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Affordable housing thrives in Abu Dhabi

Cost cutting and downsizing in the Abu Dhabi oil and government sectors have resulted in economic uncertainty, job cuts and a drop in employment allowance. This has hit rents in the capital in Q3, according to property agency Chestertons Mena.
Rents of apartments and villas in Abu Dhabi declined by up to three per cent in Q3, said Chestertons. This is consistent with a report released on Sunday by CBRE which cited a two per cent drop in Abu Dhabi housing rents in Q3.
With residents opting for cheaper options, affordable communities such as Al Reef, Al Ghadeer and Khalifa City are seeing strong demand among tenants.
"Due to the continuing instability in the job market, demand has weakened in the last few months, with major demand arising from the middle- and low-income groups focusing largely on the affordable housing segments of the emirate. Further drops in rents are expected," said Robin Teh, UAE country manager and director of valuations and advisory UAE at Chestertons Mena. Al Bandar is one of the most expensive areas to rent in Abu Dhabi at Dh185,000 for a two-bedroom apartment (Dh8,000 less compared to Q2 2016). At the opposite end of the spectrum, a two-bedroom apartment in Al Ghadeer commands a rent of Dh72,000, down Dh3,000 from Q2.
Rents for villas witnessed a drop of three per cent in Q3. Three-bedroom villas in Al Reef, Al Raha Gardens and Khalifa City declined by three per cent while similar units in Saadiyat Island declined by one per cent. Five-bedroom villas experienced the highest rent drops reaching up to five per cent in both Al Reef and Al Raha Gadens. There was a marginal decline of one per cent in overall residential sales prices, with areas such as Al Ghadeer and Al Reef showing no signs of price depreciation.
Meanwhile, Abu Dhabi still offers gross rental yields reaching as high as 8.5 per cent for apartments and seven per cent for villas.
Teh said: "The capital's position as a safe haven for investors has been consistent in recent years, offering returns of 5.5 per cent and above. Al Ghadeer and Al Reef Downtown remain the most attractive locations for investors with yields between eight per cent and nine per cent. Villas in Al Reef and Al Raha Gardens provide the highest yields between six per cent and seven per cent."
Approximately 1,000 units were delivered in Abu Dhabi during Q3 and a further 3,000 units are scheduled to enter the market by the end of 2016.
However, Teh cautioned: "There is a slowdown in the completion rate of housing supply compared to 2015 due to the current market conditions forcing developers to delay completion dates."
- deepthi@khaleejtimes.com