Increasing supply of residential stock in Abu Dhabi has led to a four per cent decline in rents in the second quarter 2012, while the year-on-year the drop was 14 per cent, says Jones Lang LaSalle (JLL).
Al Raha Beach and Reem Island districts registered maximum declines, the global real estate consultancy said in its Q2 report on Abu Dhabi, adding that a prime two-bed apartment can be leased for Dh121,000 pa in the second quarter compared to Dh140,000 pa same period last year.
Up to 11,000 new units to be completed in the second half, though many of these projects could experience further delays at the final stages of approval, JLL believes that completion of new high-end apartment buildings will improve options for higher income residents and increase vacancies in lower grade assets as tenants upgrade with rents continuing to fall by year-end.
“The softening in rents has affected some districts more than others with Al Raha Beach and Reem Island experiencing the most significant declines due to the quantity of supply and diverse ownership,” the report revealed.
Due to growing competition in the market, incentives are being offered to tenants such as the option of paying with multiple cheques.
Existing latent demand
The report says there is latent demand for high quality and well-planned residential projects, citing rapid take up of units in the St. Regis on Saadiyat Island and strong pre-leasing activity in Nation Towers.
“Due to the significant development pipeline, rents will continue to experience downward pressure as the residential sector becomes more competitive, providing tenants with better opportunities to upgrade their housing.”
Approximately 2,900 additional residential units were delivered in Abu Dhabi in Q2 with majority of the units being in Rihan Heights and Bloom Gardens in the Grand Mosque District, Burooj Views and Marina Blue on Marina Square and Amaya Towers on Shams.
These deliveries bring the total residential stock to approximately 199,800 units at the end of Q2 2012.
Although a large proportion of the residential pipeline announced prior to 2008 has since been delayed, the aggregate supply could still reach 238,000 units by the end of 2014.
About two thirds of the upcoming supply comprises apartments, with the majority of the villa supply being within Emirati housing communities such as Al Falah and Watani, JLL said.
Most of the supply for delivery in 2012 comprises additional units in master planned developments including Reem Island, Al Reef Villas, Danet,Saadiyat Island and Rawdhat.
Upcoming supply also includes Nation Towers on the Corniche, Al Bateen Park and Marasy in Bateen.
Asking prices decline
Average residential asking prices within investment areas dropped by four per cent in the second quarter to Dh10,500 per square metre, representing a decline of 51 per cent from the peak of Dh21,500 in fourth quarter 2008.
Asking prices for apartments are approximately Dh11,500 per sqm, whereas average asking prices for villas are approximately Dh9,500 per sqm.
The sales market has witnessed increased activity in Q2 with interest primarily from Emirati purchasers.
The number of sales transactions has increased in line with completions in investment areas and improved market confidence, JLL said.