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Supply of Residential Units in Abu Dhabi to Rise by 17pc

ABU DHABI - Residential property supply in Abu Dhabi is expected to rise by 17 per cent between now and 2012 and the shortfall in the availability of units is expected to fall from around 45,000 units to approximately 33,000 units during this period, says a 
study report.

“Our research and analysis shows that although there is a definitive supply shortage in the Abu Dhabi Metropolitan area relative to potential demand, prices and occupancy levels will continue to fall,” says the ‘Abu Dhabi State of the Market 2010 Report’ released by real estate advisory group Investment Boutique (IB).

The report said the downward slide in prices and occupancy levels of property units will continue until the issues like overpricing by speculators in the past, super-normal profit expectations from developers, and shortage of mature legislative and regulatory frameworks were addressed.

While rents have declined especially for larger units and low quality or badly located units, it remains substantially higher in Abu Dhabi compared to the rest of the country.

This has resulted in a significant portion of Abu Dhabi’s labour force choosing to live in Dubai, the report noted. Yields on property units remain at high levels, ranging between seven per cent and 10 per cent.

The report said that Abu Dhabi’s population isexpected to grow by one per cent in 2010 and 2.8 per cent in 2011 and 2012. The number of households (local and expatriate) is expected to rise by 6.7 per cent by this period.

A rental and mortgage affordability analysis has shown that there is a downward pressure on rents and sale prices, which will lead to further declines in 2010, IB researchers said.

Annual rents for vacant or newly delivered office property peaked at about Dh425 per square feet during the third quarter of 2008, declining steadily to Dh240 per square feet in the fourth quarter of 2009.

Current office stock in Abu Dhabi is estimated to be around 17 million square feet while the new supply is expected to boost the stock by around 50 per cent between now and 2012. On the other side, the demand for office space is projected to rise by 10 per cent during this period. This is based on the estimates that there were over 200,000 white collar workers in Abu Dhabi City in 2009, and that the number of business licences issued in the emirate has continued to increase at a healthy rate of 8 per cent for 11 months until November 2009, the report said.

“Prior to 2008 there were little changes in the Abu Dhabi commercial office market. Government offices and foreign oil and gas companies made up the lion’s share of office demand fast forward to 2010 and the Abu Dhabi office market is virtually unrecognisable. There has been a culling of villa to office conversions and offices rented by number of rooms or windows rather than on a square feet basis.”

“While the profile of office demand in the city has changed dramatically in the past few years, the underlying quantity and type of supply have not kept pace. This supply-demand imbalance led to a spike in rental values in 2008 and early 2009 in much the same way that Dubai had in 2007 and early 2008’’, 
the report said.

Cyril Lincoln, vice-president of investment banking and head of asset finance and syndications, Abu Dhabi Commercial Bank, John Bullough , CEO ofAldar Properties, Saud Masud, head of research and senior real estate analyst,UBS AG, and Heather Wipperman Amiji, CEOof IB,were among those who participated in the discussions held after the release of the report.

ramavarman@khaleejtimes.com