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Cascading demand driving rise in Abu Dhabi residential transactions
Villa prices in more affordable communities gain momentum as home upgrades continue
Skyline of Abu Dhabi. — KT file
In the first quarter of 2023, residential values across Abu Dhabi’s freehold areas grew by 1.2 per cent, pushing the average prices to Dh964 per square foot (psf).
In contrast, villa values showed signs of moderation after rising for six consecutive months, resulting in an annual rate of change of 1.2 per cent, according to the latest Abu Dhabi Residential Market Review by global property consultancy, Knight Frank.
According to the Department for Municipalities and Transport, Yas Island recorded a staggering Dh4.2 billion in property transactions during 2022, followed closely by Al Reem Island at Dh3.4 billion, and Saadiyat Island at Dh3.1 billion. The total value of transactions across the city rose by 8.5 per cent in 2022, and the number of deals saw an increase of more than 27 per cent.
Faisal Durrani, Head of Middle East Research, says, “While residential transactional activity appears to be picking up pace, average home values still trail the 2014 peak by around 26 per cent. This ‘discount’ is undoubtedly contributing to rising deal activity, but the market’s performance remains fragmented, with the headline figures masking more nuanced trends at a submarket and price-band level.
“In general, households are continuing to use the relatively low-price environment to upgrade where possible, with demand cascading upwards – those in smaller apartments upgrading to larger ones and those in smaller villas doing the same. This trend is most noticeable in locations such as Al Reef Villas, where prices have risen by 16.8 per cent since January 2020, fuelled in large part by those upgrading to villa living from apartments. Al Reef Villas remains one of the most affordable freehold villa communities in Abu Dhabi”.
“While villas appear to be a favourite amongst buyers, prices are moderating and currently stand 1.2 per cent up on this time last year. This yo-yo like behaviour of villa prices suggests a price ceiling may have been reached, beyond which buyers are reluctant to commit.”
The stability in prices across Abu Dhabi’s freehold areas is largely due to a limited number of new homes currently under construction. Knight Frank estimates that 29,000 homes are set to be completed by the end of 2025, with villas making up 58 per cent of this number. However, the pace of new project launches is quickening, with 15 new residential projects unveiled in the first quarter of 2023 alone. At present, 5,600 homes have been announced, but construction is yet to commence on these.
Stephen Flanagan - Partner, Head of Valuation and Advisory MENA comments, “We are observing a significant upswing in new project launches. With the city’s strong economic growth driving job creation, we expect an upturn in demand for rental properties, particularly in the villa market. Like the sales market, tenants are seizing the opportunity to upgrade their accommodation wherever possible, which is leading to a strengthening of the villa lease rates.”
The report also highlights a rise in villa rents, which have recovered to pre-COVID levels and currently stand 3.6 per cent above January 2020 figures. Notably, Saadiyat Island (Dh84 psf) and Al Raha Beach (Dh69 psf) have experienced the highest growth in rents since the onset of the pandemic.
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