Developers in Abu Dhabi seem to have got a grip in balancing residential demand with supply.
Supply and handover of new homes is currently half of what had been forecast, and this looks like being the case fof the next few years until market sees a clear spike in demand.
This compares with the 60 per cent plus “realisation rate” — which measures actual supply compared with forecasts - attained as recently as in 2017, and earlier in 2013.
In a new report n Abu Dhabi real estate sector, the consultancy Cushman & Wakefield Core says that between 2014-16, these realisation rates had dropped as low as 21 per cent. So, the current pace of 50 per cent does represent quite an improvement.
Bottom out
In fact, the report suggests that Abu Dhabi’s property market is quite close to reaching its downward limit. That could mean less opportunities for tenants to demand and get bigger cuts on their rents.
Or for property buyers to seek out higher discounts “Abu Dhabi saw sales and rental prices soften for a fourth consecutive year,” Cushman & Wakefield Core reports.
“However, the pace slowed down in 2019. Whilst a recovery is yet to be seen, we are reaching a pricing floor where developers and landlords, particularly those who are leveraged may not have room to drop prices any further.”
Prices in communities such as Al Raha Beach, Yas and Saadiyat islands saw relative “resilience with lower level of drops,” which means buyers were “displaying a preference for newer and quality build products”, the report notes.
This despite nearly 3,000 new homes being delivered so far this year and another 1,000 likely to make it between now and early 2020. Most of these handovers were at Saadiyat, Yas and on Reem — despite this, values at these locations have managed to hold up.
Aldar this week launched rent-to-own schemes at some of its communities in these locations, which could prove a winner with buyers.
Balance But the key is the balance the market seems to have achieved. According to Prathyusha Gurrapu, Head of Research and Advisory at Cushman & Wakefield Core,“With limited future supply, downward pressure on existing inventory is easing.
The market is more elastic with a wider product range now catering to varied preferences and entry points — making Abu Dhabi increasingly attractive for end-users.”