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Abu Dhabi: Average apartment sales prices jumped by 9 per cent in the first quarter of 2014, 2 per cent less than the previous quarter, on the back of rents softening in the capital, a report by the region's leading property services firm shows.

In its first quarter 2014 report, Asteco attributed the slowdown in rate of increase to market dynamics and the changing patterns of supply and demand in Abu Dhabi that led to a mixed performance for specific pockets of its property market in Q1 2014.

The average villa sales climbed 6 per cent during Q1 2014, 3 per cent higher than the previous quarter, the report shows.

Rents soften

The good news for renters is that residential rental rates softened further during the period covered, especially at the lower-end of the Abu Dhabi Island quality scale, with little or no increase in some areas.

A slight increase was reported in high-end properties in investment areas, with between 1-3 per cent rise, the report says.

“Rental rates were driven by tenants relocating from Abu Dhabi Island to higher-quality and more modern buildings typically within investment areas. However, prime properties situated on the Corniche and Khalidiya did continue to see high occupancy levels and retained strong premiums,” said Jerry Oates, General Manager, Asteco Abu Dhabi.

The report anticipates that more units in 2014 may soften growth rates further.

“Moving forward, rental rates are likely to witness moderate growth during the course of the year, as although significant supply was initially forecast for handover, unanticipated delays could push deliveries to early 2015 thereby leading to more stability in supply/demand balance over the year,” added Oates.

Robust sales demand

In terms of sales prices, there was robust demand for apartments at Al Raha Beach due to limited availability, with rates now between Dh 1,000 and Dh1,550 per square foot. The Gate Towers at Shams Abu Dhabi have also benefited from increases following their recent handover, which saw prices increase by 19% to Dh1,400 per square foot on average.

Low to mid-end developments, such as Reef Downtown, continued to record price increases above market averages, as buyers searched for more affordable options. Prices at Reef Downtown started from Dh900 per square foot, representing a 21 per cent increase from the Q4 2013.

Villa sales price growth was predominantly driven by a lack of supply for freehold villa developments, especially within the affordable segment. For instance, sales prices for Al Reef Villas grew by 50 per cent over the last 12 months.

On average, a three-bedroom villa now costs around Dh1.95 million compared to Dh1.65 million a year ago.

Elsewhere, 3BR type properties in Raha Gardens, Golf Gardens, and standard Saadiyat Beach Villas, were priced at Dh2.33 million, Dh2.85 million and Dh5.33 million respectively.

Rental rates for prime two-bedroom apartments on Abu Dhabi Island now average at Dh200,000 per annum, whereas similarly sized properties in the investment areas of Al Raha Beach and Saadiyat Island, currently lease for an average of Dh190,000.

At the lower end of the market, two-bedroom apartments on Abu Dhabi Island are renting for an average of Dh80,000 per annum while the same size apartment in the investment area of Reef Downtown will cost Dh95,000 per annum on average.

In terms of villas, a three-bed property on Abu Dhabi Island now costs on average Dh190,000, compared with Al Raha Beach and Saadiyat Island, where the same sized villa will cost Dh260,000 and Dh300,000 per annum respectively.   

New office stock

Abu Dhabi office leasing rates continued to witness low levels of transactional activity in Q1 2014.
However, Grade A office space showed signs of recovery with moderate growth levels last quarter for both shell & core and fitted space.

Office leasing rates increased by 3 per cent and 4 per cent for fitted and shell & core offices, respectively, in recently-completed buildings.

Rental rates for completed older good quality buildings increased by 2 per cent, averaging up to Dh1,020 per square metre per annum.

Rental rates for Grade B office space showed signs of stabilising with no rate fluctuations. Asteco anticipates approximately 600,000 square metres of office stock will be delivered in 2014; however, the vast majority of this stock is owner-occupied and will not be available for lease.