"Sales prices are expected to further decline due to redundancies attributed to the shrinkage of the oil and gas sector. We believe the trend of downsizing or moving to more affordable areas will continue until 2018, when an expected increase in government spending could improve market sentiment," said Robin Teh, UAE country manager and director of valuations and advisory UAE, Chestertons Mena.
On average, villa sales prices fell by nine per cent in the first three months of the year. Al Ghadeer, Al Reef and Khalifa City witnessed the largest percentage drop resulting in prices falling to Dh915 per sqft, Dh897 per sqft and Dh747 per sqft respectively. Al Raha Gardens also witnessed a sales decrease, although less severe, of just under six per cent to Dh931 per sqft.
Apartment sales prices, on average, declined by one per cent in the first quarter of the year. Areas bucking the trend included Al Reef Downtown, which saw an increase of one per cent to Dh948 per sqft, Al Reem Island remained flat at Dh1,362 per sqft. Al Gadeer witnessed a three per cent decrease to Dh1,009 per sqft, while Al Raha Beach fared slightly better with a decline of just under one per cent to Dh1,601 per sqft.
Ivana Gazivoda Vucinic, head of advisory and research, Chestertons Mena, said: "Sales figures, particularly in the villa market, have been sliding gradually since Q4 2014. Housing benefit packages have been impacted by cost-cutting moves in many companies which may have had a knock-on effect on the villa market. "Sales prices are likely to continue to ease throughout the remainder of 2017 and into 2018, however we do expect the market to rebound with reinvigorated activity." Apartment rents declined by an average of three per cent in Q1 compared to the previous quarter, Al Raha Beach witnessed no change, while Al Ghadeer fell on average by one per cent. Al Reef Downtown fell by an average of six per cent and Al Reem by 4.5 per cent.
"Apartment rents have declined across the board as the trend for more affordable accommodation continues. A two-bedroom apartment in Al Raha Beach is now available for Dh155,000 annually; while in Al Reef Downtown and Al Reem Island, prices for a two-bedroom start at Dh92,000 and Dh125,000 respectively," added Gazivoda Vucinic. Similar to the apartment rental market, villas also witnessed softening across the board by three per cent. Villas in Al Reef, Al Raha Gardens and Khalifa City saw rental decreases of between one per cent and seven per cent.
According to Gazivoda Vucinic, new supply will hinder the market further. "An additional 4,000 apartments and villas by the end of 2017 will add further pressure to the rental market in Abu Dhabi."
