Abu Dhabi getting affordable, so it's a good time to negotiate

Abu Dhabi's declining residential capital values were 19.5 percent lower than the same period in 2017.

The Abu Dhabi real estate review issued by ValuStrat reported that the emirate's residential capital values in the second quarter of 2019 were 13.3 percent lower than last year and 3.3 percent than the previous quarter.

Residential rents softened by another 2 percent over the last three months. Abu Dhabi's declining residential capital values were 19.5 percent lower than the same period in 2017, 13.3 percent lower than last year and 3.3 percent below the previous quarter. The weighted average residential value this quarter was Dh9,795 per sqm (Dh910 per sqft); apartments stood at Dh10,861 per sqm (Dh1,009 per sqft) and villas at Dh7,244 per sqm (Dh673 per sqft).

All 10 locations monitored by the VPI witnessed single-digit quarterly declines in capital values of less than 5 percent on a quarterly basis. Highest quarterly price falls ranging 3.7 percent to 4.3 percent were registered in Hydra Village and Al Reef. On an annual basis, most areas lost an average of 12 percent in capital values, however, two locations were slightly less affected by the negative trend and they were apartments on Saadiyat Island and villas located in Mohamed Bin Zayed City, with capital values for typical units declining 10.2 percent and 6.9 percent, respectively.

The residential rental VPI is a 100-index with a base set for the first quarter of 2016, it monitors five apartment and five villa locations within Abu Dhabi's investment zones and compares similar units within those locations on a quarterly basis. The second-quarter 2019 residential rental VPI in Abu Dhabi stood at 75.5 points, declining 24.6 percent since 2016, softening 2 percent quarterly and 7.9 percent annually. Abu Dhabi's Gross yields averaged 7.5 percent, for apartments at 7.4 percent and villas with 6.7 percent. The average occupancy rate among a sample of 31,073 residential units stood at 79 percent.

"Abu Dhabi city is increasingly becoming more affordable, and with the recently announced freehold law, investing in Abu Dhabi real estate has become more attractive. This is at a time when prices and rents can be further negotiated. Investors can also expect relatively high yields and tenants have the upper hand to upscale their rental property," said Haider Tuaima, head of real estate research at ValuStrat.

As far as residential supply was concerned, expected deliveries for this year has been adjusted upwards to 8,872 units. 16 percent of the estimated supply were completed during the first half of the year. These included Leonardo Residence in Masdar City (175 units), Al Qudra Danet Abu Dhabi (228 units) and a thousand villas completed in West Yas. During the 13th edition of Cityscape Abu Dhabi, Lea at Yas Island was sold out.

Office asking rents in primary commercial districts fell of 9.8 percent quarterly and 17 percent annually. The average citywide asking rent for offices sized between 93 sqm to 186 sqm (1,000 sqft to 2,000 sqft) stood at Dh818 per sqm (Dh76 per sqft).

As at March 2019, Abu Dhabi city has a total stock of 29,400 keys within a mix of 139 different hospitality establishments. The average occupancy rate during the first three months of 2019 achieved a healthy rate of 81 percent, which is an uptick of 0.5 percent from the previous year. The average room rate and revenue per available room displayed strong performance and jumped 16 percent and 16.6 percent year-on-year, respectively, on foot of various growth drivers during January-March 2019.