Abu Dhabi set to see further rent drops in H2

Al Bandar remains one of the most expensive locations - a two-bedroom apartment will cost Dh193,000 per annum, seeing a decrease of just Dh2,000 compared with Q1.

Despite six months of a relatively flat performance, investors in Abu Dhabi are still being rewarded with an average five per cent gross yield across the city, topping out at 8.8 per cent in some areas, according to Chestertons Mena, a property agency.

"Although the market has flattened further in Q2 and witnessed declines as sales and rents dip further, rental yields are still rewarding investors and proving that the capital is still the place to be. Apartments in Al Reef Downtown, Al Ghadeer and Al Muneera notched yields of 8.8 per cent, 7.7 per cent and 7.5 per cent respectively," said Declan McNaughton, managing director UAE, Chestertons Mena.

Apartments saw a two per cent decrease in rents during Q2 compared to an increase in Q1, with average lower range annual leasing rates for studio and one-bedroom apartments commanding Dh40,000 and Dh52,000 respectively.

"On average, the residential rental market has dropped by two per cent, with the luxury end of the segment bearing downward pressure due to a reduction in spending, compounded by cuts to government spending due to lower oil prices. The remainder of the year will see marginal declines, however solid yields will still prove popular with investors," added McNaughton.

An average two-bedroom apartment in Al Reef Downtown rents for Dh108,000 annually, a reduction of Dh2,000 compared to Q1 2016, while a similar-sized property on Al Reem Island will cost Dh140,000 per annum.

Al Bandar remains one of the most expensive locations - a two-bedroom apartment will cost Dh193,000 per annum, seeing a decrease of just Dh2,000 compared with Q1.

The villa rental market in Q2 witnessed decreases across the board. Rents varied from Dh105,000 for an entry-level lower-range three-bedroom villa up to Dh145,000 and Dh175,000 for four- and five-bedroom villas.

The cost of leasing a three-bedroom villa in Al Reef is now Dh148,000, in Khalifa City, it is Dh183,000 and on Saadiyat Island, it is Dh335,000.

In terms of average sales prices, both apartments and villas witnessed a marginal drop of one per cent in Q2. The average sales price per square foot for apartments stood at Dh1,340 in Q2, with villas selling for Dh1,088 per sq ft. Apartment projects that witnessed increases in Q1 were impacted by the lull in spending and recorded minimal price corrections.

Al Zeina dropped to Dh1,495 per square foot from Dh1,520 in Q1; and Al Reef Downtown dipped to Dh925 versus Dh930 per square foot recorded in Q1, with both areas returning to prices witnessed in Q4 2015.

"We've seen a marginal decrease this quarter and once again, the rate of decline variance among communities demonstrated mixed sentiments in terms of sales price. The addition of new units delivered this past quarter and a further 3,500 expected by the year end will result in marginal fluctuations during this period of consolidation," said McNaughton.

Villa prices in Al Reef bucked the trend of decreasing prices and remained unchanged at 1,010 per sq ft while minimal changes were seen in Al Raha Gardens and Khalifa City, dropping to Dh985 and Dh840 respectively. At Saadiyat Island, prices are just shy of Dh1,600, valued at Dh1,580 per sq ft.

- haseeb@khaleejtimes.com