Abu Dhabi landlords rake in 17% rise in H1 property prices

Abu Dhabi residential sales prices rose for a sixth successive quarter, with a 7 per cent increase in Q2 2014, according to JLL.

Around 1,750 units were completed in Reem Island, Danet Abu Dhabi and Al Reef during Q2, bringing the total stock to around 240,000 units, the global real estate consultancy said in its latest report.

Sales prices for residential units increased for a sixth successive quarter, with a 7 per cent increase in Q2 2014, bringing the average increase during the first half of 2014 to 17 per cent.

Rentals rose 3 per cent quarter on quarter with annual increase being 15 per cent in the two-bedroom apartment category. Three-bed villas saw quarterly rent rising 3 per cent and annually six per cent.

The report, however, added that the recent removal of the rent cap in Abu Dhabi has had a major impact on rents of secondary buildings as landlords have taken the opportunity to increase previously below market rents more in line with current market levels.

Craig Plumb, Head of Research, JLL MENA, said: “The second quarter of 2014 continued to witness growth in the Abu Dhabi’s prime residential market and little change in the office, retail and hospitality sectors.

The Abu Dhabi market continues to be dominated by Government related investment with short-term demand being fuelled by investment and job growth from new major government backed construction projects, such as the Airport expansion, Etihad Rail, Saadiyat Island museums and other major infrastructure, economic and social development initiatives.

“A sustainable recovery requires the government to continue to implement supply controls as many developers are now reviewing schemes that had been placed on hold following the market downturn. While new supply is needed – particularly of quality residential product, supply controls are required to ensure the right product is prioritised in locations with existing infrastructure.”

Office

Rents remained unchanged in Q2 2014 averaging Dh1,540 per square metre (psm) for prime and Dh1,180 psm for secondary space. There were no major new deliveries in the office market this quarter, with the total stock remaining stable at 3.1 million sq metre.

With an additional 130,000 sq metre expected to enter the market during 2014, there will be continued downward pressure on rents for secondary space. The vacancy rate is currently at 30 per cent and is expected to increase as further deliveries take place in the next two years.

Retail

Average line store retail rents for malls on Abu Dhabi Island and for malls outside Abu Dhabi remained stable this quarter at Dh3,000 psm per annum and Dh1,820 psm per annum respectively. Retail deliveries in the Nation Towers Galleria on the Corniche and Al Marasy retail component in Al Bateen, resulted in an additional 20,000 sqm of retail GLA completing  in Q2, bringing the total retail stock to approximately 2.2 million sqm GLA. 

Over 400,000 sqm of retail GLA is expected to enter the market by the end of 2014, dominated by the delivery of Yas Mall on Yas Island.  The Yas Mall will significantly improve Abu Dhabi’s retail offer and will reduce the amount of retail spending that is currently lost to Dubai.

Hotel

Occupancies in the Abu Dhabi hotel sector increased to 77 per cent (YT May). While ADRs remain under pressure (decreasing by 8 per cent in YT May 2014 compared to the same period in 2013), the hotel market has started to recover and is set to experience improved performance over the rest of  2014.The sector continues to witness new completions, with the opening of Ramada and Southern Sun hotels in Q2 2014.

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