Abu Dhabi real estate: Home upgrades drive villa prices; apartment rents continue to fall

Average prices remain 25% cheaper than the 2014 peak and values have remained relatively unchanged for three-and-a-half years now, Knight Frank said

Residential values across Abu Dhabi’s freehold areas experienced 1.6% growth in Q2, and rents in general continue to reduce, according to global real estate consultancy Knight Frank.

The total value of transactions during Q2 across Abu Dhabi rose to AED 6.1 billion, representing a growth of 103% compared to the same period last year.

Average prices have climbed to 979 UAE dirhams per square foot (psf), representing a 2.8% increase compared to 2022.

Al Reem Island has emerged as the emirate’s most active submarket for sales, followed by Saadiyat Island.

Average prices remain 25% cheaper than the 2014 peak and values have remained relatively unchanged for three-and-a-half years now, which is instilling confidence in buyers to transition from renting to owning or upgrading where possible, Knight Frank noted in the report.  

Faisal Durrani, Partner, Head of Research, Middle East and North Africa, said: “Home upgrades are driving price growth in certain segments of the market, with more affordable villa locations, such as Al Reef Villas for instance, registering the strongest price growth in the villa market (17%) since early 2020 as buyers use the opportunity to upgrade from apartments to villas”.

The growth in villa prices is more pronounced in the low to mid-tier segment of the market, particularly at Al Reef Villas (AED 686 psf) and Al Raha Gardens (AED 826 psf), experiencing price growth of 16.9% and 4.9%, respectively, since January 2020, in contrast to a 0.8% decline at Saadiyat Island (AED 1,337 psf).

“On Saadiyat Island, which remains Abu Dhabi’s most expensive freehold villa submarket, prices appear to be stabilising once more after a near 12-month decline. While Saadiyat Island continues to offer excellent relative value for money at around AED 1,300 per square foot, particularly when compared to similar Dubai neighbourhoods, there is a clear price sensitivity threshold here, beyond which buyers appear nervous to commit”.

Rental market

Apartment rents have experienced a 0.3% increase since Q1 but are -0.4% lower than last summer. Villa lease rates, on the other hand, have seen an upswing in demand, except in more affordable submarkets like Al Reef Villas and Al Raha Gardens, the report said.

For the city, average annual residential lease rates stand at AED 60 psf, a 0.4% rise from this time last year, according to Knight Frank.

Stephen Flanagan, Partner, Head of Valuation Advisory, Middle East & North Africa, explained: “While rents in general continue to reduce, villas are a star performing subsector in the leasing market, with a notable upswing in lease rates across Abu Dhabi, with the exception of more affordable submarkets, such as Al Reef Villas and Al Raha Gardens, where annual rents stand at AED 42 psf and AED 51.”

Article Resorce: www.zawya.com

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