Tenants living in Abu Dhabi took full advantage of increased real estate market supply by upgrading from their existing accommodation and maximising their housing allowances as better quality became more affordable through market supply and demand dynamics, according to the H1 2012 report from leading UAE property management company Asteco.
“A total of 7,400 apartments and 1,675 villas were added to the city’s rapidly expanding real estate sector in the first half of the year, triggering a wave of internal movement as existing residents sought to upgrade to better quality and value for money accommodation,” said Elaine Jones, CEO, Asteco Property Management.
Major new areas of supply include Marina Square and RahaBeach, with a combined 3,638 new homes and a number of landmark developments such as RihanHeights also coming on stream. The flight to quality has led to clear segmentation, with older areas and buildings that previously commanded high rental rates and occupancies – such as the Tourist Club, Khalifa City A&B and Mussafah - falling out of favour, with rates dropping between 3% and 14% since Q1.
Demand for premium quality developments with mixed-use facilities also grew substantially, with a high level of leasing activity for top tier product including EtihadTowers, topping out at AED 150,000 for a one-bedroom apartment and St. Regis Residences achieving AED 261,000 for a three-bedroom unit. Pre-leasing activity for NationTowers was also strong, showing high levels of interest for premium waterfront product. Rates for NationTowers reached up to AED 100,000 for one bedroom and AED 300,000 for a three-bedroom loft unit.
“Tenants are willing to pay for high quality finishes and amenities and this particular trio of developments is representative of the new Abu Dhabi lifestyle, with waterfront living in a mixed-use setting, and the appeal of new community-focused developments,” said Jones.
Asteco expects the leasing market to remain extremely active in the second half of the year with demand being driven by continued internal movement filtering through to all sub-sectors of the residential market and leading to further rental adjustments as an additional 7,000 new apartments and 4,560 villas ready for release in the next six months.
Increased residential sales transactions in H1 2012 were credited primarily to the completion of designated investment area projects and the availability of competitive mortgage interest rates and attractive selling prices.
Apartments in Shams Abu Dhabi, Marina Square and RahaBeach produced the highest volume of transactions, focused on smaller one and two-bedroom units. However most areas such as Shams Abu Dhabi, Al Raha Beach and Marina Square experienced an overall decline of around 4% averaging AED10,600 per square metre.
Meanwhile four-bedroom villas at Al Raha Gardens dipped by 7% to AED3.2 million (Q1 versus Q2) while Al Reef bucked the trend, increasing in value by 2%, fetching AED1.3 to AED2 million for three and five-bedroom units respectively.
“Investors have started to re-enter the market since rental return prospects have started to improve due to price reductions and more affordable mortgage options. But, sales prices are still depressed overall due to the amount of available supply and the number of distressed sellers still in the market. Increased transaction activity will continue in H2 2012 as more projects are handed over,” remarked Jones.
The commercial real estate sector also enjoyed positive levels of transactional activity, again fuelled by internal movement. Asteco reports that as landlords become more competitive, tenants who previously adopted a ‘wait and see’ attitude have increasingly begun to commit. There was also a substantial increase in enquiry levels as the new law requiring companies to operate from purpose-built offices came into effect and demand was led by fitted-out buildings with good parking ratios and competitive pricing.