals] from around the globe dedicating significant budgets for investment in UAE real estate,” said CEO of Bayut and Head of Dubizzle Group MENA, Haider Khan.
“For those investors, the lure of Abu Dhabi’s luxurious island communities is obvious. Highly desired and established locales such as Yas Island and Saadiyat Island, along with upcoming master-projects like that of Jubail Island, look set to ensure that investor interest will remain significant for some time yet,” he added.
Luxury properties also witnessed a higher rental appreciation, with upticks of up to 11% in H1 2023, according to the Bayut report. For luxury apartment rentals, Al Reem Island gained maximum traction from tenants in H1 2023, witnessing an increase of up to 2% in average rents. The asking prices for rental flats on Al Reem Island increased across the board, with the rents for one-bedroom apartments averaging AED 59,000, two-bed flats at AED 87,000 and three-bed apartments for AED 128,000.
In addition, tenants paid attention to prominent areas like Al Raha Beach, Corniche Area, Yas Island and Saadiyat Island, where prices have increased between 0.4% and 12.4%.
For luxury villa rentals, tenants largely favoured Al Raha Gardens where rents reported a decline of 9.51% for four-bedroom homes to average AED 168,000 and a 3.44% increase in the rent for five-bedroom houses to average AED 227,000 during the last six months.
(Writing by Bindu Rai; editing by Brinda Darasha)
