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UAE stimulates real estate market under downtrend pressure

Xinhua, February 10, 2016 Adjust font size:

United Arab Emirates (UAE) real estate service provider Asteco said Wednesday apartment and villa selling prices in the capital continue to rise.

While Dubai's real estate market lost value last year, apartment rental rates and sales prices increased four percent in 2015, while villa rentals rose two percent year-on-year.

However, villa selling prices in Abu Dhabi remained constant in 2015.

Asteco said in its latest UAE Real Estate Report, with its in-depth focus on Abu Dhabi, "the continued low oil prices exert an ongoing downward pressure on the market despite limited growth."

The UAE contains around eight percent of the world's known oil reserves whereas 90 percent of the "black gold" is located in Abu Dhabi.

According to the International Monetary Fund (IMF), oil prices are currently trading at around 30 U.S. dollars per barrel (159 liter), down from 110 dollars in mid-2014, leading to an estimated fiscal deficit of 2.3 percent in 2015, the first since the 2009 global financial crisis.

The IMF anticipates the UAE's fiscal deficit to stretch to over seven percent in 2016.

In contrast to the buoyant Abu Dhabi market, real estate prices in Dubai dropped 18 percent last year.

However, following positive market performance in 2015, which saw apartment rental rates increase on average by five percent, Asteco said it expects a "noticeable slowdown" in the coming 12 months, compounded by reduced government spending and stagnant salary levels.

Expatriates constitute around 75 percent of the capital's population and are major demand drivers for residential property, said Asteco's Abu Dhabi General Manager Jerry Oates.

He added "Unless a significant shift in labour concerns occurs, we believe the existing supply and demand dynamic will maintain the market's status-quo in the short to medium term."

A total of 2,000 apartments and 100 villas were delivered last year.

In addition, 850 units in phase one of Reem Island's Hydra Avenue project were completed, along with 160 units at Sea Side Tower, also on Reem Island, and 312 serviced apartments at Saraya's Creek Tower on the Corniche.

At the market's high end, top-of-the-line two-bed apartments on Abu Dhabi Island were renting for an average of 52,000 dollars per year in 2015, up from the previous year's 47,700 dollars.

High-end two-bed apartments in Central Abu Dhabi surged up by 3.44 percent to 41,000 dollars.

At the market's mid and lower end, Reef Downtown increased by four percent to 28,340 dollars and Corniche two-bed apartments by 4.2 percent to 34,000 dollars.

Abu Dhabi will add a further 3,000 residential apartments and 850 villas this year, including the Wave Tower with 229 units and Solaris Towers with 600 units, both on Reem Island, and phase one of Hidd Al Saadiyat, with 488 villas.

"New Launch sales, which decelerated in 2015, are expected to rise once buildings approach the handover stage. However, we anticipate this will be a 2017 scenario," remarked Asteco's Oates. Enditem