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OBSERVERAbu Dhabi Market ReportQ4 / 2018
Price MovementsApartments
Apartments
Villas
Villas Rental Movements
Report HighlightsServices
Conditions in Abu Dhabi’s residential property market remained relatively unchanged in Q4 2018 as the sales and rental sector continued to undergo downward adjustments as witnessed throughout Q3 - due to new supply and reduced levels of demand.
Sales Prices The downward price corrections witnessed in Q3, continued through to Q4 with average sales prices for apartments and villas down 2% from the previous quarter. Despite the fact the market continued to soften, it did so at a lesser rate which suggests some locations are starting to reach more realistic pricing levels. Year-on-year movements show a decrease in sales prices for both apartments and villas with a 9% and 11% drop respectively from 2017. Rental Rates The downward adjustment in rental rates from Q3, continued in Q4. Average rental rates were down 4% for apartments and 2% for villas from the previous quarter. Year-on-year movement shows an overall 12% decrease
in apartment rental rates and 9% for villas. Whilst some residents downsized to make savings on their annual rent, others took advantage of the sustained rental rate downturn to upgrade to larger units with better quality specifications, located in more popular areas.
Market Outlook Corporate cut backs and consolidation have led to limited demand in the sales and rental sectors. However, the Government is introducing initiatives to stimulate the economy which could create positive sentiment in the Capital’s real estate market. The roll out of Abu Dhabi Government’s AED 50 billion economic stimulus package, and the increased focus on public-private partnerships, could lead to an increase in investment. Furthermore, the introduction of 10-year visas for expats and 100% foreign ownership in companies located outside of free zones, might impact the real estate market as long-term visa security should increase the investor pool as well as tie them into the market for a longer period of time.
ValuationsMortgage and Secured LendingPortfolio Valuations
Advisory and ResearchFinancial FeasibilitiesHighest and Best Use StudiesMarket ResearchConceptual Advisory and Project Positioning Studies Project Redevelopment/Repositioning Advisory Investment Strategies – Acquisition and Disposal
Sales and LeasingCommercialIndustrialResidentialRetail
Property/Facilities Management CommercialMixed-UseResidential
International Properties London Off-Plan ResidentialInternational Homes and Investments International Relocations
Residential Market Q4 2018 Snapshot
QoQ −2%YoY −9%
QoQ −4%YoY −12%
QoQ −2%YoY −11%
QoQ −2%YoY −9%
The Observer - Abu Dhabi Residential Q4 2018
1
A slowdown in adjustments could mean prices have reached more realistic levels in some areas
HOT TOPIC As witnessed in Dubai, developers in the off-plan market are competing to entice buyers by offering increasingly attractive incentives which could have a positive impact on the sales market. In September 2018, Aldar announced the launch of ‘The Cedars’, in addition to its many other schemes in the pipeline. This community in Yas Acres is offering incentives which include service charges being waived for five years, a 2% municipality fee, and a 20/80 payment plan with 20% of the purchase price payable during construction and 80% upon handover.
The downward price corrections witnessed in Q3, continued through to Q4 with average sales prices for apartments and villas down 2% from the previous quarter.
Year-on-year movements show a decrease in sales prices for both apartments and villas at 9% and 11% respectively from 2017.
Despite the fact the market continued to soften, it did so at a lesser rate which suggests some locations are starting to reach more realistic pricing levels.
Apartments:Quarter-on-Quarter movement: (– 2%)Year-on-Year movement: (– 9%)
As in Q3 2018, Al Ghadeer saw one of the biggest price adjustments in Q4 with a 5% decrease from the previous quarter. Prices dropped from AED 866 per sqft to AED 822 per sqft. Year-on-year movement shows that Al Ghadeer sales prices were 16% lower in 2018 than in 2017.
Apartments in Al Raha Beach saw the smallest price decline, dropping 1% from the previous quarter,with average apartment sales prices at AED 1,450 per sqft.
Al Reef continued to offer buyers affordable units in the Capital with good facilities and short commuting times into Abu Dhabi City. Sales prices dropped 2% from Q3, with an average price of AED 880 per sqft.
Generally, year-on-year figures saw a decrease across the board. Al Reef and Al Reem Island witnessed an 11% decline in sales prices, whilst Al Raha Beach saw a lesser annual adjustment of 5%, although Saadiyat Island witnessed no change in average sales prices from 2017.
Villas:Quarter-on-Quarter movement: (– 2%)Year-on-Year movement: (– 11%)
There was a slight slowdown in the rate of decline in prices in Q4 with a 2% drop in average sales prices from Q3. However, year-on-year movements witnessed an overall 11% drop in average sales prices.
As with apartments, Al Ghadeer villa sales prices saw the biggest drop with a 7% decline from Q3 which is at a higher rate than from Q2 to Q3 and a year-on-year decline of 17%.
The highest year-on-year decline was witnessed at Al Raha Beach with a 19% drop in sales prices from 2017. However, prices in Al Raha Beach in Q4 remained unchanged from the previous quarter which suggests they may now have bottomed out.
The biggest challenge facing the residential sales market is that of oversupply and with over 11,000 units expected to be delivered in 2019, the market is likely to continue to soften throughout the year. New supply due to enter the market over the next few years, most of which are being developed by Aldar, include the most recently launched Alreeman community located in Al Shamkha, Shams Meera on Al Reem Island, West Yas on Yas Island, The Cedar’s at Yas Acres and Mamsha Al Saadiyat on Saadiyat Island.
In addition to these Aldar communities, Saadiyat Development and Investment Company are building HIDD Al Saadiyat, comprising 464 villas of various sizes, just minutes drive from downtown Abu Dhabi. All these schemes offer various options for payment plans with Mamsha Al Saadiyat offering the most competitive at 10% on the commencement of initial works and then 90% on handover.
-7%
-6%
-5%
-4%
-3%
-2%
-1%
0%
0
200
400
600
800
1,000
1,200
1,400
1,600
Al Ghadeer Al Reef Al Raha Gardens Khalifa City Al Raha Beach Area
PERCENTAG
E CHAN
GEAE
D S
ALES
PRI
CES
Q2 2018Q1 2018 Q3 2018 Q4 2018
809 86
5
766
716
692
705 69
0 66
7 768
802
743
729 89
5 89
5
875
872 1,
081
1,15
0
1,03
5 1,
035
QoQ ChangeFigures in AED/sq.ft.Source: Propertyfinder and Chestertons
Q2 2018Q1 2018 Q3 2018 Q4 2018Figures in AED/sq.ft.Source: Propertyfinder and Chestertons
-4%
-6%
-5%
-3%
-2%
-1%
0%
1%
3%
2%
PERCENTAGE CHANGE
AED
SALE
S PRI
CES
1,600
1,400
1,200
1,000
800
600
400
200
0Al Raha Beach Area Al Ghadeer Al Reef Al Reem Island Saadiyat Island
QoQ Change
1,51
61,
504
1,47
01,
450
962
923
866
822 92
391
090
088
0
1,15
21,
114
1,08
51,
053
1,49
71,
412
1,40
01,
425
-7%
-6%
-5%
-4%
-3%
-2%
-1%
0%
0
200
400
600
800
1,000
1,200
1,400
1,600
Al Ghadeer Al Reef Al Raha Gardens Khalifa City Al Raha Beach Area
PERCENTAG
E CHAN
GEAE
D S
ALES
PRI
CES
Q2 2018Q1 2018 Q3 2018 Q4 2018
809 86
5
766
716
692
705 69
0 66
7 768
802
743
729 89
5 89
5
875
872 1,
081
1,15
0
1,03
5 1,
035
QoQ ChangeFigures in AED/sq.ft.Source: Propertyfinder and Chestertons
Q2 2018Q1 2018 Q3 2018 Q4 2018Figures in AED/sq.ft.Source: Propertyfinder and Chestertons
-4%
-6%
-5%
-3%
-2%
-1%
0%
1%
3%
2%
PERCENTAGE CHANGE
AED
SALE
S PRI
CES
1,600
1,400
1,200
1,000
800
600
400
200
0Al Raha Beach Area Al Ghadeer Al Reef Al Reem Island Saadiyat Island
QoQ Change
1,51
61,
504
1,47
01,
450
962
923
866
822 92
391
090
088
0
1,15
21,
114
1,08
51,
053
1,49
71,
412
1,40
01,
425
The Observer - Abu Dhabi Residential Q4 2018 2 The Observer - Abu Dhabi Residential Q4 2018 3
Apartments − Residential Sales Prices and Quarterly Change
Villas − Residential Sales Prices and Quarterly Change
Tenants ‘do their research’ to ensure they get a competitive rental agreement The downward adjustment in rental rates from Q3, continued in Q4. Average rental rates were down 4% for apartments and 2% for villas from the previous quarter. Year-on-year movement shows an overall 12% decrease in apartment rental rates and 9% for villas.
Apartments:Quarter-on-Quarter movement: (– 4%)Year-on-Year movement: (– 12%)
The highest average rental declines for apartments were seen in Mohammed bin Zayed City, Saadiyat Island and Al Ghadeer, all falling 5% from the previous quarter. A 3BR apartment in Mohammed bin Zayed City rented for AED 93,000 per annum in Q4, down from AED 102,000 in Q3, representing a 9% decline.
The most resilient location for apartment rents wasAl Reem Island in Q4, which fell only 1% from Q3 levels. Studio and 3BR rents remained unchanged at AED 50,000 and AED 140,000 per annum respectively.
Across the board, the highest decline was in 2BR and 3BR units. Both witnessed an overall decline of 13% from Q3. The biggest declines, annually, were seen in
Al Raha Beach and Khalifa City with downward rental corrections of 17% and 16% respectively. The most resilient apartment location in 2018, when compared to 2017, was the Corniche with a 6% decrease in rental rates which demonstrates a continued appetite for established locations in the city.
Villas:Quarter-on-Quarter movement: (– 2%)Year-on-Year movement: (– 9%)
Villa rental rates, in a number of locations, remained unchanged from Q3; these include Al Ghadeer, Khalidiya and Khalifa City. In Khalidiya the 4BR and 5BR units continued to rent for AED 185,000 and AED 191,000 per annum respectively, whilst 4BR and 5BR units in Khalifa City rented for AED 165,000 per annum and AED 173,000 per annum respectively.
The biggest villa rental decline was in Al Reem Island with a 6% drop from Q3. The biggest year-on-year adjustments were witnessed in Khalifa City andAl Reem Island with declines of 11% from 2017.
In summary, Abu Dhabi’s rental market continued to be hampered by new supply entering the market and reduced demand as a result of ongoing redundancies and companies providing lower rental allowances.
HOT TOPIC A recent survey by a major UAE-based online platform* found that two-thirds of its users have successfully negotiated a rent decrease in the last year. Survey results revealed that UAE residents use several means to increase their bargaining power with their landlords, with over a third citing online tools to compare similar property prices and negotiate a decrease. Other respondents cited reducing the number of rental cheques as a tool to negotiate a rent reduction.
*Dubizzle Property
-6%
-5%
-4%
-3%
-2%
-1%
0%
0
20,000
40,000
60,000
80,000
100,000
120,000
140,000
160,000
180,000
200,000
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%
-2%
-1%
0%
0
50,000
100,000
150,000
200,000
250,000
300,000
350,000
400,000
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
-6%
-5%
-4%
-3%
-2%
-1%
0%
0
20,000
40,000
60,000
80,000
100,000
120,000
140,000
160,000
180,000
200,000
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%
-2%
-1%
0%
0
50,000
100,000
150,000
200,000
250,000
300,000
350,000
400,000
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 2018 4 The Observer - Abu Dhabi Residential Q4 2018 5
Apartments − Residential Market Rent and Quarterly Change
Villas − Residential Market Rent and Quarterly Change
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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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