Abu Dhabi’s realty picks up the pace

 

 

A view Abu Dhabi. The spike in Abu Dhabi’s realty values comes after they bottomed out last year.

Dubai: It is Abu Dhabi’s turn to pick up the pace in the property market as Dubai’s slackens slightly. The average gain in residential property values during the third quarter was a robust 14.4 per cent between July to September and came on top of a 11.2 per cent increase in the second.

The sharp increases, however, are limited to a selection of freehold clusters, unlike in Dubai where investors have access to a wider option. Also, the spike in Abu Dhabi’s realty values comes after they bottomed out last year, whereas the upward trek started in Dubai a good two years ago. But, stronger fundamentals are also at work in Abu Dhabi realty. Abu Dhabi’s skilled workforce is continuing to grow, with the construction, education, healthcare and hospitality sectors in particular, in expansionary mode, bolstering buyer requirements.

According to Samir Munshi at the real estate investment firm Orion Holdings, “Current valuations, particularly for completed properties or those on the verge, are such that it would interest investors. These can be easily placed into the rental market and thus guaranteeing income yield for investors at the earliest opportunity. Many investors are willing to look at the Abu Dhabi option as new supply is still limited.”

On the rental side, the increases have so far been relatively muted in residential. There was only a 1 per cent increase in rental values in the third quarter against the 4.5 per cent between April to June. But demand build up is such that rentals too could see some sharp upward movements.

“Aside from demand borne out of the federal decree requiring all public sector workers residing in other emirates to relocate to Abu Dhabi by September 1, there is some degree of reverse migration from Dubai taking place, driven by the lower rents than achievable in comparable Dubai locations,” the report said.

“In the lead up to the market peak, Abu Dhabi’s higher rents fuelled an exodus out of the emirate, but we may be approaching a tipping point that could also result in the return of some former non-public sector Abu Dhabi residents.

Strong tenant demand

“In addition to strong tenant demand, we continued to record high level of corporate lettings activity, which is further fuelling the rental value growth across Abu Dhabi’s freehold market,” the Cluttons report added. “This is placing additional upward pressure on rents as large-scale corporate requirements often result in the letting of entire buildings prior to market release.

“These bulk residential requirements from the hospitality sector continue to dominate the rental market and we have recorded demand for close to 2,500 apartments so far this year from this sector alone.”

Also, unlike in Dubai, newly completed properties are not getting released in Abu Dhabi at regular intervals. In contrast, it is more of a “trickle” that is apparent now.

“Since much of the stock is privately owned, owners are capitalising on the rising demand by raising prices gradually,” the report said. “However, this does not appear to be denting buyer appetite, suggesting that there is still room for further price increases in Abu Dhabi’s freehold areas over the next few quarters, particularly as the delivery of previously stalled schemes encourages further vendor activity in the emirate’s small, but growing number of freehold sub-markets.”

There are some who believe the Abu Dhabi as an investment option will be a work in progress. “Abu Dhabi will take some time to see momentum as the market in Dubai is still ripening,” said Niraj Masand, director at Banke M.E. “However, large investors have started eyeing Abu Dhabi... Expo 2020 can be an accelerator for Abu Dhabi as well as the planned event site is equidistant and will certainly create interest