observer abu dhabi market report q1 / 2019 chestertons q… · services report highlights abu...
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OBSERVERAbu Dhabi Market ReportQ1 / 2019
Price Movements QoQ
Apartments
Apartments
Villas
Villas
Rental Movements QoQ
Report HighlightsServices
Abu Dhabi’s residential property market saw further downward adjustments in the sales and rental sectors as witnessed throughout Q4 2019; mainly due to new supply and reduced levels of demand.
Sales Prices
The downward price corrections witnessed in Q4 2018, have continued in Q1 2019, with average sales prices for apartments and villas down 3% and 1% respectively from the previous quarter. One of the biggest challenges facing the Capital’s residential sales market, continues to be oversupply. With over 11,000 units expected to be delivered in 2019, the market is likely to continue to soften throughout the year. Rental Rates
The downward adjustment in rental rates in Q4 2018, also continued in Q1 2019. Average rental rates were down 3% for apartments and 2% for villas from the previous quarter. As with the sales market, Abu Dhabi’s rental market continued to be hampered by new supply entering the market and reduced demand as a result of corporate consolidations and cutbacks.
Market Outlook
Whilst the downward corrections continue to be a dominant theme in the Capital’s residential real estate market, due to restrained economic conditions and oversupply, the outlook for the medium and long-term for the UAE is encouraging. At a Government level, this is fuelled by a clear commitment to economic progress. This includes the AED 50 billion stimulus package set to be rolled out this year, as well as new visa rules to encourage expatriates to stay longer and invest in the Emirates.
From within the industry, developers are bringing new, lower cost products to the market to meet demand. Whilst the combined effects of such initiatives is expected to have a positive impact on Abu Dhabi’s real estate market, the rate at which is it realised depends on the speed at which they take to generate demand. Until that time, buyers and tenants are likely to remain cautious.
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Residential Market Q1 2019 Snapshot
-3%
-3%
-1%
-2%
The Observer - Abu Dhabi Residential Q1 2019
1
Q1 2019 saw continued pressure on sales prices as a result of oversupply and restrained economic growth
HOT TOPIC Earlier this year, it was announced that service fees for the registration of properties, rental contracts and other transactions under the remit of Abu Dhabi Municipality were to be reduced by up to 50 per cent which could attract more investors into the real estate sector. Abu Dhabi also exempted all businesses issued with new licenses from paying local fees for two years. These new initiatives were implemented with the aim of bolstering the competitiveness of the Capital’s business environment. It is also worth noting, the UAE jumped 10 places in the World Bank’s Ease of Doing Business ranking – to 11th position globally in 2019 from 21st position in 2018 – to lead the Arab world for the sixth consecutive year.
The downward price corrections witnessed in Q4 2018, have continued in Q1 2019, with average sales prices for apartments and villas down 3% and 1% respectively from the previous quarter.
One of the biggest challenges facing the Capital’s residential sales market, continues to be oversupply. With over 11,000 units expected to be delivered in 2019, the market is likely to continue to soften throughout the year.
There are a number of key schemes set to enter the market over the next few years which we identified in our last edition of the Observer. Lower ticket prices and flexible payment plans continue to be a key strategy for developers as they aim to increase absorption rates.
The Observer - Abu Dhabi Residential Q1 2019 2 The Observer - Abu Dhabi Residential Q1 2019 3
Apartment: Quarter-on-Quarter movement: (-3%)
Al Reef witnessed the biggest price adjustment in Q1 with a 7% decrease from Q4 2018. Prices dropped from AED 880 per sqft to AED 820 per sqft.
Al Raha Beach was the other location which saw the second highest price adjustment at a decrease of 5% over the previous quarter with prices declining from AED 1,450 per sqft toAED 1,382 per sqft.
Saadiyat Island was the only location which saw no price movement from the previous quarter with average apartment sales prices at AED 1,425 per sqft in Q1.
Villas: Quarter-on-Quarter movement: (-1%)
There was a 1% drop in average villa sales prices from Q4 2018 which means there has been a slight slowdown in average price declines.
For many villa locations there was no price movements from Q4 2018. These included Al Ghadeer, Al Raha Gardens, Al Raha Beach and Khalifa City, where prices remained at AED 715 per sqft, AED 729 per sqft, AED 1,035 per sqft and AED 872 per sqft respectively.
The only price decline witnessed in Q1 was in Al Reef, where average sales prices dropped 3% from AED 667 per sqft in Q4 2018 to AED 645 per sqft in Q1 2019.
The Observer - Abu Dhabi Residential Q1 2019 4 The Observer - Abu Dhabi Residential Q1 2019 5
Apartments and Villas − Residential Sales Prices and Quarterly Change
Apartment Sales Q4 2018 Apartment Sales Q1 2019Villa Sales Q4 2018 Villa Sales Q1 2019 QoQ MovementFigures in AED/Sq FtSource: REIDIN & Chestertons
Dubai
AL RAHABEACH
AED1,450
AL RAHA BEACHAED1,382
-5%Q-o-Q
Movement
Al RahaBeach
Yas Island
Al Reef
Abu DhabiInternational
Airport
Al RahaGardens
Al Ghadeer
AL GHADEERAED822
AL GHADEERAED798
-3%Q-o-Q
Movement
AL REEFAED880
AL REEFAED820
-7%Q-o-Q
Movement
SaadiyatIsland
SAADIYATISLAND
AED1,425 SAADIYATISLAND
AED1,425
0%Q-o-Q
MovementAL REEMISLAND
AED 1,053AL REEMISLAND
AED1,021
-3%Q-o-Q
Movement
AL GHADEERAED716
AL GHADEERAED715
0%Q-o-Q
Movement
AL REEFAED667
AL REEFAED645
-3%Q-o-Q
Movement
AL RAHAGARDENS
AED729
AL RAHAGARDENS
AED729
0%Q-o-Q
Movement
Khalifa City
Masdar City
KHALIFACITY
AED872
KHALIFACITY
AED872 0%Q-o-Q
Movement
AL RAHABEACH
AED1,035
AL RAHABEACH
AED1,035
0%Q-o-Q
Movement
Al ReemIsland
Ba AlGhaylam
Island
SamaliyahIsland
Al JubailIsland
ZayedSports
City
Ras GhurabIsland
Al WeheilIsland
Al AryamQassabi
Al Rafiq
Halat AlBahrani
Al Futaisi
ICAD II
Umm YifenahIsland
Abu Dhabi continues to be a renters market in Q1 2019The downward adjustment in rental rates continued in Q1 2019. Average rental rates were down 3% for apartments and 2% for villas from the previous quarter.
Abu Dhabi’s rental market continued to be hampered by new supply entering the market and reduced demand, as a result of ongoing redundancies and companies providing lower rental allowances.
Whilst some residents downsized to make savings on their annual rent, others have taken advantage of the sustained rental rate downturn to upgrade to larger units with better quality specifications, located in more popular areas.
Apartments: Quarter-on-Quarter movement: (-3%)
The highest average rental declines for apartments were seen in the older parts of Abu Dhabi in the Al Khalidiya and Al Muroor areas, both falling an average 6% from the previous quarter. A 2 BR apartment in Al Khalidiya rented for AED 96,000 per annum in Q4 2018, decreasing to AED 85,000 in Q1 2019, representing an 11% decline.
The most resilient locations for apartment rents were Corniche Road and Mohammed bin Zayed City where there were no average rental movements from Q4 2018. In the Corniche Road location, there was no change in rates across the studio, 1 BR, 2 BR or 3BR units.
Other locations which witnessed a small decline in average rents included Al Reem Island, Saadiyat Island and Khalifa City where there was an average 2% decline from Q4 2018 and a 3 BR apartment rented for AED 133,000 per annum, AED 171,000 per annum and AED 91,000 per annum respectively.
Across the board, the biggest rental declines were seen in 1 BR and 2 BR units at a 4% decline since Q4 2018. The smallest average decrease was seen in studio apartment formats at a 1% drop from the previous quarter.
Villas: Quarter-on-Quarter movement: (-2%)
The most resilient villa location in Q1 2019 was Al Raha Gardens which witnessed no rental rate movement from Q4 2018. A 3 BR villa rented for AED 150,000 per annum, a 4 BR for AED 170,000 per annum and a 5 BR for AED 230,00 per annum.
As witnessed in Q4 2018, the biggest villa rental decline was seen in Al Reem Island with another 6% average drop from the previous quarter. It was also in Al Reem Island where the largest decline was seen in the 5 BR villa format with a 13 % drop from Q4 2018. A 5 BR villa rented for AED 295,000 per annum in Q1 2019, down from AED 340,000 per annum in Q4 2018.
Across the board, the format villa which seemed to generate the smallest average rental declines, with just a 1% drop from the previous quarter, was the 4 BR units.
HOT TOPIC Whilst Airbnb style rentals are proving increasingly popular in prominent locations across the globe, they are currently only legal in Dubai and Ras Al Khaimah in the UAE. However, it seems as if Abu Dhabi already has a significant number of properties actively listed on the Airbnb platform, mainly focused around the studio and 1 BR format. As such, they are likely targeted towards those who are in the UAE for project work or who are working but do not yet have a residence visa to register a long-term lease with the Municipality. Whilst it is unclear as to when these style of rentals will be officially allowed under Abu Dhabi law, they are already being actively marketed and signal another potential change for Abu Dhabi’s rental market in the near future.
-7%
-6%
-5%
-4%
-3%
-1%
-2%
1%
0%
0
20,000
40,000
60,000
80,000
100,000
120,000
140,000
160,000
180,000
Studio 1BR 2BR 3BR QoQ ChangeFigures in AED ‘000 p.aSource: Propertyfinder and Chestertons
Al Raha Beach Area Al Ghadeer Al Reef Al Reem Island Saadiyat Island Khalifa City Al Khalidiya MBZ Corniche Road Muroor Area
PERCENTAG
E CHAN
GE
AED
REN
TAL
-6%
-5%
-4%
-3%
-2%
-1%
0%
0
50,000
100,000
150,000
200,000
250,000
300,000
350,000
Al Ghadeer Al Reef Al RahaGardens
Khalifa City Al ReemIsland
Al Khalidiya MBZ
3BR 4BR 5BR QoQ Change
PERCENTAG
E CHAN
GE
AED
REN
TAL
Figures in AED ‘000 p.aSource: Propertyfinder and Chestertons
-7%
-6%
-5%
-4%
-3%
-1%
-2%
1%
0%
0
20,000
40,000
60,000
80,000
100,000
120,000
140,000
160,000
180,000
Studio 1BR 2BR 3BR QoQ ChangeFigures in AED ‘000 p.aSource: Propertyfinder and Chestertons
Al Raha Beach Area Al Ghadeer Al Reef Al Reem Island Saadiyat Island Khalifa City Al Khalidiya MBZ Corniche Road Muroor Area
PERCENTAG
E CHAN
GE
AED
REN
TAL
-6%
-5%
-4%
-3%
-2%
-1%
0%
0
50,000
100,000
150,000
200,000
250,000
300,000
350,000
Al Ghadeer Al Reef Al RahaGardens
Khalifa City Al ReemIsland
Al Khalidiya MBZ
3BR 4BR 5BR QoQ Change
PERCENTAG
E CHAN
GE
AED
REN
TAL
Figures in AED ‘000 p.aSource: Propertyfinder and Chestertons
The Observer - Abu Dhabi Residential Q1 2019 6 The Observer - Abu Dhabi Residential Q1 2019 7
Apartments − Residential Market Rent and Quarterly Change
Villas − Residential Market Rent and Quarterly Change
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Disclaimer:All articles and data presented herein is intended for information purposes and has been compiled from sources deemed reliable including the Valu-ations and Research Department of Chestertons, sales and leasing staff, published data, and secondary sources. Though information is believed to be correct, materials presented is subject to errors, omissions, changes, or withdrawal without notice.
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