OBSERVER Abu Dhabi Market Report Q4 / 2019 Services Report Highlights
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OBSERVER Abu Dhabi Market Report Q4 / 2019 Services Report Highlights Economic snapshot Market Outlook Valuations Mortgage and Secured Lending Standard and Poor’s (S&P) has rated Abu Dhabi as stable What does 2020 hold for Abu Dhabi’s real estate Portfolio Valuations reporting that the Emirate is projected to record full-year market? growth of 2% in 2019. Oil activity is key to both short and medium-term growth and S&P estimates the economy Following a sustained period of falling capital values and Advisory and Research will grow by an annual average of 2.5% through to 2022, declining rents, Abu Dhabi’s real estate sector is showing Financial Feasibilities underpinned by higher oil production. This could see GDP signs of positive sentiment. Highest and Best Use Studies growth accelerate to 3% by 2022. Real Estate activities Market Research contributed 4.2% to the Capital’s real GDP in 2018. Over the last 18 months there has been a marked shift, in Conceptual Advisory and Project Positioning Studies line with market demand, for affordability and competitive Sales Prices pricing in the Capital and developers are now looking at Project Redevelopment/Repositioning Advisory the latest trends, such as co-living and co-working models, Investment Strategies – Acquisition and Disposal There were minimal downward price corrections in Q4 as well as offering a range of flexible payment plans to 2019. Average sales prices for apartments were down entice investors. Sales and Leasing 2% from the previous quarter with sales prices for villas registering just a 1% decline. This suggests the market Going forward, we believe it is unlikely there will be the Commercial could have levelled out in some areas. The year-on-year same prolonged period of price decreases as witnessed in Industrial picture shows that sales prices of apartments in Abu the last five years. This is a result of favourable supply and Residential Dhabi fell by 10% on average across 2019 while villa sales demand dynamics as well as the introduction of a number Retail appeared to fare better with figures only dropping by 2%. of radical Government reforms. These reforms include allowing foreign nationals to own freehold property in Rental Rates designated zones, plus the introduction of long-term Property/Facilities Management residency permits and new business licenses, all of which Commercial Rental rates declined a marginal amount in Q4. Average are expected to support future growth in Abu Dhabi’s real Mixed-Use rates were down 1% for apartments and 2% for villas from estate sector. Residential the previous quarter, signalling that perhaps the market is stabilising. The year-on-year picture shows that apartment rents in Abu Dhabi fell by 10% on average across 2019 International Properties while villas rents were down by 6%. London Off-Plan Residential International Homes and Investments International Relocations Residential Market Q4 2019 Snapshot Price Movements Apartments Villas QoQ −2% QoQ −1% YoY −10% YoY −2% Rental Movements Apartments Villas QoQ −1% QoQ −2% YoY −10% YoY −6% The Observer - Abu Dhabi Residential Q4 2019 1 Prices in investment zones held steady in Q4 There were minimal downward price corrections in Q4 2019. The most resilient apartment locations in Q4 were Al Reem Average sales prices for apartments were down 2% from the Island and Saadiyat Island where there were no price previous quarter with sales prices for villas registering just a 1% adjustments and prices held firm at AED 965 per sqft and decline. This suggests the market could have levelled out in AED 1,400 per sqft respectively. some areas. The average year-on-year price decline for apartments The year-on-year picture shows that sales prices of apartments saw a 10% drop from 2018. The most resilient apartment in Abu Dhabi fell by 10% on average across 2019 while villa location was Saadiyat Island with an overall 2% decline in sales were down by 2%. prices from the previous year and the largest price decline was seen in Al Raha Beach with a 14% decrease from 2018. In April last year, the Government made significant inroads into supporting investment into the Capital’s real estate sector Villa Sales Prices: by allowing foreign nationals to own freehold property in Quarter-on-Quarter Movement: –1% designated investment zones; a privilege previously enjoyed Year-on-Year Movement: –2% only by UAE and Gulf Cooperation Council (GCC) nationals. Villa sales prices remained relatively resilient across most Q4 performance supports the theory such initiatives are having districts with little or no price movements from Q3 2019. the desired effect as prices in investment zones, such as Al Reem Island and Saadiyat Island, held steady with little or no price Prices within the established communities of Al Ghadeer and fluctuation. Al Raha Gardens remained stable at AED 695 per sqft and AED 700 per sqft respectively. The majority of Abu Dhabi’s residential inventory is concentrated in the off-plan segment and we predict new releases to continue The largest decline was witnessed in the Al Raha Beach Area witnessing a steady uptake on the back of attractive payment where prices dropped 5% from the previous quarter from plans, while the completed units market is expected to remain AED 1,160 per sqft to AED 1,100 per sqft. challenged by newly delivered and off-plan stock. Other modest price adjustments were witnessed in Al Reef and Apartment Sales Prices: Khalifa City, which only dropped 1% from the previous quarter Quarter-on-Quarter Movement: –2% from AED 620 per sqft to AED 615 per sqft and AED 872 per Year-on-Year Movement: –10% sqft to AED 860 per sqft respectively. The decline in apartment prices in the Capital between Q3 and The average year-on-year price decline for villas was a fall of Q4 was 2%. 2% from 2018. The most resilient villa location was Khalifa City with a 1% decline from the previous year and the largest price Al Reef saw the highest price adjustments, dropping 4% from decline was seen in Al Reef with an 8% decrease from 2018. the previous quarter with average apartment prices declining from AED 797 per sqft in Q3 to AED 765 per sqft in Q4. HOT TOPIC In late November 2019, Aldar Properties launched a new rent-to-own scheme to allow customers to build up equity in their homes over a three-year period. The offer is available at three of its completed developments, namely Ansam, Al Hadeel and Meera communities. Those taking up the offer will be able to exercise the rent-to-own option each year with no rent escalations or fees while doing so. Rent-to-own programmes are not a new concept in the UAE, but have made a resurgence at a time when consumers are wary of buying and the availability of financing for home purchases may be limited. The Observer - Abu Dhabi Residential Q4 2019 2 The Observer - Abu Dhabi Residential Q4 2019 3 Apartments and Villas − Residential Sales Prices and Quarterly Change AED1,400 Halat Al 0% SAADIYAT Bahrani Q-o-Q AED1,400 ISLAND Movement SAADIYAT ISLAND Al Rafiq 0% AED965 AED965 Saadiyat Q-o-Q Ras Ghurab Al Weheil Island Island Island AL REEM AL REEM Al Reem Movement Qassabi ISLAND ISLAND Island Al Aryam Al Jubail Island Ba Al Umm Yifenah Ghaylam Island -2% Island Q-o-Q Dubai Al Futaisi Movement AED1,250 AL RAHA BEACH Zayed Sports AED1,280 City 0% AL RAHA Q-o-Q BEACH AED695 Movement AED1,100 AL GHADEER Al Raha 0% Beach AL RAHA Q-o-Q Samaliyah BEACH AED695 Island Movement AED700 Yas Island AL GHADEER AL RAHA AED1,160 GARDENS -5% AED700 AL RAHA BEACH Q-o-Q AL RAHA Al Raha Movement GARDENS Gardens Al Reef -2% Khalifa City Q-o-Q Al Ghadeer ICAD II Movement Masdar City Abu Dhabi AED797 International AED725 AL REEF AED765 AED740 Airport AL GHADEER AED872 AL REEF AL GHADEER KHALIFA CITY -4% AED620 Q-o-Q AED860 AL REEF Movement KHALIFA -1% CITY Q-o-Q Movement -1% Q-o-Q Movement AED615 AL REEF Figures in AED/Sq Ft Villa Sales Q3 2019 Villa Sales Q4 2019 Apartment Sales Q3 2019 Apartment Sales Q4 2019 QoQ Movement Source: REIDIN & Chestertons The Observer - Abu Dhabi Residential Q4 2019 4 The Observer - Abu Dhabi Residential Q4 2019 5 Rental rates declined a marginal amount in Q4, possibly signalling the market is stabilising Rental rates declined a marginal amount in Q4, with average law. Both of which make it far more attractive and cost-effective which saw the biggest rental movement. A studio apartment The most resilient villa locations in Q4 were Al Reef, Khalifa rates down 1% for apartments and 2% for villas from the for residents to become owner-occupiers rather than tenants. rented for AED 88,000 per annum in Q3 2019, decreasing to City, Al Khalidya and Mohammed Bin Zayed City, all of which previous quarter possibly signalling that the market is stablising. With rental yields across most locations currently between AED 75,000 per annum in Q4 2019, representing a 15% decline. witnessed no rental declines from Q3 2019. In these locations, 6%-8% and interest rates at circa 4%, it’s clear being an owner- rates for a typical four bedroom villa held at AED 132,000 per The year-on-year picture shows that apartment rents in Abu occupier is a highly appealing option. Apartment locations which witnessed no rental adjustments in annum, AED 160,000 per annum, AED 178,000 per annum and Dhabi fell by 10% on average across 2019 while villa rents were Q4 were Al Ghadeer, Al Reem Island, Khalifa City, Mohammed AED 130,000 per annum respectively.