There has always been an imbalance between demand and supply in Abu Dhabi’s residential property market, which inevitably leads to high rents. This had long been the case until 2009 when the trend reversed, demand dropped and the rents declined.
Abu Dhabi is not alone in experiencing this trend; in fact it’s a story familiar in cities around the world following the global economic downturn. However Abu Dhabi properties still remain at a premium in comparison with neighbouring Dubai properties with the average rental cost of a two bedroom apartment being AED 150,000 versus AED 120, 000 in Dubai.
However, after analysis of data, the market seems to be stabilising with only small rent decreases during the first quarter of 2010. This could be attributed to varying factors such as the continued investment in infrastructure projects in Abu Dhabi, new houses for sale and the new lower interest rate (minimum of 5.5%) being offered by Abu Dhabi Finance on mortgages.
The planned infrastructure development in areas such as public transport has a key role to play in the growth of the real estate sector as it will create demand for goods and services. In turn this leads to new jobs and a requirement for further office and residential space. In fact, an additional 2,000 residential units are expected to enter the market over the first six months of 2010.
This quantity could aid the stabilisation of pricing values, although the further supply expected in Q3 and Q4 of 2010 could quash any significant appreciation over the coming year. A cumulative effect of the improved infrastructure and continuing investment in this area should lead to an increase in the region’s population; this will of course help absorb the new units on the market.
Abu Dhabi Finance, a leading mortgage provider in the region, has recently announced the reduction of their interest rates to a minimum of 5.5%. This decrease in the cost of borrowing should lead to uplift in market activity for 2010. Furthermore it boosts confidence as it demonstrates that financial institutions in the region are taking an active role to move the market forward.
With all of the factors considered, all the indicators point to the Abu Dhabi property market stabilising over the course of 2010. Vital to this positive trend is the improved sentiment in the region which can underpin the buoyancy of the market place.
