Abu Dhabi: The government is calling upon private firms and government agencies that are planning to establish operations in Abu Dhabi to encourage their staff to stay in the capital, according to the latest report published by Jones Lang Lasalle.
The move is aimed at reducing the level of commuting from Dubai and also supporting the local residential market which saw the delivery of 5,600 units last year. “The residential sector in Abu Dhabi will witness an increase in sales activity this year as more ready properties come on to the market,” says Craig Plump, head of research, Jones Lang Lasalle Mena.
Demand versus supply
In Q4 2010, no major delivery took place in the market and actual completions this year will be lower than scheduled due to further delays, according to the report.
There is a mismatch between supply and demand in different layers of the market. While the affordable and middle market segments are challenged by undersupply, the upper segments of the market are oversupplied. About 23,000 residential units are set to be delivered this year. “Since there is going to be more completed stock available in investment zones, investors will show a lot more interest in the market. We also expect a lot of end-users to invest in the capital’s residential sector this year.”
With major banks coming up with more flexible payment schemes recently, the market is bound to witness augmented activity this year, according to the report.
Prices seemed to stabilise towards the end of last year. “The previous boom in residential sales and prices, driven by speculative investment rather than end-user demand, came to an abrupt halt at the end of 2008, with prices having reached over Dh3,000 per square feet in some developments.
“The market has witnessed a major fall in prices in the last two years. Average prices have remained relatively stable in Q4 2010 at around Dh1,110 per ft² for completed and almost completed projects,” says Craig, adding that he expects the prices to fall this year with more supply coming online.
Abu Dhabi rents are still higher compared to Dubai and this trend is attributed to more demand and limited supply. However, rents registered a dip in recent times. “Recent supply and increasing vacancies in existing good quality buildings have resulted in a year-on-year decrease of between 14 per cent and 18 per cent in average rentals,” says Craig.
Rentals continued to decline in Q4 2010 with the average rent for a two-bedroom apartment going down a further 3 per cent to Dh145,000 per annum. The report states that MBZ and Khalifa City A witnessed the maximum dip in rents last year.
While lower segment shared villas have seen a major adjustment in rentals, they remain pricey compared to Dubai and further falls are expected in 2011, the JLL report states.
The rent for a two-bedroom apartment in Abu Dhabi is Dh145,000 per annum.
From Dh3,000 per square feet in 2008, residential prices have come down to Dh1,100 per square feet in Q4 2010.