Abu Dhabi villa prices seen falling by at least 15% in 2017

Prime and mid-prime villa values in Abu Dhabi are anticipated to fall by at least 15 percent this year while apartment prices are set to drop by 7 percent, according to a new report.

Real estate firm Core Savills said the 2017 drop in values would be close to 2016 levels as similar market conditions persist.

Its latest market outlook for 2017 also forecast that mid-market communities, particularly buildings with smaller units, are predicted to maintain relative sale and rental price resilience and stay flat. 

The report said the reinstatement of the 5 percent rental cap has been received with mixed reviews as some tenants are apprehensive that landlords may interpret this law as an opportunity to increase rent by 5 percent.

It added that the 3 percent municipality fee payable by expatriate tenants is adding stress to overall rising household costs. 

Core Savills CEO, David Godchaux, said: “We have seen landlords in mainland areas, who have been inflexible with re-negotiating better rents, losing tenants to outer, more affordable areas.

"Interestingly, this migration is statistically under-reported and is artificially feeding stock in these outer areas. This may act as a risk for developers who overestimate potential demand for the outer mid-market communities due to the spurious swell in demand stemmed from the lack of elasticity in prices in core areas.” 

He added that almost 2,400 units are expected to come to the market in Reem Island in 2017, excess supply will be hard to absorb and is expected to cause a noticeable drop in both rental and sales values.

“Despite the softened outlook in the near term, we foresee a self-adjustment in values as the Abu Dhabi real estate market evolves and moves towards market maturity in the mid-term," added Godchaux.

The report also points out that although the current market may be witnessing headwinds, opportunities continue to exist for astute investors, adding that residential areas expected to outperform the present market conditions are Saadiyat Lagoons and Yas Acres.