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The Abu Dhabi AnalysisMarket Performance, Trends and Affordability
White Paper
Measuring Affordability Levels in Abu Dhabi | UAE
December 2014
Addressing The Housing Gap | December 2014 | Abu Dhabi | Colliers International2
Ian Albert
Regional Director | Middle East
Colliers International
Colliers International
Colliers International is a global leader in commercial real
estate services with over 15,800 professionals operating out
of more than 485 offices in 63 countries. Colliers
International delivers a full range of services worldwide that
includes: valuations, consulting, appraisals, brokerage, asset
management and research, within the residential,
commercial, retail, hospitality, healthcare, education,
infrastructure sector, Public Private Partnership (PPP) and
economic and industrial free zones. In MENA Colliers
International has provided leading advisory services through
its regional offices located in Dubai, Abu Dhabi, Riyadh and
Jeddah since 1996. The latest annual real estate survey by
Euromoney named Colliers International ‘Best Advisor’ in
the MENA region, UAE, Qatar and Saudi Arabia.
Introduction
Affordability is a relative measure, especially in an
undersupplied market, with a high per capita income, such
as Abu Dhabi.
Affordability in the housing market is highly pertinent to
Abu Dhabi owing to the limited supply in the market. The
lack of mid-market properties has been addressed by the
government; the Urban Planning Council (UPC) in 2010
announced that at least 20% of new residential
developments need to be set aside for middle income
residents. Developments applicable under the guideline are
projects involving a minimum of 75,000m² of housing
(villas/ townhouses are excluded).
A commonly accepted guideline globally for housing
affordability is when accommodation costs are within 30%
of a household's gross income. However, according to the
latest income and expenditure survey published by the
Statistics Centre Abu Dhabi, it is the accepted guideline
that expatriate households spend 37% of their income on
housing. This percentage is only likely to increase in the
future due the combination of an acute undersupply and a
growing population.
With 72% of households in Abu Dhabi (excluding blue
collar workers) earning between AED9,500 and
AED32,000 per month, the majority of residents can afford
rental levels between AED43,000 and AED140,000 per
annum. These rental levels are based on the average
expatriate household spend in the capital (37% of
household income).
While the provision of affordable housing involves
important social and economical values, our focus in this
whitepaper is aimed at highlighting Abu Dhabi’s overall
residential market performance, trends and some strategies
for addressing the growing demand for affordable housing
towards a sustainable and competitive asset class.
The availability of affordable housing not only improves
worker and employer attraction and retention, but it also
increases the overall spending power of households. These
households can then afford to improve their existing
quality of life by increasing their spending on vital social
infrastructure facilities such as better levels of education
and healthcare for their families.
Mansoor Ahmed
Director | Development Solutions
Colliers International
Mariam Mahmooth
Associate Manager | Development Solutions
Colliers International
Addressing The Housing Gap | December 2014 | Abu Dhabi | Colliers International3
Demand Vs. Supply
The gap between residential demand and supply is
currently -21% across Abu Dhabi, indicating a
significantly undersupplied market. This gap is
expected to reach -31% in 2018, provided existing
developer timelines are met.
Colliers International estimates that an additional
47,900 housing units are due to enter the market
during 2014 – 2018, representing an annual increase of
3.6%. Despite the increase in supply, high population
growth rates of 5.5% per annum combined with
declining household sizes are expected to maintain an
undersupplied residential market in the capital during
the short to medium term.
“With demand growing at a higher rate than supply, in an
already undersupplied residential sector, market fundamentals
are likely to remain undersupplied in the short to medium
term”
Exhibit 3: Average Household Size
Exhibit 2: Abu Dhabi Residential Demand and Supply
Source: Colliers International
Source: Statistics Centre Abu Dhabi, Colliers International
Estimates
7.5
5.4
6.1
5.2
4.3
0
1
2
3
4
5
6
7
8
1980 1985 1995 2007 2009
-
500,000
1,000,000
1,500,000
2,000,000
2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020
-
50,000
100,000
150,000
200,000
250,000
300,000
350,000
400,000
2013 2014 2015 2016 2017 2018
Undersupply Supply Demand
Exhibit 1: Abu Dhabi Metropolitan Population
Undersupply: 31%
Undersupply: 21%
CAGR 5.5%
Addressing The Housing Gap | December 2014 | Abu Dhabi | Colliers International
Affordability in the
Rental MarketAffordable housing takes many different forms, and
this whitepaper uses the term to define all housing units
at levels affordable to average households in Abu
Dhabi.
Analysing the latest available income and expenditure
surveys published by the Statistics Centre Abu Dhabi
(SCAD), suggests that an accepted guideline for
spending on accommodation is approximately 37% of
their income. This number however, is likely to
increase as a result of the removal of the rental cap (Q4
2013) in a market that is acutely undersupplied.
This ratio is significantly higher when compared to a
number of established international benchmarks, such
as the Department of Housing and Urban Development
(USA) and NSW Government (AUS), where the
accepted definition of affordability is for a household
to pay no more than 30% of its annual income on
housing. In the UK, The National Housing Federation
defines affordable rent levels at 25% of household
income.
4
With rental levels increasing at a significantly higher rate
than average income, affordable housing in Abu Dhabi is a
limited commodity.
The distribution of income levels in the capital suggests that
41% of total households are earning less than AED9,500 per
month. As households in this income category are generally
provided with accommodation by their employers (mainly
comprising of contractors, hospitals, hotels and retailers), or
are living in shared/alternative accommodation facilities,
they are omitted from the study.
Analysis of monthly household income levels also suggests
that 44% of households* earn between AED9,500 and
AED19,000. At this income bracket, they can afford rental
levels between AED42,000 and AED85,000 per annum.
Households earning between AED19,000 and AED32,000 a
month, represented by 28% of households, can afford rentals
ranging between AED85,000 and AED140,000 per annum.
The highest income bracket represented by households
earning AED32,000 and above per month are 28% of
households. Rental affordability at this top tier of the market
starts at AED140,000 per annum.
Source: Colliers International* Total households excluding households in company/ shared accommodation
Exhibit 4: Monthly Household Income Distribution in Abu Dhabi
AED 12,621 AED 15,777 AED 18,932 AED 22,088 AED 24,542 AED 28,399 AED 31,554 AED 34,710 Above
AED 9,466 AED 12,621 AED 15,777 AED 18,932 AED 22,088 AED 24,542 AED 28,399 AED 31,554 AED 34,710
44% of Households* 28% of Households*
Rental Affordability:
AED42,000 – AED85,000 p.a.
Rental Affordability:
AED85,000 – AED140,000 p.a.
Rental Affordability:
AED140,000+ p.a.
28% of
Households*
Addressing The Housing Gap | December 2014 | Abu Dhabi | Colliers International5
“44% of households* in Abu Dhabi can afford rentals between
AED42,000 and AED85,000 p.a.”*Total households excluding households in company/shared accommodation
Addressing The Housing Gap | December 2014 | Abu Dhabi | Colliers International6
Rental RatesAverage rents across Abu Dhabi increased 11% year-on-
year (Avg. 2013 – Avg. 2014). Compared to 2008
however, average rents are currently 49% below the peak.
While newer established residential developments such as
Al Raha Beach and Al Reem Island continue to witness
significant increases in rentals, more affordable housing
locations such as Mohammed Bin Zayed City, Markaziya
and Al Zahiya have witnessed the highest increases in
rental rates YOY (10%), highlighting the growing demand
for more affordable housing.
The combination of increasing population and the removal
of the rent cap* is expected to maintain the upward trend
in rental rates, until the supply gap met.
*The rent cap was introduced in 2006 and was set at 5% in 2010,
before being removed in November 2013.
“More affordable housing locations such as Mohammed Bin
Zayed City, Markaziya and Al Zahiya witnessed the highest YOY
rental increases”
Exhibit 5: Average Rental Rates in Key Residential Districts across Abu Dhabi
Source: Colliers International
Exhibit 6: Average Rental Rates per m²
Source: Colliers International
-35%
-30%
-25%
-20%
-15%
-10%
-5%
0%
5%
10%
15%
-
500
1,000
1,500
2,000
2,500
2008 2009 2010 2011 2012 2013 2014
YO
Y G
row
th
AE
D p
er
m²
Rent YOY
- 49%
0%
2%
4%
6%
8%
10%
12%
-
50,000
100,000
150,000
200,000
250,000
Corniche Markaziya(City Centre)
Khaldiya Al Zahiya(Tourist Club
Area)
MohammedBin Zayed
Al RahaBeach
Al ReemIsland
Al ReemIsland-MarinaSquare
YO
Y G
row
th
AE
D p
er
Annum
1BR 2BR 3BR YOY Growth
Addressing The Housing Gap | December 2014 | Abu Dhabi | Colliers International
According to Colliers’ Rental Affordability Analysis,
households earning AED15,000 can afford rentals
across areas such as Mohammed Bin Zayed City and
Markaziya. There are a number of households within
this income bracket that occupy units in more
expensive locations, however, they are spending more
than 37% of their annual income doing so.
Exhibit 7 highlights rental options across key
residential locations for two sample households in Abu
Dhabi; households earning AED15,000 per month and
a household earning AED35,000 per month
7
Source: Colliers International
Affordable Unaffordable
Exhibit 7: Rental Affordability Analysis : A comparison between two households
(1) Household earning AED15,000 per month (2) Household earning AED35,000 per month
As graphically illustrated, those earning AED15,000 per
month are not only limited by location, but are also
restricted to one bedroom units within these areas. The
only two bedroom units that are even marginally
affordable are those in MBZ City.
Rental options for households with a monthly income of
AED35,000 are spread across many locations, albeit the
majority are limited to one bedroom and two bedroom
apartments. Households requiring a minimum of three
bedroom units can afford these larger units in MBR City,
Markaziya, Al Reef Downtown and Al Zahiya (TCA).
“Households earning AED15,000 or less, represent 33% of Abu
Dhabi’s residential market, but are limited for rental options
across areas such as Mohammed Bin Zayed City and Markaziya,
and that too within one bedroom units. One bedroom units in
Markaziya and Al Zahiya, as well as two bedroom units in MBZ
City are also affordable, albeit marginally”
Monthly Income: AED15,000
Locations 1 BR 2 BR 3 BR
Corniche
Markaziya
(City Centre)
Khaldiya
Al Zahiya
(Tourist Club
Area)
Mohd Bin Zayed
Al Raha Beach
Al Reem Island
Al Reem Island-
Marina Square
Saadiyat Island
Al Reef
Downtown
Monthly Income: AED35,000
Locations 1 BR 2 BR 3 BR
Corniche
Markaziya
(City Centre)
Khaldiya
Al Zahiya (Tourist
Club Area)
Mohd Bin Zayed
Al Raha Beach
Al Reem Island
Al Reem Island-
Marina Square
Saadiyat Island
Al Reef
Downtown
Marginally Affordable
Addressing The Housing Gap | December 2014 | Abu Dhabi | Colliers International
Rental Rates in Primary Apartment Districts
According to Colliers’ Rental Affordability Analysis,
households earning between AED10,000 – AED22,000
can afford to rent apartments in MBZ City. Households
with a minimum income of AED14,700 can afford
apartments in Al Zahiya (TCA), Markaziya and
Khalidiya. Renting an apartment in the Corniche, Al
Reem and Al Raha Beach would require a minimum
monthly income of AED20,000.
Exhibit 8 maps rental options by household income
levels across popular apartment locations in Abu
Dhabi. Exhibit 9 illustrates the distribution of
affordability levels by area.
8
Source: Colliers International
Exhibit 8: Rental Affordability Analysis : Affordability in Popular Apartment Districts
“While Mohammed Bin Zayed City is affordable to nearly all
households in Abu Dhabi, Al Raha Beach is affordable to only
29% of households”
AED 10,000 – AED 22,000+ AED 14,700 – AED 38,000+ AED 20,000 – AED 48,000+
Household Monthly Income
0%
20%
40%
60%
80%
100%
Moh
am
ma
d B
inZ
aye
d
Mark
aziy
a
Al R
eef
Dow
nto
wn
Tou
rist
Clu
b A
rea
Kha
ldiy
a
Al R
eem
Isla
nd
-M
arin
a S
qua
re
Co
rnic
he
Al R
eem
Isla
nd
Saa
diy
at Is
lan
d
Al R
aha
Bea
ch
Exhibit 9: Distribution of Affordability Levels of
Households by Area
Addressing The Housing Gap | December 2014 | Abu Dhabi | Colliers International9
“Sales prices have increased 27% YOY.
The highest increase was witnessed in Al Raha Beach at 32%”
Affordability in the
Sales MarketSimilar to the rental market, sales prices in Abu Dhabi
have also witnessed an upward trend since 2012.
In 2014, average sales prices across freehold units in
Abu Dhabi increased by 27% YOY (Avg. 2013 – Avg.
2014). Al Raha Beach remains a popular investment
asset class, witnessing the highest YOY increase of
32% compared to all freehold developments illustrated
in Exhibit 11.
Increasing rentals, and limited freehold supply in Abu
Dhabi’s residential market is likely to improve investor
appetite in the short to medium term.
Exhibit 11: Average Sales Prices by Location – Q3 2014
Source: Colliers International
Exhibit 10: Average Sales Prices
Source: Colliers International
-40%
-30%
-20%
-10%
0%
10%
20%
30%
40%
-
5,000
10,000
15,000
20,000
25,000
2008 2009 2010 2011 2012 2013 2014
YO
Y C
hange
AE
D p
er
m²
Sales YOY Change
0%
5%
10%
15%
20%
25%
30%
35%
-
2,000
4,000
6,000
8,000
10,000
12,000
14,000
16,000
18,000
20,000
Al ReefDowntown
Al ReemIsland
Al RahaBeach
SaadiyatIsland
YO
Y G
row
th
AE
D p
er
m²
Sales Price YOY Change
Addressing The Housing Gap | December 2014 | Abu Dhabi | Colliers International10
“Colliers International’s Mortgage Affordability Analysis suggests
that, 67% of Abu Dhabi’s households* can afford mortgage
payments for properties AED1 million and below”*Total households excluding households in company/shared accommodation
Addressing The Housing Gap | December 2014 | Abu Dhabi | Colliers International11
Colliers International’s Mortgage Affordability Analysis
suggests that, 67% of Abu Dhabi’s households can afford
mortgage payments for properties AED1 million and
below.
Properties priced AED2 million or less require monthly
installments up to AED8,200. These payments are
affordable by 39% of households.
Properties priced AED2 million and above require
mortgage payments in more than AED8,200, and therefore
are affordable by 24% of households.
Mortgage
AffordabilityMortgages available for expatriates in Abu Dhabi
generally require a minimum average monthly income
AED15,000 (some banks set the minimum income at
AED20,000), along with a down payment of 25% of the
property’s value.
Interest rates vary significantly and are dependent on
both the terms of the lender as well as the credit rating
of the borrower.
Exhibit 12 illustrates the monthly instalments payable
on a sample of properties of which the values range
between AED 1 million and AED 5 million.
Assumptions used to calculate mortgage payments:
•Interest rate: 4.25% reducing rate
•Repayment period: 25 years
•Borrowers’ leverage: 35% of income
•Down payment: 25% of property value
Source: Colliers International
“The mortgage instalment for a property priced AED 2 Million is
AED8,200 per month – a 35% leverage of a resident earning
AED23,000 per month.”
Exhibit 12: Average Monthly Instalments for Mortgages Based on Property Value
39%
Affordability by % of
Households
< AED 2 Million
Property ValueAvg. Monthly Instalment
for Mortgage
< AED 8,200
< AED12,200< AED 3 Million
< AED16,300< AED 4 Million
> AED 5 Million
4%
Distribution (%) of
Existing Freehold
Apartment Units
24%
48%
67% < AED 1 Million < AED 4,100 6%
41%
> AED20,300
Addressing The Housing Gap | December 2014 | Abu Dhabi | Colliers International12
Affordability in
Freehold SupplyColliers’ research suggests that there are just over
16,000 freehold apartments handed over in Abu Dhabi;
6% of which are priced below AED1 million, and as
previously mentioned require a mortgage payment of up
to AED4,100 per month. These properties are
affordable to 67% of Abu Dhabi’s households; clear
mismatch between demand and availability of suitable
and affordable supply. The market gap is graphically
illustrated in Exhibit 13.
Freehold apartments priced between AED1 million and
AED2 million represent 48% of supply, while demand
for these properties are characterised by 39% of
households.
Freehold apartments priced AED2 million and above
comprises 45% of supply. However, based on mortgage
affordability, demand for these properties are
represented by 24% of households, highlighting a
possible oversupply within the higher price category
(considering only the resident market).
It is Colliers’ opinion that the mismatch between
affordability and the availability of suitable housing,
needs to be addressed when planning future
developments.
Exhibit 14: Distribution of Freehold Apartments by Price*
Source: Colliers International*Units AED4 Million+ represent <1% of the market
Source: Colliers International
Exhibit 13: Identifying the Market Gap – Demand & Supply by Price Levels (Based on the Resident Market)
Exhibit 15: Freehold Apartments by Unit Type
< AED 1 Million
Source: Colliers International
Studios 1 Bedrooms
67%
39%
24%6%
48%
45%
0%
10%
20%
30%
40%
50%
60%
70%
80%
< 1 Million 1 Million - 2 Million 2 Million+
Demand Supply
< AED 1 MillionAED 1 Million - AED 2 MillionAED 2 Million - AED 3 MillionAED 3 Million - AED 4 Million
Undersupply Oversupply
“The combination of limited supply and upward rental trends in
Abu Dhabi has resulted in an increased appetite for end-user
investment. Al Reef 2 for example, is a popular development
among owner occupiers, given its affordability”
Addressing The Housing Gap | December 2014 | Abu Dhabi | Colliers International13
“In order to prevent prices reaching unsustainable levels, governments
regionally and internationally implement price controls to regulate the
market and protect the interest of all parties”
The Impact of Increasing Real Estate Prices
Increased Real Estate Prices/
Rents
Lower Disposable
Income
Lower Spending on Vital Social Infrastructure Facilities
(Healthcare & Education)
Lower Spending on Retail, Leisure and
Entertainment
Lower Standards of
Living
Market Becomes Unattractive for much needed expat skilled
labour
High LabourCosts
Loss of Market Competitiveness
Addressing The Housing Gap | December 2014 | Abu Dhabi | Colliers International14
Land infrastructure by the government is leveraged against
social infrastructure and greater returns to the local
economy. Revenues can take the form of fees for
permissions, zoning, and utilities, or they can reflect sales,
income, or fees generated by construction related
economic activity.
Having access to housing that is affordable by the majority
of households clearly results in both social and economical
benefits.
With innovations in low-cost building technology (cost-
effective construction methods, and not low-build quality)
being applied across the globe, developers in Abu Dhabi
can combine these mechanisms to effectively service the
increasing demand for affordable housing.
It is Colliers’ opinion that offering more government
incentive programs, access to well located and service
land, affordable developer financing options, and Public
Private Partnerships will increase the availability of
housing units that are affordable to the majority of
households.
Developing
Affordable
Communities
SuccessfullyThe development of affordable housing represents great
potential to Abu Dhabi. Despite UPC’s attempt to
address this market gap by means of planning
guidelines, the acute undersupply of residential units
persists.
Affordable housing when developed effectively, can
provide high returns for investors. Community facilities
such as neighbourhood retail, schools, healthcare
services and leisure facilities can generate significant
additional revenue for the developer, whilst maintaining
affordable rental levels.
Developing a community integrated with such facilities
in well connected locations (easy access to the main
arteries, and public transport network), attracts high
occupancy rates and retains the value of developments.
Public Private Partnerships between developers and the
government can also assist to increase the availability of
more affordable residential communities in Abu Dhabi.
Conclusion
As seen globally, governments are actively involved in
providing developers access to well located and
serviced land, home investment partnership funds, and
favourable developer financing options as active
incentives for developers to develop affordable housing.
Source: Colliers International
“Public Private Partnership (PPP) is a potential way for developing
Affordable Housing in partnership with Private Developers”
Exhibit 16: Primary Benefits of Affordable Housing
Exhibit 17: Key to Successfully Developing Affordable
Housing Communities
Source: Colliers International
Economic Benefits Developer Benefits
Revenues can take the form of fees for permitting,
zoning, and utilities, or they can reflect sales,
income, or fees generated by construction related
economic activity.
Improving Worker and Employer Attraction and
Retention.
Increasing the Buying Power of Residents.
Incorporating revenue accelerators (retail / F&B,
healthcare and educational facilities) within
affordable housing communities are likely to increase
the developers’ overall returns on the project.
Addressing The Housing Gap | December 2014 | Abu Dhabi | Colliers International15
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About Colliers International
Colliers International is a global leader in commercial real estate services, with over 15,800
professionals operating out of more than 485 offices in 63 countries. Colliers International delivers a
full range of services to real estate users, owners and investors worldwide, including global corporate
solutions, brokerage, property and asset management, hotel investment sales and consulting, valuation,
consulting and appraisal services and insightful research. The latest annual survey by the Lipsey
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colliers.com
Copyright © 2013 Colliers International.
The information contained herein has been obtained from sources deemed reliable. While every reasonable effort has been
made to ensure its accuracy, we cannot guarantee it. No responsibility is assumed for any inaccuracies. Readers are
encouraged to consult their professional advisors prior to acting on any of the material contained in this report.
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For further information,
please contact:
Ian Albert
Regional Director | Middle East
+971 4 453 7400
Mansoor Ahmed
Director | Development Solutions
+971 4 453 7400 | +971 55 899 6091
Saadallah Al Abed
Senior Manager | Development Solutions
+971 4 453 7400 | +971 55 899 6106
Mariam Mahmooth
Associate Manager | Development Solutions
+971 4 453 7400 | +971 55 899 6108
Colliers International | MENA Region
Dubai | United Arab Emirates
+971 4 453 7400