Rents and house prices in Abu Dhabi continue to fall as the low price of oil dampens demand in the capital.
According to property broker Cavendish Maxwell, apartment rents in Abu Dhabi’s five key investment areas all fell by between 0.8 and 2.5 per cent in the 12 weeks to the end of September.
At Al Reef Downtown, one of Abu Dhabi’s most affordable investment areas, rents experienced some of the biggest declines over the quarter, with average rents down 2.5 per cent, while there were similar declines in Aldar’s prime Al Raha Beach location.
Villa rents also fell rapidly during the quarter, Cavendish Maxwell reported, with average rents in Saadiyat Beach villas down by 2.7 per cent during the quarter, and in Raha Gardens and Al Reef 2.3 per cent lower.
Apartment prices in the capital also fell during the period, albeit by smaller amounts.
Cavendish Maxwell reported that apartment prices in Abu Dhabi’s more affordable investment locations Al Ghadeer and Al Reef Downtown fell 0.6 per cent during the period, while in Saadiyat Beach Residences, Al Raha Beach and Al Reem Island they were 0.4 per cent lower, pushing annual price falls down by between 2.7 and 4.3 per cent.
“The decline in rents in the city is likely to be followed by a further decline in prices,” said Jonathan Brown, head of Cavendish Maxwell’s Abu Dhabi office. “With oil prices still low in comparison to where they were a few years ago, government expenditure will remain under pressure.”
Abu Dhabi has been hit hard by the global fall in oil prices, which has prompted a swath of job cuts in the oil and gas and construction sectors in the city, as well putting government budgets under pressure.
In May state-owned oil company Adnoc announced it was planning to cut 5,000 jobs by the end of the year, prompting many private companies to scale back.
Speaking at the Cavendish Maxwell breakfast briefing in Abu Dhabi yesterday, Ben Crompton, managing partner at Crompton Partners Estate Agents, said he expected rents and prices in the city to continue to slump over the coming months.
“Gauging demand is a bit tricky because Statistics Centre Abu Dhabi only publishes population data after a significant time lag,” he said. “After the job losses this year I would be very surprised if the population continued to increase at the same rate this year, but even if population levels remain flat and the amount of new supply added to the market increases by about 2 per cent, then that will continue to put pressure on rents and prices.”
Cyril Lincoln, the head of real estate and asset finance at ADCB, said that there was a case to be made for the Central Bank to relax mortgage caps, which currently restrict the loan-to-value ratio for mortgages to 75 per cent for expatriates and 80 per cent for Emiratis for properties costing less than Dh5 million.
“More regulation from the government is creating a more stable environment,” he said. “But it is a tool the authorities could use to stimulate the market.”
Follow The National’s Business section on Twitter