Average rental rates in Abu Dhabi for apartments and villas fell by 7 percent and 5 percent respectively during 2016 and are expected to soften further in 2017, according to real estate consultancy Asteco.
Its Abu Dhabi Real Estate Report Q4 2016 report said the decline will be exacerbated by new supply to the market this year.
Approximately 1,400 residential units were handed over during 2016, and around 4,000 units – including 2,700 apartments and 1,360 villas – are expected to be handed over during 2017.
“Although delays cannot be ruled out, this will definitely put pressure on rental rates for existing stock,” said John Stevens, managing director, Asteco.
The continued macroeconomic uncertainty will also negatively affect rents as tenants search for more affordable rates, he said.
“Residential units that were previously able to maintain rental levels due to the reluctance of existing tenants to move, are now more likely to be affected as residents in search of the best value-for-money will become more frequent. High profile corporate mergers in the pipeline are expected to lead to increased job uncertainty and could affect employee benefit packages, including housing allowances over the next few years, raising the potential for softening demand and therefore declines in market rates,” added Stevens.
The report noted that average apartment rents fell by 7 percent over 2016, while prime and high-end apartments declined by 6 percent and 9 percent respectively year-on-year.
Similar to apartments, villa rents declined by 5 percent on average in 2016, with the greatest decrease witnessed in the Al Raha Beach area (10 percent).
“Mature villas, which previously recorded high rental rates, have been affected the most, which resulted in an increase in vacancies in some communities,” said Stevens.
Asteco said apartment sales prices decreased by 4 percent on average in 2016 and the same decline was seen in the villas market.
Stevens said: “The anticipated delivery of new residential projects is expected to increase investment opportunities, which in turn will have a positive effect on transaction volumes. Off-plan projects offering attractive sales rates and payment plans will continue to achieve good demand levels.”