Abu Dhabi Q2 Report – Residential Sales and Leasing

So Q2 is done and dusted but what did it mean for residential sales and leasing in Abu Dhabi? We take a brief look here.

Overall the trends we saw through the last two quarters have stayed with us, in general a flat sales market but increasing rental rates. This has led to widening yields on property in Abu Dhabi, something we expect both investors and end users to begin to take advantage of in the very near future, particularly on the back of limited future residential supply.

The most interesting question, and it is an article in itself, is will Abu Dhabi follow the pattern is has over the last 10 years and mimic that of Dubai with a 12/18 months lag? Dubai hit its dip at the beginning of this year – will Abu Dhabi start to see a downturn in early 2016? I don’t think so, but the flat sales market may mean that others do …. read on.

Residential Rental Market – Get our free guide to renting in Abu Dhabi here

Demand was strong again in Q2 as it had been in Q4 of 2014 and Q1 this year with 2-3% growth across the quarter (equating to 8-12% for the year). This has been backed by a strong economy, despite the oil shocks, and resulting net immigration into Abu Dhabi to fill new job posts. Significantly the Supreme Petroleum Council has announced that it wants to increase oil production from the 3m barrels per day currently to 3.5m in 2017, which has meant a hiring spree in the extraction part of the oil industry that has more than set off losses in the exploration segment.

Supply remains very limited as a mere 5,000 units are expected to be added this year, couple that with an increasing population and we are likely to see higher rents well into 2016.

Residential Sales Market – Get our free guide to buying in Abu Dhabi here

We have seen residential sale rates remain stable since Q4 of 2014 mostly due to a softening of investor sentiment since the decline in oil prices and the bump that Dubai hit at the same time. Q2 isn’t looking any different as the market remains obdurately flat, but as mentioned above, sales prices are flat but rents are on track for at least 8% growth this year.

With yields ballooning out it can’t be long before investors realise the oil shock isn’t affecting Abu Dhabi and return to the market, but there is still the spectre of Dubai on the horizon. Many pundits are predicting Dubai will decline through 2016 by as much as 20%, so if you believe that the little brother leads the way for Abu Dhabi to follow then you’d be nervous to invest now.

But we think this time the two Emirates will finally divorce their real estate cycles from each other and for one reason, supply. Dubai is a dynamic and entrepreneurial market whereas Abu Dhabi is a more ponderous beast lead by a slower and more thoughtful government sector. Dubai built furiously to take advantage of higher rents and the oversupply is now hurting prices. Abu Dhabi was slow to build and even now there is very limited supply coming online until at least 2017. With no supply Abu Dhabi prices will continue to rise. Let’s see if it happens.