But a more sedate build and delivery schedule is the best fit for the times
Dubai: Abu Dhabis developers are not rushing out with new launches … and that’s a good thing these days. Developers are increasingly becoming sensitive to not amplifying the already soft market conditions by bringing in too much new stock, said David Godchaux, CEO of Cushman & Wakefield Core. We do not expect a large number of new launches this year. “Besides, [there are already] a few prominent developers launching limited off-plan stock with researched demand drivers and calibrated product offerings.
In other words, developers are well-advised not try to just copy and paste Aldar’s strategy … at least for now. By and large, Aldar continues to hit its targets with timed launches such as the Reflection, a twin-tower project on Al Reem Island where studios start at Dh580,000, a one-bed for Dh880,000 and a three-bed for Dh1.82 million.
But market sources say that Aldar has the scale to try and mix its off-plan and pricing strategies in what remains an exceptionally difficult market. And then again, it has the Dh30 billion worth of alliance with Emaar to work on.
Apart from Aldar’s Reflection, there has been few other launches, with generally slow response from buyers across the market, said Godchaux.
There are other reasons why developers should refrain from packing in too many launches at the same time. More than 9,200 units have been announced for completion in 2018, but it is anyones guess as to how many will meet that deadline. Cushman & Wakefield Core reckons the tally will not exceed 5,000 units. And that over the next three years, almost 60 per cent of the new supply will be concentrated on Al Reem and Yas islands.
Developers need to be mindful of not exerting further downward pressure by bringing in new supply in these districts, said Godchaux. The demand on Al Reem Island is predominantly rental-driven with many occupiers working on the main island and Al Maryah, apart from on Al Reem itself. These tenants prefer to live in the newer built stock on Al Reem at competitive rental levels. With more supply expected to come to this district over the next two to three years, we are anticipating it to become very tenant-friendly, he said.
If developers are caught in a bind over weak demand and falling asking prices, those investors hoping to sell their units are even worse off. We see secondary market remain muted as owners are not keen on selling at much below their acquisition prices, the Cushman & Wakefield Core official added. At the same time, buyers expect the prices to go down marginally further and are waiting on the sidelines. The expatriate movement to home ownership remains limited due to the current uncertainty surrounding the employment market, combined with the ongoing attractive and flexible rental terms. The off-plan market on the other hand is witnessing relatively better absorption levels with competitively priced products such as the Water’s Edge and Mayan developments setting a new price and quality benchmark in Yas Island.
Abu Dhabi’s residential property market tries to find a balance
With new deliveries slowing, supply levels are gradually expected to align with market conditions in the mid-term,” states a recent market update issued by Cushman & Wakefield Core. “Master-developers are also controlling overall market inventories by building limited stock and passing on the development risk to private players through large plot sales, phasing out development time-lines.
Plus, the geographical limitations of the core islands of Saadiyat, Reem as well as Yas, will potentially make these districts restricted for future growth, curtailing the oversupply spread — unlike the current case in Dubai,” the report adds. “Private developments are expected to further increase product offerings and offer innovative acquisition plans such as rental to ownership.