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Residential values in freehold areas of Abu Dhabi increased by 1.2% in Q1 2023, pushing the average price to AED964 per square foot (psf).
In contrast, villa values showed signs of slowing after rising for six consecutive months, with annual growth of 1.2%, according to the latest Abu Dhabi Residential Market Review by global property consultancy Knight Frank.
According to the Ministry of Municipalities and Transport, Yas Island will see a staggering AED 4.2 billion in real estate transactions in 2022, followed by Al Reem Island at AED 3.4 billion, Saadiyat Island 3.1 billion dirhams. In 2022, the city’s total turnover will increase by 8.5%, and the number of transactions will increase by more than 27%.
Faisal Durrani, Head of Research Middle East, said: “While residential transaction activity appears to be picking up the pace, average house prices are still around 26% below their peak in 2014. This ‘discount’ has certainly contributed to the increase in transaction activity, but market performance remains fragmented, The headline numbers mask more nuanced trends at the submarket and price range levels.
“Overall, households continue to upgrade where possible using relatively low-priced settings, with demand cascading – households living in smaller apartments upgrading to larger apartments, those living in smaller cottages Households are doing the same.The trend is most pronounced in locations such as Al Reef Villas, where prices have risen by 16.8% since January 2020, driven in large part by those upgrading from apartments to villas . Al Reef Villas remains one of the most affordable freehold villa communities in Abu Dhabi”.
“While villas seem to be the favourites, prices are slowing and are currently up 1.2 per cent year-on-year. This yo-yo-like behavior in house prices suggests that a price ceiling may have been reached, beyond which buyers are in danger. Unwilling to promise.”
The price stability in the freehold areas of Abu Dhabi is mainly due to the limited number of new homes currently under construction. Knight Frank estimates that 29,000 homes will be completed by the end of 2025, with villas accounting for 58 per cent. However, the pace of new project launches is picking up, with 15 new residential projects launching in the first quarter of 2023 alone. Currently, 5,600 homes have been announced but construction has yet to start.
Stephen Flanagan – Partner, Head of Valuations and Consulting, MENA, commented: “We have observed a significant uptick in new project starts. With the city’s strong economic growth driving job creation, we expect demand for rental properties to increase. It will improve, especially in the villa market. Like the sales market, tenants are seizing opportunities to upgrade their accommodation where possible, which has resulted in stronger villa rental rates.”
The report also highlights the rise in villa rents, which have returned to pre-COVID levels and are now 3.6% higher than the January 2020 figure. Notably, Saadiyat Island (Dh84 psf) and Raha Beach (Dh69 psf) experienced the highest rental growth since the onset of the pandemic.
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