JLL: Abu Dhabi Real Estate Market Overview Q2 2011
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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 completions were limited in Q2, Abu Dhabi's supply pipeline will continue to generate over-supply for most asset classes.
Average rents and sales prices continued to decline during Q2 2011, with limited sales transactions in all sectors.
Market conditions in Dubai continue to negatively impact Abu Dhabi. Dubai experienced a sharper price / rent decline than Abu Dhabi and is, therefore, currently more competitive for occupiers. However, declining rents and improved quality real estate in the capital will start to draw commuters back and also increase office space requirements.
Few new projects were started in Q2 and many existing projects are now under review, delayed and scaled back. There continues to be significant consolidation within government-backed real estate entities and projects. Liquidity remains tight with many developers continuing to experience cash-flow issues.
In Q2, two major towers entered the office market: Tower One Sowwah Square and Guardian Tower at Danet. Significant new supply is due for delivery in 2011, which will push down average rents, particularly for secondary quality assets, but will also drive occupier relocations improving take-up rates.
In Q2, the residential market saw no significant additions to supply. Average rents for prime two bedroom apartments remained unchanged, while those older and low quality units decreased by 10% to 15% compared to Q1. Abu Dhabi rents remain a premium over Dubai, resulting in the ongoing prevalence of daily commuting.
In the retail market, no major handovers were reported in Q2 with the opening of several centres delayed until H2 2011. Supported by high occupancies, rents in major malls on Abu Dhabi Island remain constant, but rents in both existing and upcoming malls outside Abu Dhabi Island decreased as the market moves in favor of tenants.
Although no new supply entered the hotel market in Q2, a number of major hotels are anticipated for delivery in H2 2011, which will put additional downward pressure on Adrs and hotel occupancy rates. In YTD April 2011, average room rates fell 20% compared to the same period in 2010.
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