By Manoj Nair gulfnews.com
Project delays could play out favourably as Abu Dhabi’s property market — and its developer-landlords — hope to slow down the decline in values. Against the projected 22,000 new units to be delivered this year, the market would have to settle for something much lower.
But unlike in Dubai where developers have made wholesale exits from announced projects — or got the Real Estate Regulatory Agency to do so for them — Abu Dhabi’s developers has opted for the middle course.
“Developments have not been cancelled but with the delays, this might prevent a major drop in prices as demand meets supply,” said Ronald Hinchey of Cluttons Middle East.
According to Better Homes data, about 4,000 units will enter the market in the second and third quarters, and another 3,000 could be delivered later this year.
But there is a nice little caveat attached — all of this is subject to these units meeting the Municipality approvals, as well as getting electricity and water connections.
The wider marketplace has now come to accept a three- to six-month delay between a high-rise project getting completed and getting its papers in order as par for the course. In fact, at some newly completed projects, there were drops — though small — in the property values as a consequence of the handover delays.
But the long hoped for rental stability my still prove elusive. “Rents will continue to fall as new supply has still not reached the market,” Hinchey added.
“A two-tier market is developing; those older buildings, which also don’t have facilities, will lose tenants to new locations.”
It was to prevent this very occurrence that Abu Dhabi earlier this year extended the 5 per cent cap on existing tenancy contracts. The flight to quality goes on uninterrupted. “Based on our observation, tenants are still researching new locations and opting to move out once their tenancies expire,” said Loshini Lawrence, operations manager at Better Homes’ Abu Dhabi office.
“There are various factors associated with this decision and — in most cases — is not directly related to the rental cap.
“For reasons such as parking in the city — which has now become limited and restricted with the introduction of Mawaqif — it is no longer acceptable to rent an apartment in the city and park on the street.
“New developments are offering facilities — undercover parking, built-in cupboards and multiple rental payments — for similar or less than the older price ranges.”
Obviously, the newer developments in town have a lot of in-built advantages running in their favour. Developments that were handed over in the last three years are recording occupancy rates of 70 per cent and over, of course dependent on multiple factors such as location, price and product offering.
Having said that, their newness is no guarantee it can halt rental erosion.
As a case in point look no further than to the Al Reem Island master-development.
“Rents are likely to fall as supply increases,” Lawrence added.
Apartment rents fall 8%
Apartment rents in Abu Dhabi were down an average eight per cent in the first quarter of the year, according to the latest data from Asteco.
In the city’s older neighbourhoods, “for the few units which have become available, rents have reduced significantly compared with first quarter of 2010, a trend which is expected to become more pronounced,” the report added.
As for the new precincts such as Al Bandar, Raha Beach, the majority of the units have now been taken up, with only limited numbers of the three- and four-bedroom units available.
The persistently soft rental market continued in the villa space as well, and recorded an 8 per cent fall in the first three months. According to Asteco, it has even reached a point where lower quality units on the mainland have become even more difficult to lease out.
Against that, there has been a noticeable increase in enquiries for quality villas in Khalifa City A, “typically from families looking to relocate from Al Raha Gardens seeking to secure a larger home for the same rental budget”, the report said.
“Consequently, rents for better quality villas have stabilised, particularly those located within the most desirable sectors, near to Eithad Plaza. A similar situation is also witnessed in Mohammad Bin Zayed City, where good quality villas closest to Mazyad Mall are still in demand.” The established villa clusters of Golf Gardens, Mangrove Village, Seashore Villas and Sas Al Nakhl recorded little availability and stable prices during the quarter.