Abu Dhabi Real Estate Market Outlook for 2014/2015 - Asteco
Double digit sales growth for Abu Dhabi real estate market for 2014, with stable outlook for 2015.
- Villa sales prices rise by 16%, apartments up 15%
- Rental rates increase by 10%, and 9% for apartments, villas respectively
Investors in Abu Dhabi’s real estate sector can expect sustained rental growth and relatively stable capital values in 2015, on the back of a strong performance in 2014, according to the latest Abu Dhabi real estate report from Middle East’s largest independent full service real estate company, Asteco.
In its Abu Dhabi Property Review: 2014 Highlights & 2015 Outlook, Asteco, noted that Abu Dhabi market had strengthened over the last two years and is set to continue in 2015 with continued rental growth across all sectors, in an encouraging investment climate.
Average sales rates for apartments and villas increased by 15% and 16% respectively in 2014 with a strong performance in H1, followed by a stable second half of the year. The volume of transactions also declined in H2 due to the shortage of quality stock for sale in the secondary market. The high sales volumes experienced at the newly launched projects in Ansam, Al Hadeel and Mamsha Al Saadiyat, proved that pent-up demand for quality products exists.
“Popular master-planned developments for sale included Saadiyat Island and Al Raha Beach while Reem Island proved to be an attractive area providing more mid-market units. We expect apartment sales prices to remain stable this year as the market becomes more competitive due to the imminent handover of new projects,” said Jerry Oates, General Manager, Asteco Abu Dhabi.
Full year-on-year comparisons (2008-2014) highlight continuous apartment sales price growth since 2012, up on average by 48% for all areas combined but still 26% lower than 2008 market peak.
Sales prices in Al Muneera at Al Raha Beach now stand at AED 1,425 per square foot on average, up 21% compared with last year, whereas rates at Reef Downtown also climbed 21% to an average of AED 1,000 per square foot. Marina Square saw a 17% increase to an average of AED 1,375 per square foot.
Villa sales prices also witnessed strong growth from their lowest level in 2012, growing 47% on average (for Al Raha Beach, Golf Gardens and Al Reef Villas during the period, with increases of 19% during the last year alone. Rates are however still 11% lower than at their Q4 2008 peak.
According to the report, the villa sales market will remain relatively flat as there will be limited prime and high-end product available for sale in the primary and secondary markets in 2015.
Despite continuous increases of 20% since their low point in 2012, rental rates for both apartments and villas are still considerably more affordable than in 2008 by over 40%, indicating potential for further growth.
Apartment rental rates were up by 10% year-on-year (2013-2014) while villas rentals rose by 9%. A prime two-bedroom apartment currently rents for AED 175-180,000 per annum with high-end units achieving AED 140-175,000 (compared with the peak 2008 figure of AED 280,000) and mid to low-end units recording an affordable AED 90-120,000 (down from highs of AED 225,000 in 2008).
Villa rental rates are expected to increase during 2015 due to a shortage in quality villa units with occupancy rates expected to remain high.
An average four-bedroom villa could be leased for AED 239,000 per annum in Q4 2014, whereas the average in 2011 was AED 203,000 and AED 433,000 respectively in 2008.
The biggest increases in rental rates in 2014 were on Saadiyat Island and Marina Square on Reem Island where recent hand-overs of high-end projects achieved high occupancy levels leading to rental increases as landlords capitalised on strong tenant demand. The year was also marked by a positive level of transaction activity as tenants continued their flight to quality.
New mid to high quality developments at still relatively affordable rents are encouraging relocation by tenants to upgraded accommodation with older properties and lower quality projects being placed under increased rental and occupancy pressure. Since 2012 quality and recreational amenities have been a tenant priority across all areas and Asteco expects this to continue in 2015 with occupancy rates in popular developments maintaining their current high levels.
The Abu Dhabi rental market in 2015 is expected to see continuous strong levels of demand. A range of new projects are due for handover in 2015 including an anticipated 13,000 apartments and villas which will come online, will have an impact on the Abu Dhabi real estate market by creating greater competition, particularly in apartment rents.
Asteco expects this to continue in 2015 with occupancy rates in popular developments maintaining their current high levels.
“The Abu Dhabi rental market in 2015 is expected to see continuous strong levels of demand. A range of new projects are due for handover in 2015 including an anticipated 13,000 apartments and villas which will come online, will have an impact on the Abu Dhabi real estate market by creating greater competition, particularly in apartment rents,” said Oates.
Abu Dhabi’s office market was stable in 2014, as landlords of single-owned buildings maintained their asking rates. However, it is anticipated that as new developments such as ADDAX Tower on Reem Island hand over during the year, rates for multiple-owned office space in the Investment Areas could come under pressure as individual landlords compete to secure tenants.
Since 2013, the Abu Dhabi real estate market has continued to strengthen, a trend Asteco predicts to continue throughout 2015.
General Manager, Asteco Abu Dhabi