Supply of new residential property units in Abu Dhabi is expected to see a big spike in Abu Dhabi this year, keeping prices and rentals also under pressure though a few established residential districts witnessed green shoots of recovery in the last quarter of 2020, say analysts.
Similar to Dubai, tenants in Abu Dhabi are also looking to move away from apartment living as they are hesitant to share common areas with other residents.
“With many occupiers continuing with hybrid workplace strategies, requirements for larger, more open residential space may continue over the first half of 2021,” said Prathyusha Gurrapu Head of Research and Advisory at Cushman & Wakefield Core.
Over 4,500 units were delivered in Abu Dhabi over 2020 with most handovers located in Al Raha Beach, Al Reem Island and Yas Island, the real estate consultancy said.
“The Abu Dhabi market historically has had relatively lower levels of supply handovers each year, however, 2021 is expected to witness a spike with over 7,000 units slated to be handed over. A significant portion of the new supply projected for 2021 is expected in Al Reem Island and Al Raha Beach which are witnessing substantial development activity followed by Yas Island,” said Gurrapu.
While the number of actual handovers may be slightly lower, Cushman & Wakefield Core expects existing and future inventory to face further absorption challenges given the current economic climate of subdued demand.
Property consultancy Cavendish Maxwell expects 5,200 apartments and over 900 villas/townhouses will hit the market in the UAE capital in the first quarter of 2021. However, actual materialization could be lower due to project delays.
To undertake continuous growth and development in the real estate sector and ensure the completion of projects, Abu Dhabi-based holding company ADQ and Aldar Properties have entered into an agreement under which Aldar will take over the management of government capital projects valued at Dh30 billion. Projects include the developments of Riyadh City and Baniyas North along with other projects in Al Ain and Al Dhafra.
Rentals
While average apartment rentals displayed a 5% year-on-year drop, the older stock has witnessed further reductions as tenants relocated to superior buildings at similar or lower rentals, said Gurrapu.
Furthermore, many of the better-built and newer apartment complexes have seen continued softening over the last few years and now have limited room for further reductions.
“Therefore, it is important to note that while rental reductions may show lower year-on-year changes, various landlord incentives such as rent-free periods, a higher number of cheques and other forms of flexibility are supporting headline rentals,” she added.