Renters in Abu Dhabi are continuing to downsize to more affordable apartments as lower oil prices cast a shadow over the emirate’s economy, according to the property consultancy Asteco.
Julia Knibbs, the company’s UAE associate director of research and consultancy, said that renters are not only seeking moves to more affordable areas, but also to more affordable units within existing communities.
“If you take some of the prime developments on the Corniche, the units that have the highest vacancies would be the special units like the big, three-bedroom, four-bedroom and the extra large two bedrooms,” she said. “These are seeing less demand. It’s not that people are leaving the country, but they are a bit more budget-conscious.”
Asteco’s new first-quarter property report for Abu Dhabi shows that rents across the city fell by 2 per cent quarter-on-quarter, with the most pronounced declines occurring on Reem Island as more new stock came on to the market.
Apartment rents in Shams Abu Dhabi dropped by 6 per cent quarter-on-quarter, ranging from Dh95,000 to Dh120,000 for a one-bed unit, or Dh130,000 to Dh170,000 per year for a two-bed. Rents also fell by 5 per cent in the Khalidiya/Al Bateen area and 3 per cent on the Corniche. There was virtually no decline in rents at the lower end of the market. Villa rents remained stable, with units at the higher end of the market increasing slightly owing to a lack of quality stock.
Ms Knibbs said that the market for selling homes remained subdued.
“Very few transactions are happening at the moment,” she said. “People are still waiting to see what will happen. People don’t want to take the step of buying right now, but there are also not many sellers.”
The most marked decline in asking prices during the quarter was again at Reem Island. Prices fell by 6 per cent at The Gate and Marina Square, and by 5 per cent at Sun & Sky Towers.
Ms Knibbs said that she did not expect much further deterioration in prices because supply remains limited. Just 1,500 new units were launched during the first three months of the year, and these are not likely to be delivered for another three years.
“The UPC [Urban Planning Council] has a plan for the city and there’s only so much that gets approved. It’s not as deregulated as Dubai, where new projects are launched all of the time without any proper agreement about whether it makes sense or not. There’s more faith, because supply is controlled.”
She also pointed to the recent statement from ratings agency Moody’s, which stated that it expects Abu Dhabi’s government to slow the pace of spending cuts in its 2016 budget to sustain growth.
“If that happens, it’s a very positive thing for Abu Dhabi because there is so much related to market sentiment. If there are no further cuts, maybe that is going to improve confidence, lead to more spending and maybe people being a bit less cautious about buying property.”
Last week, Mathias Angonin, a sovereign analyst at Moody’s said it expected that “in 2016 there will be a lower decrease in spending that the 20 per cent achieved in 2015″.
“We expect Abu Dhabi government’s fiscal consolidation effort to slow because of the need to balance the two objectives of supporting growth and curbing the budget deficit,” he said.
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