ABU DHABI 27 July 2020: Abu Dhabi’s real estate market witnessed continued moderate declines, across both sales prices and rents, during Q2.
However, with a raft of developer incentives and the proactive public policy response, sales volumes are expected to increase over the second half of 2020, according to the Chestertons’ Observer: Abu Dhabi Market Report Q2 2020.
Overall, the capital’s real estate market continued to see declines in sales values, with average apartment prices falling by 1.4% and villas by 1.3% q-on-q.
The capital’s residential sector, however, was supported by a rise in loan to value ratio for first-time buyers introduced by the Central Bank of the UAE (CBUAE), coupled with the cancellation of the Abu Dhabi Municipality fee, equivalent to 2% of a property’s purchase price, in March 2020.
Chris Hobden, Head of Strategic Consultancy, Chestertons Mena, said: “While we expect Abu Dhabi to see falls in sales prices over the second half of 2020, generous developer incentives, such as extended post-handover payment plans, initial service charge waivers and discounted prices should serve to support transaction volumes.
“Further initiatives, by both UAE and Abu Dhabi authorities, to support an economic recovery over 2021 bode well for the capital’s real estate market medium term.”
In the apartment sales market, Al Ghadeer saw the highest price declines q-o-q, with average apartment prices falling by 2.1%, from Dh715 to Dh700 per sqft. Al Reef saw the second-highest fall in average prices, reaching Dh750 from Dh765 per sqft over Q1 2020, representing a 2% decline. Saadiyat Island saw the lowest average quarterly decline, with prices falling by just 0.7% to Dh1,370 from Dh1,380 per sqft in Q1.
Al Reef saw the highest price declines on an annual basis, at -7.8%, followed by Al Ghadeer at -6.7%, with average prices reaching Dh750 and Dh700, respectively. In contrast, Saadiyat Island was the most robust performing location on an annual basis, with average prices falling by just 2.1%, from Dh1,400 in Q2 2019.
In the villa market, Al Raha Gardens recorded the highest declines q-o-q, with average prices falling by 2.2% to Dh675 per sqft in Q2. The strongest performing locations were Khalifa City and Al Raha Beach Area, which witnessed declines of 0.6% and 0.5% q-o-q, respectively, with average prices at Khalifa City at Dh840 per sqft, and in Al Raha Beach Area at Dh1,065 per sqft.
While Al Raha Beach Area performed well over Q2, higher than average falls over late 2019 led to an annual decline in average prices of 8.2%, down from Dh1,160 per sq ft in Q2 2019. Al Raha Gardens and Al Ghadeer saw the most moderate yearly price declines of 3.6%, with average prices in both locations standing at Dh675 per sqft in Q2 2020, down from Dh700 in Q2 2019.
Average apartment rental rates fell by 2.2% and villas by 2%, a sharper rate of decline than experienced in Q1, a result of the economic impact of Covid-19. The highest average rental decrease in the apartment sector was in Al Ghadeer, where average rents decreased by 4.2% from Q1 2020, with average two-bedroom apartment rents standing at Dh40,000 per annum.
Al Reem Island witnessed the second-highest quarterly declines, at -4%, due to declining rents for smaller units. Studio rents averaged Dh46,000 while rental rates for a one-bedroom units stood at Dh60,000 per annum.
Corniche Road and Mohammed bin Zayed City saw the greatest stability in Q2, with rents declining by just 0.4% and 0.6%, respectively. Rents for one-bedroom units in Al Khalidya averaged Dh65,000 per annum, with the same size unit in Al Raha Beach Area averaging Dh82,500.
Muroor Area also saw declines of below 2%, with average rents falling by 1.9% q-o-q to Dh50,000 for a one-bedroom apartment.
Average villa rent declines were less pronounced than apartments; however, they witnessed an increased rate of decline over the second quarter of 2.0%, following an overall reduction of just 0.6% in Q1 2020.
Al Raha Gardens saw the most moderate decline in quarterly rents, with average rates falling by just 0.5% over Q2, following a rise of 2.3% in the previous quarter. Three-bedroom units in Q2 averaged Dh144,000 per annum.
Al Reef was the only other location to see average rents fall by below 1%, declining by just 0.8% q-o-q. Average rents for three-bedroom units fell by 2.4%, to Dh100,000 per annum, from Dh102,500 the previous quarter, with rents across four- and five-bedroom villas holding steady at Dh130,000 and Dh140,000 per annum, respectively.
The most significant decline in average rents was seen in Al Ghadeer, with rates falling by 4.4% over Q2, following a 2.4% decline over Q1 2020. Average rents for three- and four-bedroom villas stood at Dh95,000 and Dh120,000 per annum, respectively, compared to Dh110,000 and Dh130,000 in Q2 2019.
Most significant ongoing threat
“The most significant ongoing threat to the rental sector comes from a fall in demand driven by rising unemployment and declining income levels for private sector workers. The second quarter witnessed a rise in unemployment, especially across travel-related sectors, and a further fall in Abu Dhabi’s expatriate population presents a clear risk moving forward.
“With Abu Dhabi’s economy forecast to rebound next year, we expect to see greater stability across residential prices and rents over 2021,” concluded Hobden.