Abu Dhabi residential sale prices drop in the first quarter
Abu Dhabi residential sale prices declined by an average of 5 per cent year-on-year in the first quarter, with expectations of further drops this year because of lower demand and new supply, according to a report from dubizzle and broker JLL.
“A decline both in the rental and sale segment is further expected in the capital – fragmented in nature, with some communities and property types to be affected more than others,” said Ann Boothello, dubizzle’s senior product marketing manager of property.
The largest fall in villa sale prices came from Golf Garden in Khalifa City A, dropping by 11 per cent to an average price of Dh1,005 per square foot compared to the first quarter of last year. Other areas that slid in pricing were Al Raha Beach, Al Reef and Al Zeina. Saadiyat Beach was the only villa community in the report that remained stable at Dh1,524 per sq ft.
However, the biggest plunge in sales came from apartments in the Al Bandar area, down 21 per cent. Saadiyat Beach and Al Reem Island both dropped 7 per cent, with downtown Al Reef declining by 4 per cent. Apartments rentals dropped 6 per cent for one, two, and three bedrooms citywide, while rental prices for three-bedroom villas declined by 8 to 12 per cent.
Ms Boothello said that developers needed to keep an eye on market demand, which varies greatly from Abu Dhabi to Dubai. “Abu Dhabi is known for its family-feel,” she said pointing to the most popular search on dubizzle’s platform in both sales and rentals being two-bedroom flats and four to five-bedroom villas last year, as opposed to one-bedrooms in Dubai.
As a result, smaller villas were subject to price declines, such as three bedrooms in Al Raha, Al Reef and Al Zeina and two bedrooms in Al Reem. Property prices have been on a downward spiral for the past year as more supply has been brought on despite higher vacancy rates. Abu Dhabi has also been grappling with less money from oil sales, which has led office rental searches on dubizzle to plummet by 47 per cent in the first quarter compared with a year earlier.
“While demand has reduced largely due to the decline in oil prices and the resultant impact on government spending and sentiment, reduced supply completions have mitigated the extent of oversupply,” said David Dudley, JLL’s Abu Dhabi head.
More than 3,000 residential units were completed last year, pushing up the property stock to nearly 250,000 units. Developers have since become more cautious by reducing completions.
There are about 5,000 units scheduled to be completed this year, but dubizzle and JLL forecast that a significant proportion of this will be delayed at the final stages to help balance the market. Mr Dudley said that the property market is expected to remain depressed through next year, but there are indications that supply completions for 2017-18 will be higher than 2015-16 levels. “As market conditions start to improve in Dubai and government spending returns to Abu Dhabi, the market will head back towards recovery and it will be important for supply completions to remain balanced,” he said.
JLL and dubizzle echo reports by property brokers, including Cavendish Maxwell and Cluttons, which have indicated a softening market in the emirate.
Cluttons said last weak that weak economic conditions, rising inflation and high costs of living are curbing demand in residential and commercial markets in Abu Dhabi, with the steepest declines in the luxury market.
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