Average rental rates in Abu Dhabi for apartments and villas fell by 7 per cent and 5 per cent, respectively, during 2016 and are expected to soften further in 2017, according to the latest Abu Dhabi Real Estate Report from leading consultancy, Asteco.

The decline will be exacerbated by new supply to the market. Approximately 1,400 residential units were handed over during 2016, and around 4,000 units – including 2,700 apartments and 1,360 villas – are expected to be handed over this year. 

“Although delays cannot be ruled out, this will definitely put pressure on rental rates for existing stock,” said John Stevens, managing director of Asteco.

The continued macroeconomic uncertainty will also negatively affect rents as tenants search for more affordable rates.

“Residential units that were previously able to maintain rental levels due to the reluctance of existing tenants to move, are now more likely to be affected as there will be more residents in search of the best value-for-money. High profile corporate mergers in the pipeline are expected to lead to increased job uncertainty and could affect employee benefit packages, including housing allowances over the next few years, raising the potential for softening demand and, therefore, a decline in the market rates,” added Stevens.

Average apartment rents fell by 7 per cent over 2016, while premium and high-end apartments declined by 6 per cent and 9 per cent, respectively, year-on-year.

Similar to apartments, villa rents declined by 5 per cent on an average in 2016, with the greatest decrease witnessed in the Al Raha Beach area. “Mature villas, which previously recorded high rental rates, have been affected the most, resulting in an increase in vacancies in some communities,” said Stevens.

Average rents for villas on Saadiyat Island remained relatively stable over the year, mainly due to a large percentage of owner-occupied properties.

Apartment sales prices, meanwhile, declined by 4 per cent on an average in 2016, with properties in Marina Square and The Gate, both experiencing average drops of AED125 per square feet.

“The anticipated delivery of new residential projects is expected to increase investment opportunities, which, in turn, will have a positive effect on transaction volumes. Off-plan projects offering attractive sales rates and payment plans will continue to achieve good demand levels,” said Stevens.

Office rental rates declined on an average by 7 per cent year-on-year, with a notable slowdown in office take-up and upgrades, particularly for larger space requirements. As a result, landlords countered by offering smaller units, lower rental rates and more flexible payment plans.

“Demand for large offices will remain subdued and landlords are expected to continue to subdivide space in order to entice new takers,” noted Stevens.

Source :Times Of Oman