Average leasing rates for Q1 2011 fell 8% across both apartments and villas
Rental prices in Abu Dhabi continued their downward trajectory in the first three months of 2011, with declining trends continuing from last quarter, according to the latest Q1 2011 report from leading UAE property management company, Asteco.
With a high volume of new housing supply either delivered during the quarter or set for delivery in the coming months, average leasing rates for Q1 2011 fell 8% across both apartments and villas.
According to Elaine Jones, CEO, Asteco Property Management, “On the main island, turnover is slow within the lower quality buildings, where tenants are taking advantage of ‘capped’ low rental agreements. Among those that have become available, rents have reduced significantly and this is a trend we expect to become more pronounced.”
The report finds villa rents have fallen 8% over the quarter, declining further from the 5% decrease of Q4 2010, with falls especially pronounced within lower quality villas.
Apartment rents also continue to decline, with landlords becoming more flexible on price, with declining prices more evident at the lower quality end of the market.
However, interest in good quality large villas is improving, value-for-money being the key driver here, as tenants, particularly families, are looking to up-size. Rents have stabilised, particularly in favoured areas surrounding Etihad Plaza, characterised by small compounds with good facilities.
Villa rental rates at Golf Gardens, located next to the Abu Dhabi Golf Club, remain stable, at AED250,000 upwards for a three-bedroom villa. Additionally, in MBZ City rents for quality villas closest to Mazyad Mall start at AED140,000.
On the sales side, prices for villas have remained relatively stable over the last quarter, with many owners remaining naturally reluctant to sell due to market conditions. Prices in Al Reef declined further, 15%, 6% and 8% for three, four and five-bedroom units respectively.
While demand is apparent, investors are concerned about future rental yield potential. Prices for a four-bedroom house at Al Reef start at AED1.5 million climbing to an entry price of AED2.9 million at Golf Gardens.
In apartment sales, the current trend in Q1 2011 is toward owner-occupiers rather than investors. A wait-and-see approach dominates, as a result of ongoing uncertainty and negative outlooks in rental yields.
“Overall, investors remain cautious as they await stabilisation of rental prices. For those looking at buying homes, delays in handovers combined with mortgage financing difficulties are also hindering transactional volumes. But we expect the imminent new property deliveries and UAE’s improving economic performance will improve the situation,” said Jones.
Due to the continuing supply and demand dynamics, office rental rates have continued to slide, with prices per square metre sliding most in new building stock, down 11% this quarter. Net effective rents on new shell and core offices range from AED900 to AED1,600 per square metre excluding service charge.. A lack of fitted office space is also subduing demand.
Al Ain’s residential apartment and villa rental rates fell by an average of 5% and 1% respectively. A new law stopping apartment subdivisions is also now taking effect, with larger, more suitable stock due to come on the market, which should see tenant uptake improve.
Meanwhile, the office sector in Al Ain remains stable, with little new supply added this quarter. The anticipated price jump in Al Ain office rents, as a result of new laws requiring companies to have purpose-built facilities, has not yet taken noticeable effect.