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OBSERVERAbu Dhabi Market ReportQ4 / 2019
Report HighlightsServices
Economic snapshot
Standard and Poor’s (S&P) has rated Abu Dhabi as stable reporting that the Emirate is projected to record full-year growth of 2% in 2019. Oil activity is key to both short and medium-term growth and S&P estimates the economy will grow by an annual average of 2.5% through to 2022, underpinned by higher oil production. This could see GDP growth accelerate to 3% by 2022. Real Estate activities contributed 4.2% to the Capital’s real GDP in 2018.
Sales Prices
There were minimal downward price corrections in Q4 2019. Average sales prices for apartments were down 2% from the previous quarter with sales prices for villas registering just a 1% decline. This suggests the market could have levelled out in some areas. The year-on-year picture shows that sales prices of apartments in Abu Dhabi fell by 10% on average across 2019 while villa sales appeared to fare better with figures only dropping by 2%.
Rental Rates
Rental rates declined a marginal amount in Q4. Average rates were down 1% for apartments and 2% for villas from the previous quarter, signalling that perhaps the market is stabilising. The year-on-year picture shows that apartment rents in Abu Dhabi fell by 10% on average across 2019 while villas rents were down by 6%.
Market Outlook
What does 2020 hold for Abu Dhabi’s real estate market?
Following a sustained period of falling capital values and declining rents, Abu Dhabi’s real estate sector is showing signs of positive sentiment.
Over the last 18 months there has been a marked shift, in line with market demand, for affordability and competitive pricing in the Capital and developers are now looking at the latest trends, such as co-living and co-working models, as well as offering a range of flexible payment plans to entice investors.
Going forward, we believe it is unlikely there will be the same prolonged period of price decreases as witnessed in the last five years. This is a result of favourable supply and demand dynamics as well as the introduction of a number of radical Government reforms. These reforms include allowing foreign nationals to own freehold property in designated zones, plus the introduction of long-term residency permits and new business licenses, all of which are expected to support future growth in Abu Dhabi’s real estate sector.
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The Observer - Abu Dhabi Residential Q4 2019
1
Price MovementsApartments
Apartments
Villas
Villas Rental Movements
Residential Market Q4 2019 Snapshot
QoQ −2%YoY −10%
QoQ −1%YoY −10%
QoQ −1%YoY −2%
QoQ −2%YoY −6%
Prices in investment zones held steady in Q4
There were minimal downward price corrections in Q4 2019. Average sales prices for apartments were down 2% from the previous quarter with sales prices for villas registering just a 1% decline. This suggests the market could have levelled out in some areas.
The year-on-year picture shows that sales prices of apartments in Abu Dhabi fell by 10% on average across 2019 while villa sales were down by 2%.
In April last year, the Government made significant inroads into supporting investment into the Capital’s real estate sector by allowing foreign nationals to own freehold property in designated investment zones; a privilege previously enjoyed only by UAE and Gulf Cooperation Council (GCC) nationals.
Q4 performance supports the theory such initiatives are having the desired effect as prices in investment zones, such as Al Reem Island and Saadiyat Island, held steady with little or no price fluctuation.
The majority of Abu Dhabi’s residential inventory is concentrated in the off-plan segment and we predict new releases to continue witnessing a steady uptake on the back of attractive payment plans, while the completed units market is expected to remain challenged by newly delivered and off-plan stock.
Apartment Sales Prices:Quarter-on-Quarter Movement: –2%Year-on-Year Movement: –10%
The decline in apartment prices in the Capital between Q3 and Q4 was 2%.
Al Reef saw the highest price adjustments, dropping 4% from the previous quarter with average apartment prices declining from AED 797 per sqft in Q3 to AED 765 per sqft in Q4.
The most resilient apartment locations in Q4 were Al Reem Island and Saadiyat Island where there were no price adjustments and prices held firm at AED 965 per sqft and AED 1,400 per sqft respectively.
The average year-on-year price decline for apartments saw a 10% drop from 2018. The most resilient apartment location was Saadiyat Island with an overall 2% decline in prices from the previous year and the largest price decline was seen in Al Raha Beach with a 14% decrease from 2018.
Villa Sales Prices:Quarter-on-Quarter Movement: –1%Year-on-Year Movement: –2%
Villa sales prices remained relatively resilient across most districts with little or no price movements from Q3 2019.
Prices within the established communities of Al Ghadeer and Al Raha Gardens remained stable at AED 695 per sqft and AED 700 per sqft respectively.
The largest decline was witnessed in the Al Raha Beach Area where prices dropped 5% from the previous quarter fromAED 1,160 per sqft to AED 1,100 per sqft.
Other modest price adjustments were witnessed in Al Reef and Khalifa City, which only dropped 1% from the previous quarter from AED 620 per sqft to AED 615 per sqft and AED 872 per sqft to AED 860 per sqft respectively.
The average year-on-year price decline for villas was a fall of 2% from 2018. The most resilient villa location was Khalifa City with a 1% decline from the previous year and the largest price decline was seen in Al Reef with an 8% decrease from 2018.
The Observer - Abu Dhabi Residential Q4 2019 2 The Observer - Abu Dhabi Residential Q4 2019 3
HOT TOPIC In late November 2019, Aldar Properties launched a new rent-to-own scheme to allow customers to build up equity in their homes over a three-year period. The offer is available at three of its completed developments, namely Ansam, Al Hadeel and Meera communities. Those taking up the offer will be able to exercise the rent-to-own option each year with no rent escalations or fees while doing so. Rent-to-own programmes are not a new concept in the UAE, but have made a resurgence at a time when consumers are wary of buying and the availability of financing for home purchases may be limited.
The Observer - Abu Dhabi Residential Q4 2019 4 The Observer - Abu Dhabi Residential Q4 2019 5
Apartments and Villas − Residential Sales Prices and Quarterly Change
Apartment Sales Q3 2019 Apartment Sales Q4 2019Villa Sales Q3 2019 Villa Sales Q4 2019 QoQ MovementFigures in AED/Sq FtSource: REIDIN & Chestertons
Dubai
AL RAHABEACH
AED1,280
AL RAHA BEACHAED1,250
-2%Q-o-Q
Movement
Al RahaBeach
Yas Island
Al Reef
Abu DhabiInternational
Airport
Al RahaGardens
Al Ghadeer
AL GHADEERAED740
AL GHADEERAED725
-2%Q-o-Q
Movement
AL REEFAED797
AL REEFAED765
-4%Q-o-Q
Movement
SaadiyatIsland
SAADIYATISLAND
AED1,400 SAADIYATISLAND
AED1,400
0%Q-o-Q
MovementAL REEMISLAND
AED965AL REEMISLAND
AED965
0%Q-o-Q
Movement
AL GHADEERAED695
AL GHADEERAED695
0%Q-o-Q
Movement
AL REEFAED620
AL REEFAED615
-1%Q-o-Q
Movement
AL RAHAGARDENS
AED700
AL RAHAGARDENS
AED700
0%Q-o-Q
Movement
Khalifa City
Masdar City
KHALIFACITY
AED872
KHALIFACITY
AED860 -1%Q-o-Q
Movement
AL RAHABEACH
AED1,160
AL RAHABEACH
AED1,100
-5%Q-o-Q
Movement
Al ReemIsland
Ba AlGhaylam
Island
SamaliyahIsland
Al JubailIsland
ZayedSports
City
Ras GhurabIsland
Al WeheilIsland
Al AryamQassabi
Al Rafiq
Halat AlBahrani
Al Futaisi
ICAD II
Umm YifenahIsland
Rental rates declined a marginal amount in Q4, possibly signalling the market is stabilising
Rental rates declined a marginal amount in Q4, with average rates down 1% for apartments and 2% for villas from the previous quarter possibly signalling that the market is stablising.
The year-on-year picture shows that apartment rents in Abu Dhabi fell by 10% on average across 2019 while villa rents were down by 6%.
One of the key trends we have witnessed over the last few quarters is a consistent demand for affordable rental opportunities across various locations as renters have become more price-conscious and this has continued in Q4.
As in Dubai, one of the biggest threats to the long-term rental market in the Capital is a combination of the flexible payment plans that are being offered by developers and the new freehold
law. Both of which make it far more attractive and cost-effective for residents to become owner-occupiers rather than tenants. With rental yields across most locations currently between6%-8% and interest rates at circa 4%, it’s clear being an owner-occupier is a highly appealing option.
Apartment Rental Rates:Quarter-on-Quarter Movement: –1%Year-on-Year Movement: –10%
The highest average rental decline for apartments in Q4 was seen in Saadiyat Island, with rents decreasing 4% from the previous quarter. A typical two bedroom apartment rented for AED 140,000 per annum in Q3 2019, decreasing toAED 135,000 per annum in Q4 2019, reflecting a 4% decline for that format. However, it was the smaller studio apartments
which saw the biggest rental movement. A studio apartment rented for AED 88,000 per annum in Q3 2019, decreasing to AED 75,000 per annum in Q4 2019, representing a 15% decline.
Apartment locations which witnessed no rental adjustments in Q4 were Al Ghadeer, Al Reem Island, Khalifa City, Mohammed Bin Zayed City and Muroor. Rates for a typical two bedroom apartment remained at AED 52,000 per annum, AED 90,000 per annum, AED 60,000 per annum, AED 50,000 per annum and AED 65,000 per annum respectively.
Other locations which witnessed a very modest decrease in rents included Al Reef, Al Khalidiya and Corniche Road with average rents dropping by 1%.
Villa Rental Rates:Quarter-on-Quarter Movement: –2%Year-on-Year Movement: –6%
The Capital’s villa rental market, which saw no movement in rates in Q3, dropped by 2% in Q4 2019.
The most resilient villa locations in Q4 were Al Reef, Khalifa City, Al Khalidya and Mohammed Bin Zayed City, all of which witnessed no rental declines from Q3 2019. In these locations, rates for a typical four bedroom villa held at AED 132,000 per annum, AED 160,000 per annum, AED 178,000 per annum and AED 130,000 per annum respectively.
The biggest villa rental decline in Q4 was in Al Raha Gardens with a 6% average drop from the previous quarter. It was Al Raha Garden’s five bedroom villas which experienced the largest decline at 9%. This suggests people could be downsizing in this location to save costs. A typical five bedroom villa rented for AED 220,000 per annum in Q3, dropping to AED 200,000 in Q4.
Across the board, the market for four and five bedroom villas saw the largest average rental declines dropping 2% from the previous quarter.
-5%
-4%
-3%
-2%
-1%
0%
1%
0
20,000
40,000
60,000
80,000
100,000
120,000
140,000
160,000
180,000
Studio 1BR 2BR 3BR QoQ ChangeFigures in AED ‘000 p.aSource: Propertyfinder and Chestertons
Al Raha Beach Area Al Ghadeer Al Reef Al Reem Island Saadiyat Island Khalifa City Al Khalidiya MBZ Corniche Road Muroor Area
PERCENTAG
E CHAN
GE
AED
REN
TAL
-7%
-6%
-5%
-4%
-3%
0%
-2%
-1%
0
50,000
100,000
150,000
200,000
250,000
300,000
Al Ghadeer Al Reef Al RahaGardens
Khalifa City Al ReemIsland
Al Khalidiya MBZ
3BR 4BR 5BR QoQ Change
PERCENTAG
E CHAN
GE
AED
REN
TAL
Figures in AED ‘000 p.aSource: Propertyfinder and Chestertons
The Observer - Abu Dhabi Residential Q4 2019 6 The Observer - Abu Dhabi Residential Q4 2019 7
Apartments − Residential Market Rent and Quarterly Change
HOT TOPIC It could become standard practice for prospective tenants to face credit checks before they are approved for renting a property. It was reported late last year that there has been growing use by property companies of Al Etihad Credit Bureau’s (AECB) reports to assess the financial health of tenants. FAB Properties, a real estate management company owned by the UAE’s biggest lender First Abu Dhabi Bank, is one of the companies to utilise these reports. Running credit checks on prospective tenants is an established practice in many sophisticated real estate markets around the world and one of the indicators that the UAE’s property market is maturing.
-5%
-4%
-3%
-2%
-1%
0%
1%
0
20,000
40,000
60,000
80,000
100,000
120,000
140,000
160,000
180,000
Studio 1BR 2BR 3BR QoQ ChangeFigures in AED ‘000 p.aSource: Propertyfinder and Chestertons
Al Raha Beach Area Al Ghadeer Al Reef Al Reem Island Saadiyat Island Khalifa City Al Khalidiya MBZ Corniche Road Muroor Area
PERCENTAG
E CHAN
GE
AED
REN
TAL
-7%
-6%
-5%
-4%
-3%
0%
-2%
-1%
0
50,000
100,000
150,000
200,000
250,000
300,000
Al Ghadeer Al Reef Al RahaGardens
Khalifa City Al ReemIsland
Al Khalidiya MBZ
3BR 4BR 5BR QoQ Change
PERCENTAG
E CHAN
GE
AED
REN
TAL
Figures in AED ‘000 p.aSource: Propertyfinder and Chestertons
The Observer - Abu Dhabi Residential Q4 2019 8 The Observer - Abu Dhabi Residential Q4 2019 9
Villas − Residential Market Rent and Quarterly Change
Contact Us Nick Witty, BSc (Hons) MRICSManaging [email protected]
Adam Wilson, BSc (Hons) MRICS ACIArbHead of [email protected]
Chris Hobden, BA (Hons) MSc MRICSHead of Strategic [email protected]
Ellen SleutjesHead of [email protected]
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Disclaimer:All articles and data presented herein is intended for information purposes and has been compiled from sources deemed reliable including the Valu-ations and Research Department of Chestertons, sales and leasing staff, published data, and secondary sources. Though information is believed to be correct, materials presented is subject to errors, omissions, changes, or withdrawal without notice.
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