UAE Property Portal
phone Call Us On +44 208 305 7879
email Email

Abu Dhabi property market reaches ‘tipping point’

Abu Dhabi’s property market is at a “tipping point” because of an increase in the cost of living and a reduction in demand.

According to JLL’s Abu Dhabi Real Estate Market Overview for the second quarter of the year, demand growth in the capital is weakening, with rentals and sales flat during the period. “We are currently at a ‘tipping point’, with market stability very much dependent on the government continuing to invest in major new infrastructure and economic development projects,” said David Dudley, the head of JLL’s Abu Dhabi office.

He said that employment creation has continued as a result of projects that were started before the recent decline in oil prices, such as the new US$3 billion Midfield Terminal Complex, and Etihad Airways’ ongoing expansion plans.

Yet the oil price decline has led to a reduction in domestic government spending as future projects are re-prioritised. It has also led to a decline in investor sentiment.

“The extent to which conditions remain stable over the next year or so very much depends on the government’s spending plans,” Mr Dudley added.

One factor underpinning the market is the lack of new supply. There have been no significant new developments delivered on to the market during the first half of the year, and only 6,000 units are expected by the year-end – at Saraya, Hydra Avenue and The Wave on Reem Island, C59 in Rawdhat and Amwaj 2 at Al Raha Beach.

This would bring the total number of properties in Abu Dhabi’s investment areas monitored by JLL to 250,000. Only 6,000 more units are expected to be added in 2016.

Separately, a report from MPM Properties, the property branch of Abu Dhabi Islamic Bank showed that about 6,750 new residential units were added to Dubai’s property market over the past three months, bringing the total stock to 479,000 properties.

Most of the new units were delivered along the Sheikh Mohammed bin Zayed Road corridor, with new homes in the International Media Production Zone making up 26 per cent of the supply.

The number of new units delivered during the first half of the year climbed to 8,500, and MPM Properties said that it expects a further 11,500 to be handed over during the second half of the year.

The increased supply meant that prices and rents continued to fall. Average sale prices dropped by 3.5 per cent and rents fell by 3 per cent on the previous quarter.

“The volume of new projects in the Dubai market means that properties will increasingly need to appeal to potential buyers’ sense of value,” said Paul Maisfield, the chief executive of MPM Properties. “That means a shift towards well managed, self-contained and mid-market properties, particularly close to the Expo 2020 site. We are also seeing a greater emphasis on buyer incentives and unique selling points, especially in the luxury segment and expect buyers to benefit from these trends.”

The report also warned that new leasehold property developments at the northern end of Dubai in areas such as Al Nahda, Muhaisanah and Al Qusais Industrial Areas 3 & 4 could “further exert pressure” on infrastructure, most notably roads between Dubai and Sharjah already facing serious traffic congestion at peak hours.

Comments ( 0 )

Post a Comment

Submit Your Comment