Abu Dhabi Residential Market Review: Demand for Properties Drives Rise in Transactions

The residential property market in Abu Dhabi’s freehold areas experienced growth of 1.2 percent in Q1 2023, pushing average prices to Dh964 per square foot (psf), according to the latest Abu Dhabi Residential Market Review by global property consultancy Knight Frank. Conversely, villa values showed moderation after six consecutive months of growth, resulting in an annual rate of change of 1.2 percent. The report also reveals that Yas Island saw the highest value of property transactions in 2022 at Dh4.2 billion, followed by Al Reem Island at Dh3.4 billion and Saadiyat Island at Dh3.1 billion, while the total value of transactions across the city rose by 8.5 percent in 2022, with a 27 percent increase in the number of deals.

Faisal Durrani, Head of Middle East Research, notes that while residential transactional activity increases, average home values remain around 26 percent below the 2014 peak. Durrani suggests that the “discount” contributes to rising deal activity, but the market’s performance remains fragmented, with more nuanced trends at a submarket and price-band level. Households are continuing to upgrade where possible, with demand cascading upwards. For example, those in smaller apartments upgrade to larger ones, and those in smaller villas do the same. This trend is particularly noticeable in Al Reef Villas, where prices have risen by 16.8 percent since January 2020, driven by those upgrading to villas living from apartments.

While villas appear popular among buyers, their prices are moderating and are currently up only 1.2 percent from last year. This suggests a price ceiling may have been reached, beyond which buyers are reluctant to commit. The stability in prices across Abu Dhabi’s freehold areas is due, in part, to the limited number of new homes currently under construction. However, new project launches are quickening, with 15 new residential projects unveiled in Q1 2023 alone. At present, 5,600 homes have been announced, but construction is yet to commence on these.

Stephen Flanagan, Partner and Head of Valuation and Advisory MENA, observe a significant upswing in new project launches. With the city’s strong economic growth driving job creation, he expects an upturn in demand for rental properties, particularly in the villa market. Like the sales market, tenants are seizing the opportunity to upgrade their accommodation wherever possible, which is leading to a strengthening of villa lease rates.

The report also highlights a rise in villa rents, which have recovered to pre-COVID levels and are currently 3.6 percent above January 2020 figures. Notably, Saadiyat Island (Dh84 psf) and Al Raha Beach (Dh69 psf) have experienced the highest rent growth since the onset of the pandemic.

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