(MENAFN - Khaleej Times) Off-plan sales are driving the Abu Dhabi housing market as the emirate continues to feel the pinch of reduced government spending and sluggish economic growth, according to Chestertons Mena.
In Q4 2017, off-plan sales activity remained high as developers rolled out a number of incentives to attract buyers. However, the secondary market witnessed a 2 per cent decline in apartment sales prices and 1 per cent decline in villa sales prices. GCC and Arab nationals dominated both markets.
Ivana Gazivoda Vucinic, head of consulting and research at Chestertons Mena, said: "Throughout 2017, we saw the effects of a number of economic factors, including low oil prices, reduced government spending, increased stock in the secondary market, a rising cost of living and redundancies."
Sales prices, on average, decreased by 2 per cent for apartments during Q4 2017, with some markets experiencing a more pronounced decline, such as Reem Island (5 per cent).
Conversely, Saadiyat Island registered the highest increase in apartment sales prices for the second consecutive quarter, at 5 per cent, fuelled in part by the inauguration of the Louvre Abu Dhabi. On average, prices increased from Dh1,362 per sqft to Dh1,430 per sqft in Saadiyat Island, compared to Reem Island which declined from Dh1,242 per sqft to Dh1,184 per sqft.
Average villa sales prices fell by 1 per cent in Q4, with the Al Raha Beach area falling more than 4 per cent from Dh1,348 per sqft to Dh1,282 per sqft; while Khalifa City, in contrast, registered an increase of almost 6 per cent, with prices up from Dh852 per sqft to Dh895 per sqft.
There was an overall decline in rents of 2 per cent and 1 per cent for apartments and villas respectively.
Vucinic added: "Shrinking company housing allowances and excess rental supply exerted downward pressure on rents. Vacancies in some locations, such Al Raha Beach, surged over the quarter as residents downsized their accommodation or moved to more affordable communities."
Downsizing did, however, bring some positive news for investors, as rents for one-bedroom apartments in Al Khalidiya rose by 7 per cent bucking the wider market trend.
In the villa market, Al Reef and Reem Island emerged as preferred locations. For example, a three-bedroom villa in Al Reef could be rented for Dh120,000 pa and on preferential leasing terms.
Saadiyat Island was the best performing area in the apartment segment and Khalifa City in the villa segment. Mohammed Bin Zayed City registered the highest increase in villa rents at almost 2 per cent.
Vucinic added: "There is a likelihood of positive economic sentiment emerging from Adnoc's recent announcement to invest $109 billion in growth strategies. This plan could be the turning point for Abu Dhabi's real estate sector as it could generate new jobs and therefore renewed demand for residential property."
The supply of new apartment and villa units peaked at around 1,500 and 250 respectively. In addition, announcements were made about Al Riyadh City, reserved solely for UAE nationals and the 18-hectare waterfront development, Pixel Towers, which will contribute 480 residential units, expected to come to the market in 2018.
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