Abu Dhabi’s residential sector continues to experience consolidation, with falling selling prices across the majority of the market during the first quarter, according to a new report.
CBRE’s Q1 2017 Abu Dhabi MarketView report said demand in the transactional market has remained particularly sluggish, with the sector exhibiting signs of further contraction.
It said average sales prices have slipped by 2 percent quarter-on-quarter and by 8 percent year-on-year, reflecting the limited demand for investment.
The report added that a similar situation is occurring in the residential leasing market, with sustained declines in average rentals rates, with a 2 drop drop quarter-on-quarter and an 8 percent year-on-year drop
However, rents in more affordable off-island locations have remained broadly stable, reflecting the relative undersupply of housing options for the lower income groups in the capital, CBRE said.
CBRE noted that with ongoing erosion of corporate leasing packages, housing allowances and overall take-home salaries, many Abu Dhabi residents are downsizing and relocating to lower cost areas of the city.
Mat Green, head of Research & Consulting UAE, CBRE Middle East, said: “One brighter spot has been the capital’s mid-market focused housing options, which continue to demonstrate a greater resilience to ongoing downward market pressures, against more pronounced declines for premium residences.”
CBRE’s report also showed that demand for smaller, flexible office spaces is likely to grow as firms look for ways to cut down occupational costs and keep capital expenditures to a minimum.
Abu Dhabi’s wider office market continues to suffer from weakening demand fundamentals due to soft economic conditions and ongoing government cost cutting measures, which have negatively impacted demand in the commercial sector.
Consequently, leasing activities during Q1 2017 have remained relatively subdued, adding further pressure to market rental levels, CBRE said.
Total office stock has increased by around 2 percent year-on-year, reaching 3.9 million sq m by the end of the first quarter, its report noted, adding that an analysis of the future development pipeline reveals a sizable 1.4 million sq m of new office accommodation, which could enter the market over the next four years.