Abu Dhabi residential market to see sustained rental growth

Abu Dhabi: Abu Dhabi’s residential market is expected to see sustained rental growth in 2015, and relatively stable capital values on the back of strong performance in 2014, according to Asteco, a property management company.

In its latest report released on Tuesday, Asteco said the Abu Dhabi market had strengthened over the last two years, and is set to continue rental growth in 2015.

Apartment rental rates were up by 10 per cent year-on-year while villa rentals rose by nine per cent. A prime two-bedroom apartment currently rents for Dh175-180,000 per annum with high-end units going up to Dh140-175,000. The figure marks a drop from the peak rates of 2008 that reached Dh280,000.

Meanwhile, mid- to low-end units recorded Dh90-120,000 — down from highs of Dh225,000 in 2008.

Villa rental rates are expected to increase during 2015 due to a shortage in quality supply, with occupancy rates expected to remain high.

“The Abu Dhabi rental market in 2015 is expected to see continuous strong levels of demand. A range of new projects are due for handover in 2015 including an anticipated 13,000 apartments and villas, which will come online [and] will have an impact on the Abu Dhabi real estate market by creating greater competition, particularly in apartment rents,” said Jeremy Oates, general manager of Asteco Abu Dhabi.

The biggest increases in rental rates in 2014 were on Saadiyat Island, and Reem Island’s Marina Square, where recent handovers of projects saw high occupancy levels leading to rental increases as landlords capitalised on strong demand, Asteco’s report said.

The year was also marked by a positive level of transaction activity as tenants continued to move to quality units.

Mathew Green, head of research CBRE UAE, a commercial real estate adviser, said he expected positive performance in 2015, though it would depend on economical circumstances including oil prices. “There’s not enough quality supply in the market to push rents down at this point, and demand remains strong. Ultimately, lower oil prices will have an impact although the government is trying to spend its way out of it by increasing public spending. It’s going to have an impact in terms of sentiment. Investors are less likely to purchase during times of uncertainty,” he told Gulf News.

Green added that though 2015 is expected to be slower than 2014, there will still be growth.

Looking at residential sales, average rates for apartments and villas increased by 15 per cent, and 16 per cent respectively in 2014, with strong performance in the first half of the year. The second half saw more stability.

Popular areas for sale included Saadiyat Island and Al Raha Beach, while Al Reem Island generated sales demand in the mid-market units.

Sales prices in Al Muneera at Al Raha Beach now average Dh1,425 per square foot — up 21 per cent compared with last year, whereas rates at Reef Downtown also climbed 21 per cent to an average of Dh1,000 per square foot.

Similarly, Marina Square saw a 17 per cent increase to an average of Dh1,375 per square foot.