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UAE Real Estate Market Highlights Q2 2014 by Asteco

The second quarter of this year saw a continuation of the slowdown in Q1 2014 residential sales performance for Dubai with the market witnessing marginal growth, up 6% and 3% respectively for apartments and villas in Q2 2014; but the latest market report from Asteco, the Middle East’s largest full service real estate company, anticipates renewed interest and activity in Q3 2014.

H1 2014 activity was marked by sector stabilisation and consolidation as the market continued to absorb the rapid growth witnessed in 2013. According to the Asteco Dubai Q2 2014 report, interest shifted to peripheral communities such as Jumeirah Village, Dubai Sports City and Dubai Silicon Oasis, as many prospective purchasers remained priced out of the more popular areas of the city such as Downtown Dubai and Dubai Marina.

We recorded positive growth rates of around 10% in Q2 for these areas, but at the same time there was a decline in interest in the previously popular affordable communities of Discovery Gardens and International City, which only registered minimal growth, indicating that they are now topping out price-wise and any further growth will take them out of the affordable bracket.

John Stevens, Managining Director, Asteco

A raft of recent new launches, including Dubai Properties Group projects such as Manazel Al Khor in Culture Village, Rahat Villas at Mudon, and 200 new units at Remraam, have joined a growing list of announcements with Damac also launching its NAIA Hotel and Hotel Apartments, 34 premium Fendi Villas at Akoya Drive, and two hotel apartments at Jumeirah Village.

Stevens also noted that sellers who raised their prices following the Expo 2020 announcement are intent on maintaining their position, which has resulted in a reduction in transaction levels, especially for higher priced properties within established communities.

With rents increasing steadily since 2013, many existing tenants have elected to remain where they are and absorb the rent increase, as indicated by the RERA rental index, rather than start from scratch and incur the cost of moving, agent commissions etc.

John Stevens, Managining Director, Asteco

Abu Dhabi Market

A slowdown in transaction volume and more sustainable levels of rental and capital appreciation defined Abu Dhabi’s residential sector performance according to Asteco’s Q2 2014 real estate report.

On average apartment sales prices increased by 4% quarter-on-quarter, and 29% since Q2 2013, while villa sales prices remained relatively stable over the same period, showing an average increase of just 2%. Average apartment rental rates ran in parallel with villas recording modest Q2 growth rates of up to 8%. 

“Ongoing tenant preference for newer, master planned communities drove demand for apartments in prime developments within investment areas, while affordable villa locations continue to be popular,” Jerry Oates, General Manager, Asteco Abu Dhabi.

“Market sustainability will be further buoyed by Abu Dhabi’s plans to launch its own rental index this year, designed to create a more transparent market for UAE national investors, regulating maximum rental increases”, he added.

The market received a vote of confidence from investors following the successful off-plan sales launch by Aldar, with its Al Hadeel project at Al Raha Beach, selling out in a matter of hours and Ansam on Yas Island selling approximately 300 units out of 540.

Abu Dhabi office leasing figures recorded moderate quarter-on-quarter rental growth of 3% for Grade A fitted commercial space whereas ‘average quality’ Grade B commercial rates remained stable, for both fitted and shell & core. 

On Abu Dhabi Island, Grade A office space achieved net effective rental rates estimated at AED 1,700 per square metre for fully fitted space; while rental rates for upscale Sowwah Square remain unchanged over the last 12 months, as leasing is on hold pending confirmation of free zone status. 

Rental rates for Grade B office space stood at AED 800 per square metre for fitted and AED 700 for shell & core with good quality older stock also renting from AED 700 to AED 1,100 per square metre.

Northern Emirates Market

Demand for affordable housing continued to attract new arrivals to Sharjah and Ajman in Q2 2104. The latest Northern Emirates market report from Asteco highlighted a slowdown in residential rental growth rates as the supply and demand dynamic underwent a geographic shift.

The emirate of Sharjah recorded 3% quarter-on-quarter growth for apartment rentals with year-on-year growth dropping to 31% from 38%, whilst annual rates in the other Northern Emirates of Fujairah, Umm Al Quwain and Ras Al Khaimah remained stable with nominal increases of 2% and 1% respectively.

Bucking the trend, Ajman’s residential real estate sector received a fillip, registering a 7% increase in Q2 2014 and driven by the emirate’s ultra-affordability, with two-bedroom apartments available for between AED 30,000 to AED 45,000 per annum in comparison to up to AED 80,000 in Sharjah.

Ajman is now taking over the mantle as the relocation destination for budget-conscious residents as landlords in Sharjah ask higher than average rental rates, particularly for brand new buildings in popular locations like Al Nahda, Corniche and Al Wahda. However, this eagerness to capitalise on market opportunity is not being matched by transaction volume, confirming that budget issues are still a key driver.

Sharjah in particular has benefited in recent months due to aggressive rental rate increases in neighbouring Dubai, but this quarter saw a degree of stabilisation in Dubai’s more affordable communities, which led to a reduction in the number of residents choosing to relocate.

John Stevens, Managining Director, Asteco