ABU DHABI RESIDENTIAL SNAPSHOT - Analysing market performance, drivers and deterrents | 2018 - Core
←
→
Page content transcription
If your browser does not render page correctly, please read the page content below
ABU DHABI RESIDENTIAL SNAPSHOT
Analysing market performance, drivers and deterrents | 2018
Supply and demand Sales and rental performance Realisation rate analysis Who is buying in Abu Dhabi and where?
1
FOREWORD
ABU DHABI CONTENTS
RESIDENTIAL Supply and demand
Off-plan stock witnesses relatively
SNAPSHOT 2018 steady absorption whilst secondary
stock performance weakens.
Real estate in Abu Dhabi continues to feel downward pressure Sales and rental performance
across most sectors due to the lingering impact of job losses Decelerating pace of drops, however, a
and consolidation activity witnessed during 2016/2017. With clear recovery remains elusive
VAT being introduced across the UAE, a marginal negative
impact has been felt in Abu Dhabi’s retail sector, whereas Realisation rate analysis
other asset classes are yet to register a shift in dynamics. Abu Dhabi’s residential stock’s strong
correlation with crude oil prices.
Prices and rents are softening across the board, however ,
the pace is starting to decelerate. With oil prices witnessing Who is buying in Abu Dhabi and
sustained upward momentum and government spending where?
on the rise, these positive forces are driving up the overall
economic sentiment. Although a clear turnaround is distant,
we expect this deceleration to continue in the mid-term
followed by a very gradual growth in prices and rents.
Nevertheless, other factors such as a steady increase in
supply over the 12-24 months is expected to impact recovery,
although the range of products now on offer is targeting the
mid-market segment, thus marginally enabling absorption.
This publication
This document was published in April 2018. The data used in the charts and tables is the latest available at the time of going to press.
Sources are included for all the charts. We have used a standard set of notes and abbreviations throughout the document.
2 3
ABU DHAB I
RESIDENTIAL SNAPSHOT 2018 2018
Residential supply Abu Dhabi upcoming residential supply distribution: Residential demand Residential rents
2018-2020
Prominent completions over H2 2017 saw steady absorption Most off-plan acquisitions are from investor buyers, who The overhang of downsizing activity across the private and
including Al Hadeel at Al Bandar, Bloom Marina and Hidd Al Others continue to be drawn to lower priced products due to the public domain and the resulting contractions in housing
Saadiyat. Key development launches such as Marina Rise 9% expected high level of yields and easier payment plans. allowances led to further weakening of rents over the last few
Tower and Waters Edge have also witnessed traction in off- Al Maryah Island However, despite rental migration to these new areas, overall quarters. Villa districts continue to underperform due to a shift
Al Reem Island
plan take-up as they offer compact products at lower entry 3%
35% tenant pool growth is expected to be much slower - resulting in occupier preferences led by contracting housing allowances,
points along with lucrative payment plans. Saadiyat Island in yield contraction from the current high levels that many with average rental declines hovering over 17% while apartment
7% investors falsely expect to continue post hand-over. Eventually, communities displayed relative resilience at 7% drops.
this decline in yields will reduce investor demand, in turn pulling
Over 9,200 units are scheduled for completion sales prices further down over the mid-term. Areas further away from the city centre, such as Al Reef Villas
Al Raha Beach
in 2018, although the number of actual 10%
and apartments in Khalifa City A saw the largest declines
deliveries is likely to be notably lower as as tenants preferred to relocate to Abu Dhabi main island to
capitalise on falling rents and reduce the commute to the city.
handover dates typically vary significantly from Net rental absorption
projected completion dates. Over the next 3 Abu Dhabi Island We forecast new supply on Reem and Yas Island to add further
years, almost 60% of upcoming supply will be 11% Yas Island
Over the last few quarters, rental stock is witnessing a downward pressure on rents within these districts. Although
25%
concentrated on the Reem and Yas Island. relatively steady take-up, particularly in areas dominated Saadiyat Island is also expected to see a significant increase
by new stock such as Reem Island and few projects on in residential supply. Rental rates in the area are likely to be
the Abu Dhabi mainland. This may elude the market with resilient due to its growing appeal as a lifestyle destination and a
a perception of positive absorption figures, along with growing art and cultural hub.
Realisation rate analysis a rise in number of overall tenants in the city. However,
upon closer scrutiny, this is just a displacement of a
As the emirate has been strongly dependent on its in 2017, as many developers could not hold their stock any portion of the total tenant pool from outer areas to Average villa rents H1 2017 vs H1 2018
hydrocarbon revenues, the realisation rate of Abu Dhabi’s longer due to cashflow strains, realisation rate surged to over central locations. Districts and developments which were
residential stock has historically had a strong correlation 64%, despite oil prices only showing a marginal recovery. previously inaccessible to tenants, either due to limited 600
with crude oil prices. The trend of rising oil prices witnessed In other words, the supply anomaly witnessed in 2017 was product offerings or because of higher entry points, are
over 2010-2012 translated to a steady realisation rate of more a consequence of a bottleneck building up over the now becoming accessible to a wider occupier base, 500
nearly 45%, peaking at an optimistic 68% in 2013. Similarly, previous two years rather than a conscious attempt to add triggering this shift.
Per annum rent in ‘000 AED
realisation rates plummeted to as low as 21%, mirroring the significant new stock to the contracting market. As the 400
downfall in oil prices witnessed between 2014 and 2016 due market slowly responds to stable oil prices, we expect the With the tenant pool almost staying the same (in some
to cautious behaviour displayed by developers. However, realisation rates to stabilise around 50% in the near term. cases shrinking, such as in the high-income segment), 300
landlords who were not fast to react to the changing
200
Realisation rate vs. Average crude oil prices market scenario are witnessing higher vacancy levels.
In other words, the higher take-up in new and centrally 100
80% 120 located stock is not largely due to new tenant demand
but the result of slower performing districts and 0
uncompromising landlords. Al Reef Golf Al Raha Hydra Saadiyat
70%
Villas Gardens Gardens Village Beach Villas
100
Annaul avergae crude oil prices in USD/barrel
60%
80 Average two bed apartment rents H1 2017 vs H1 2018
50%
Realisation rate
180
40% 60
160
Per annum rent in ‘000 AED
30% 140
40
120
20%
100
20
10% 80
60
0% 0
40
2011 2012 2013 2014 2015 2016 2017 2018*
20
Source: Core Savills Research Realisation rate Annual average crude oil prices Expected realisation rate 0
Al Reef Al Reem Khalifa Al Raha Saadiyat
Realisation rate is the ratio of total units delivered by units announced in a given year. Island City A Beach Island
Source: Core Savills Research H1 2017 H1 2018
4 5
ABU DHAB I
RESIDENTIAL SNAPSHOT 2018 2018
Residential sales
Sales prices also continued to weaken across most The secondary sales market continues to be muted as Who is buying in Abu Dhabi and where?
communities, 8% on average across the city over the past potential buyers remain on the side-lines waiting for the
12 months. Most sales activity is concentrated in the off-plan market to fall further. Existing owners who bought properties The city has been a stronghold for local and GCC buyers, and regional buyers/investors to lock-in at the current low
segment where attractive deals and newer products are to be at the peak are becoming reluctant landlords, looking to particularly from KSA, and they continue to occupy a entry prices. A wide variety of compact as well as better build
found. Prices in various communities such as Al Bandar, Al rent to an already limited tenant pool, rather than selling dominant share - although, undeniably the total pool of products that are now on offer, give traditional investors the
Zeina and Saadiyat appeared to have improved slightly due much below the acquisition prices. This gap in unrealised buyers has shrunk. Despite the downturn and ongoing choice to expand their portfolio. However, because of this
to numerous hand-overs of quality off-plan projects such expectation vs. market reality is causing the secondary sales dampened economic sentiment, many regional buyers long-term horizon, expatriate movement to homeownership
as Al Hadeel and Mamsha al Saadiyat. These hand-overs market to see long transaction timelines and fewer concluded continue having faith in the long-term prospects of the city. remains limited due to the current uncertainty surrounding
achieved steady absorption levels although older units transactions. This faith is fundamentally driven by the fact that Abu Dhabi the employment market and flexibility offered by the ongoing
continued to see sales prices soften. is comfortable with hydrocarbon reserves to fuel its future softened and attractive rental market.
growth. With oil prices recovering steadily throughout 2017
- YTD 2018, and umpteen government announcements, For end-user buyers, a strong preference is seen for prime
Despite downward pressures due to oversupply concerns, the geographical waterfront limitations its diversification impetus further bolsters its economic gated villa communities such as Saadiyat Islands. Given
perception in the regional and global markets. the recent history of this location as a prime residential
of the core islands of Saadiyat, Reem as well as Yas, will potentially make these districts restricted investment zone, it is gradually creating a momentum as
for future growth, curtailing the oversupply spread - unlike the current case in Dubai. Within the region, buyers also perceive Abu Dhabi to be a more HNWI end-users and investors look towards this area
relatively smaller market where decent stock has historically for long term capital preservation and lifestyle amenities.
been in shortage and better products have consistently This sentiment is further reinforced by its surrounding of the
Villa sales H1 2017 vs H1 2018 outperformed the market. Despite downward pressures burgeoning cultural district and superior quality residential
due to oversupply concerns, the geographical waterfront stock. The recent announcement of the Aldar and Emaar
2,000 limitations of the core islands of Saadiyat, Reem as well as partnership in Saadiyat Grove, reinforces the prime nature of
Yas, will potentially make these districts restricted for future this district.
1,800
growth, curtailing the oversupply spread - unlike the current
1,600 case in Dubai. With the pace of new deliveries slowing Reem Island on the other hand, is predominantly an investor
down, supply levels are gradually expected to align with the driven market due to its lower entry prices and relatively
Sales price in AED/sq.ft
1,400
market conditions in the mid-term. Master developers are higher returns on the back of steady tenant demand. As the
1,200 also controlling overall market inventories by building limited island gains traction and liquidity due to the pipeline of supply
1,000 stock and passing on the development risk to private deliveries, coupled with easy accessibility to Abu Dhabi main
players through large plot sales, phasing out development island and upcoming commercial hubs on Maryah Island, the
800
time-lines. Private developments are expected to further area is likely to witness sustained tenant interest. Yas Island,
600 increase product offerings and offer innovative acquisition due to its lifestyle, leisure and retail offerings is attracting both
plans such as rental to ownership. investors and end-users from a mix of GCC and the wider
400
Arab region. However, on the downside, mid to long term
200 Understandably these factors make the Abu Dhabi market a capital and rental appreciation is expected to remain under
0 mid to long-term investment avenue, driving cash-rich local pressure due to this rising level of stock.
Al Reef Villas Al Raha Gardens Ghadeer Villas Golf Gardens Hydra Village Saadiyat Island Saadiyat (sea view)
Apartment sales H1 2017 vs H1 2018
1,600
1,400
1,200
Sales price in AED/sq.ft
1,000
800
600
400
200
0
Al Bandar Al Muneera Al Zeina Al Reef Downtown Marina Square Saadiyat beach Sun and Sky The Gate
residences Towers
Source: Core Savills Research H1 2017 H1 2018
6 7ABU DHAB I
RESIDENTIAL SNAPSHOT 2018 2018
Abu Dhabi market performance
Drivers Deterrents
• Ongoing stability in oil prices • Most of the absorption is displacement of tenant demand rather
• Availability of newer, affordable products than new take-up
and the overall softening rental market • Most buyers are investors instead of end-user occupiers
aiding tenants in housing cost savings transitioning to home-ownership
• Diversification measures and • Pool of end-user occupiers not growing at expected levels,
government stimulants up-ticking market particularly at the pace of increasing a vacancy and new supply
sentiment levels
• The pace of sale and rental price • New lower priced off-plan stock being absorbed relatively well due
decline decelerating. Although a clear to investor expectations of sustained rental demand and higher
turnaround is unlikely, this deceleration yields. However, if tenant demand of these projects is insufficient
is expected to continue in the near term, at handover, this supply surge is expected to exert considerable
although subject to controlled supply downward pressure on rents, leading to faster yield compression
deliveries and eventually pulling sales prices down over the mid-term
8 9CORE - UAE RECENT MARKET LEADING
ASSOCIATE OF SAVILLS RESEARCH PUBLICATIONS
G L O B A L C O M PA R I S O N S URBAN IMPACT OF ABU DHABI GRAND PRIX
Around the world in price and yields | 2018 Spotlight | November 2017
Office market performance Supply and demand dynamics Emerging trends Industrial market snapshot
GLOBAL COMPARISONS – AROUND THE WORLD IN PRICES AND YIELDS WHAT DOES 1 MILLION USD BUY?
1
Global Comparisons Dubai Investment Urban Impact of
Around the world in price Outlook 2018 Abu Dhabi Grand Prix
and yields 2018 November 2017
Over 600 owned
and associate
offices worldwide, D U B A I O F F I C E A N D I N D U S T R I A L U P D AT E RESIDENTIAL SENTIMENT SURVEY
employing more 64 Offices 124 Offices 117 Offices 273 Offices 70 Offices
Core Savills Research | H2 2017 Core Savills Research | 2017 Edition
Supply and demand dynamics Emerging trends Industrial market snapshot
than 35,000 people Americas & UK, Ireland & Europe Middle East & Asia Pacific
er Market Segments Market Outlook
in over 60 countries. Caribbean Channel Islands Africa
As one of the largest UAE property services firms, Core, UAE
Associate of Savills, combines expert local market insight with the
international strength provided by over 700 offices globally.
Dubai Office and Dubai Residential Residential Sentiment
Core’s multi-lingual advisers share an entrepreneurial spirit Industrial Update Market Update Survey
with a commitment to cultivating long-term, collaborative client Prathyusha Gurrapu Q3 2017 Q3 2017 2017 Edition
relationships. Our local roots, commitment, and attention to Head of Research and Advisory
detail are backed by the global standards of Savills’ 150-year-old prathyusha.gurrapu@core-me.com
brand, giving our clients direct access to 30,000 experienced
practitioners, with a deep understanding of specialist real estate
services in over 60 countries.
Our bespoke residential and commercial property advice enables
core-me.com
our clients to make informed real estate decisions both locally D U B A I R E S I D E N T I A L M A R K E T U P D AT E
and abroad, through a single point of contact in any of the 15 Aruba Khalid
Core Savills Research | Q2 2017
Sales and rental market performance
languages spoken by our consultants, in one of our 3 offices, in Assistant Manager -
Downtown Dubai, Jumeirah Lakes Towers and Abu Dhabi. Research and Advisory
aruba.khalid@core-me.com
This report is for general informative purposes only. It may not
be published, reproduced or quoted in part or in whole, nor may
it be used as a basis for any contract, prospectus, agreement
or other document without prior consent. Whilst every effort
has been made to ensure its accuracy, Core, UAE Associate
of Savills, accepts no liability whatsoever for any direct or Abu Dhabi Mid-Year Dubai Residential The Green Issue
consequential loss arising from its use. The content is strictly Andrew Aussama Snapshot Market Update Sustainability and
copyright and reproduction of the whole or part of it in any form is Associate Director - August 2017 Q2 2017 Wellness in Dubai - 2017
prohibited without written permission from Core’s research team. Head of Abu Dhabi Office
© Core Real Estate Brokers. andrew.aussama@core-me.com
10 11Head Office DMCC Office Abu Dhabi Office
Ground Floor, Building 6, 7H, Seventh Floor, Almas Tower, Office No. RU 04, Abu Dhabi National
Emaar Square, Downtown Dubai, Jumeirah Lakes Towers, Exhibition Centre (ADNEC), Al Khaleej Al
Dubai, UAE Dubai, UAE Arabi Street, Abu Dhabi, UAE
Tel: +971 4 388 3339 Tel: +971 4 423 9933 Tel: +971 2 556 7778
Mail:12
info@core-me.com Mail: info@core-me.com Mail: abudhabi@core-me.comYou can also read
