Abu Dhabi’s housing market is showing signs of “fragmentation” as a softening market in higher-priced areas is contrasting with greater demand for more affordable homes, according to CBRE.
The company said in its latest Abu Dhabi Marketview ahead of Cityscape Abu Dhabi, which starts on Tuesday, that affordable residences experienced modest rental growth of about 2 per cent in the first quarter of this year, offsetting a softening of rents in more expensive areas.
“Lease rates in areas such as Corniche and Khalidiya remained high, with prime rentals for one-bedroom and two-bedroom units currently around Dh120,000 and Dh180,000, respectively,” said Matthew Green, the UAE head of research and consulting for CBRE.
He said that there was a “continued shortage of affordable homes in the capital”, meaning that rental levels at the lower end of the market would continue to remain strong as more people seek out cheaper accommodation to mitigate increases in the cost of living.
The market for house sales was largely muted during the quarter, with no major changes in average prices and weak appetite for property purchases.
The lack of demand has been blamed on economic uncertainty as a result of continued lower oil prices, which is also hampering the commercial property market. A slowdown in both the government and hydrocarbon sectors has led a number of firms to announce downsizing, and others have closed offices in the capital.
Demand for smaller offices of less than 500 square metres remains buoyant, and rent for prime space stayed steady at Dh1,900 per square metre per year, with better built and managed buildings holding their value.
Mr Green said that occupiers had “become a little more cautious with their approach to capital expenditures, and even to their overall business approach”, with decision-making periods over office moves often being delayed, despite landlords being more willing to negotiate rent-free periods and discounts.
“Amid a sustained period of market uncertainties and heightened risks, the non-oil sector is set to become an increasingly important component of the overall economy,” said Mr Green. “However, with oil prices anticipated to remain low, we expect the remainder of 2016 to follow similar patterns to the first quarter, with the market characterised by weakening demand and increasing supply.”
Courtesy: The National