JLL: Abu Dhabi Real Estate Market Overview Q4 2010
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The road to home finance has been a long one for the Kingdom, but with its highly anticipated mortgage law edging ever closer to ratification, would-be homeowners and financial institutions are gearing up for a new era of opportunity.
With the announcement this year of a US$66.7 billion initiative to address the demand-supply imbalance in the Kingdom’s housing market, social infrastructure spend is topping the Government agenda as it focuses on building affordable homes for the future.
The South-East Asian island has seen a number of distinctive developments come to fruition over the past few years as the country further establishes itself.
While developers have scaled back many projects since the market correction at the end of 2008, the additional supply entering the market is generating an over-supply situation for most asset classes.
Consequently, average rentals and sale prices continued to decline in most sectors during Q4 2010.
The inter-relationship between Abu Dhabi and Dubai continues to negatively impact both markets.
Other than selective relationship lending, liquidity remains tight and many developers continue to experience cash-flow issues.
In Q4 2010, no major new supply entered the office market. Several large-scale projects are expected to be delivered in 2011, which will increase office supply by more than 25%. Quoted rents decreased from the previous quarter with few transactions occurring.
The residential market did not see any major increase to supply in Q4 2010. Whil the market continues to experience an aggregate under-supply based on the number of households relative to units, average rentals have declined 5% to 10% during Q4. the lower to mid-market segments of the market remain significantly under-supplied.
New supply has entered the retail market in Q4 2010 with the full opening of Dalma Mall in Mussafah. The occupancy rates of more than 95% in high quality centers, indicating a shortage of quality space. Rental rates have remained stable over the past year in major malls, but asked rents have decreased significantly for upcoming malls outside Abu Dhabi Island.
Supply still outpaces demand in the hotel market. Abu Dhabi continues to develop its leisure offering, with the opening of Ferrari World on Yas Island in Q4. For the first time in more than 5 years, occupancies dropped below 60% (year to Nov) causing significant declines in Average Daily Rates.
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