Abu Dhabi apartment sales prices up 29% in 2014

According to the latest Q4 2013 report from Middle East’s largest full service real estate services company, Asteco, apartment sales prices have witnessed strong growth, with rates up

by 11%, on average, compared with the previous quarter and 29% compared to Q4 2012 as buyers begin to factor in further growth expectations.

“The sales price increases are due in part to the growing popularity of the newly established communities and the anticipated demand which will also drive rental rates, coupled with limited new supply entering the market in the short term.

These aspects, combined with improving market sentiment are making property ownership a more attractive option for both owner-occupiers and investors,” said Jerry Oates, General Manager, Asteco Abu Dhabi.

Demand has been particularly pronounced for Al Raha Beach, where the average price of an apartment is now between AED 1,175 and AED 1,425 per square foot. Al Raha Beach benefits from its proximity to Dubai. The Gate Towers in Shams Abu Dhabi, Reem Island, have also seen rates up by 15% since their handover in Q3 2013, due to the completion of retail outlets on the island and the offering of a community environment.

Reef Downtown, an affordable development off-island, has outperformed the market with a 50% sales price growth compared with last year. Current rates at Reef Downtown start from AED 825 per square foot.

“We would expect to see price growth to continue throughout 2014, albeit at a slower pace than the previous year,” added Oates.

Villa sales prices have followed a similar upward trend to those of apartments, with Al Reef Villas witnessing the fastest pace of growth, up 38% compared to the previous year. Al Raha Gardens were up by 21% and Golf Gardens by 13% for the same period, where a three-bedroom villa is now priced at AED2.85 million.

Rental rates have also grown rapidly during the first half of 2013, mainly due to demand from Dubai commuters relocating to the capital. However, in the last quarter of 2013, there has been a slowdown in rental growth, with modest rental rate increases of up to 5%.

Annual rental rates for a two-bedroom apartment in the investment areas of Saadiyat and Al Raha Beach now average AED 190,000 per annum, however Asteco believes that the current slow growth in rental activity is only temporary.

Only 8,500 units of supply are expected to come onto the market in 2014 (excluding Emirati Housing), therefore Asteco expects rental rates to grow, in line with the overall positive sentiment throughout this year,” said Oates.

The developments that will continue to be in demand include the three communities at Al Raha Beach, which have become more attractive since retail outlets have opened and the communities have established themselves. In addition, properties in prime locations on the Corniche and Saadiyat Island are likely to attract premium rates, especially with a lack of new prime developments in the pipeline.

There also continues to be demand for affordable accommodation, but to date, there is only a limited supply of purpose-built affordable housing. Residents on a budget live in old and lower quality buildings on the main island or outside the city near Al Reef, Hydra Village and MBZ / Khalifa City.

These areas are experiencing some of the fastest rental growth, as tenants are priced out of other developments. This increase may be exacerbated, as tenants will no longer be protected by the rent cap. It now costs AED 70,000 per annum to rent an average two-bedroom apartment in central Abu Dhabi, a 7% increase since Q3 2013.

Overall rental rates in the villa market have been relatively stable, with only the most affordable properties in Al Reef, MBZ and Khalifa A witnessing some growth. At the lower end of the scale, average three-bedroom villa rents in MBZ now start at AED120,000 per annum, whereas a similar property in Saadiyat Island will command an annual rent of AED 290,000.

The office market supply has continued to outstrip demand over an extended period of time in Abu Dhabi, especially for Grade A & B shell and core space.

As a result, rental rates for Grade A fitted office space were stable this quarter, whereas Grade A shell & core rates declined by 4%.