Abu Dhabi apartment rents fall 57%

According to a new report by Kuwait Financial Centre (Markaz), on an average, apartment rents in Abu Dhabi, declined 57 per cent from its peak in 2009; similar to the decline in buying prices.

Apartment rents currently are at a 20 per cent premium to Dubai; down from 50 per cent during first quarter 2009, while villa rentals declined on an average by 47 per cent.

Organic demand within Abu Dhabi will not be suffice to absorb the forthcoming residential supply during 2011-13 and tapping the potential latent demand will aid in mitigating the oversupply, according to a new report.

“About 50 to 65 per cent of the forthcoming supply during 2011-13 would not be absorbed by organic demand and the market needs to turn towards other sources of demand such as the latent pent-up demand,” Kuwait Financial Centre (Markaz) said.

It identifies three different sources of pent up demand: From people employed in Abu Dhabi, but living in Dubai and commuting; from people in low quality units and from multiple households sharing a single housing unit.

Markaz believes an average 75 per cent materialisation of the pent-up demand potential would mitigate the oversupply during 2011-13. About 15 per cent of the estimated supply are in locations with low-mid income properties such as Mohammad Bin Zayed, Mussafah and Khalifa A & B, which will be catering to the pent-up demand from shared households.

Estimates of forthcoming supply in Abu Dhabi for the period 2011-13 are in the range of 40,000 to 60,000 units, of which slightly over half are in the investment areas and the rest in areas where non-nationals cannot own property. Despite the lower actual supply, Abu Dhabi stands next only to Dubai compared to its GCC peers in terms of maximum decline in prices and rentals, estimated in the range of 50-57 per cent from the peak.

In October, Jones Lang LaSalle said approximately 2,800 new residential units were delivered in Abu Dhabi district during the third quarter, bringing the total current residential stock to 193,000 units. Handovers will increase significantly in the fourth quarter with up to 11,000 units scheduled for completion with aggregate supply still reaching 246,000 units by the end of 2013.

Markaz believes re-mobilizing of residential projects on hold and other new project starting will worsen the market further. As per the data from Meed projects, 48 projects are currently on hold and could get remobilized.

“However the actual supply of units from such resumed and new projects would occur in the long run, after three to four years on an average, and the corresponding demand trends are positive in general,” the report pointed out.

Follow Emirates 24|7 on Google News.