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Abu Dhabi real estate prices stable despite oil slump

Xinhua, April 13, 2016 Adjust font size:

The residential rentals market in Abu Dhabi, the capital of the United Arab Emirates (UAE), remained stable in the first quarter of 2016, whilst demand for smaller office space and property market fragmentation continued, according to real estate research firms CBRE and JLL on Tuesday.

According to CBRE's report, the residential sales market remained stable from January to March with low purchase demand.

This resulted in low rentals of higher priced residential apartments, while slightly less expensive property registered modest rental increases, leading to a stable residential market in the first quarter (Q1).

Property research provider JLL said that "only 719 residential units were delivered during Q1, with prime rentals remaining stable with an average of 44,414 U.S. dollars for a two bedroom apartment," said Craig Plumb, head of research in the Middle East and Africa at JLL.

Rental rates along the Persian Gulf coast remained high during ample demand for seaview apartments and villas.

As for office rentals, considering the declining global oil prices, commercial retail space landlords exhibited "greater willingness to negotiate with tenants, including rental discounts and rent-free periods," said CBRE.

Property research firm JLL said that due to government spending cuts throughout the oil price plunge, the office market has been affected the most.

However, rentals for "grade A" premium offices remained stable due to the segment's limited supply. JLL expects a sharp decrease in office supply by 2017 and a market recovery by 2018.

Abu Dhabi has a population of 2.65 million and is a major oil supplier.

Abu Dhabi witnessed commercial and residential property rentals rise sharply between 2010 and 2014 when oil prices surged to 110 dollars per barrel in June 2014. That was after the government scrapped the annual rental cap which stood at a maximum increase of five percent in November 2013, leaving price fluctuations to market forces according to supply and demand.

With oil prices currently down to 40 dollars per barrel, Abu Dhabi's real estate market relaxed in mid-2015.

As for oil prices, according to CBRE, they are not expected to increase significantly this year, however the size of the non-oil market is expected to increase significantly.

In 2015, Abu Dhabi's non-oil foreign trade rose 11 percent year-on-year up to 46.1 billion dollars.

The UAE's Minister of Economy, Sultan Al-Mansouri, said in September 2015, that the government plans to reduce the oil sector's share from its current 29 percent of the country's gross domestic product (GDP) to 19 percent within the coming 10 years. Endit