Abu Dhabi apartment prices still 26% below peak despite 2014 rise

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 a new report by Asteco.

Its report said the 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.

Asteco said average sales rates for apartments and villas increased by 15 percent and 16 percent respectively in 2014 with a strong performance in the first half of the year, 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 report said.

“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 percent for all areas combined but still 26 percent lower than 2008 market peak.

Villa sales prices also witnessed strong growth from their lowest level in 2012, growing 47 percent on average but rates are however still 11 percent 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.

 Asteco said rental rates for both apartments and villas are still considerably more affordable than in 2008 by over 40 percent, indicating potential for further growth.

Apartment rental rates were up by 10 percent year-on-year (2013-2014) while villas rentals rose by 9 percent, Asteco added.

Villa rental rates are expected to increase during 2015 due to a shortage in quality villa units with occupancy rates expected to remain high.

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.

Oates added: “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.”

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