Abu Dhabi Property Yields Average 5% Says Chesterons Q2 Report

Chestertons MENA, a leading international property agency, has released its latest residential market report for Abu Dhabi today (Monday 15 August 2016). Following six months of a relatively flat performance in H1 2016, investors are still being rewarded with an average 5% gross yield across the city, topping out at 8.8% in some areas.

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Emirate of Abu Dhabi, UAE
Emirate of Abu Dhabi, UAE

“Although the market has flattened further in Q2 and witnessed declines as sales and rental rates dip further, rental yields are still rewarding investors and proving that the capital is still the place to be. Apartments in Al Reef Downtown, Al Ghadeer and Al Muneera all notched yields of 8.8%, 7.7% and 7.5% respectively,” said Declan McNaughton Managing Director UAE, Chestertons MENA.

Overall, apartments saw a 2% decrease in rental rates during the second quarter of 2016 compared to an increase in Q1 2016 with average lower range annual leasing rates for studio and one-bedroom apartments commanding AED 40,000 and AED 52,000 respectively.

“On average the residential rental market has dropped by 2% with the luxury end of the segment bearing downward pressure due to a reduction in spending, compounded by cuts to government spending due to lower oil prices. The remainder of the year will see marginal declines however solid yields will still prove popular with investors,” added McNaughton.

An average two-bedroom apartment in Al Reef Downtown rents for AED108,000 annually, a reduction of AED2,000 compared to Q1 2016, while a similar sized property in Al Reem Island will cost AED 140,000 per annum. Al Bandar remains one of the most expensive locations – a two-bedroom apartment will cost AED 193,000 per annum, again a minimal decrease of just AED2,000 compared with the first quarter of the year.

The villa rental market this quarter followed suit of the apartment rental market and witnessed decreases across the board. Rental rates varied from AED105,000 for an entry level lower range three-bedroom villa up to AED145,000 and AED175,000 for four and five-bedroom villa in the same pricing category.

In terms of average sales prices, both apartment and villa prices witnessed further falls with marginal drops of 1% in Q2 2016.

The resulting cost of leasing an average three-bedroom villa in Al Reef for a year is now AED 148,000, in Khalifa City AED183,000 and in Saadiyat Island, AED 335,000.

In terms of average sales prices, both apartment and villa prices witnessed further falls with marginal drops of 1% in Q2 2016. The average sales price per square foot for apartments in the capital stood at AED 1,340 in Q2 2016, with villas selling for AED 1,088 per square foot.

The apartment developments that had witnessed increases in Q1 were impacted by the lull in spending and recorded minimal price corrections. Al Zeina dropped to AED1,495 per square foot from AE1,520 in Q1 2016; and Al Reef Downtown dipped to AED925 versus AED930 per square foot recorded in the first quarter of the year, with both areas returning to prices originally witnessed in Q4 2015.

“We’ve seen a marginal decrease this quarter and once again the rate of decline variance among the communities demonstrated mixed sentiments in terms of sale price. The addition of new units delivered this past quarter and a further 3,500 expected by the end of the year will result in marginal fluctuations during this period of consolidation,” said McNaughton.

Villa price in Al Reef bucked the trend of decreasing prices unchanged at 1,010 per square foot whilst minimal changes were seen in Al Raha Gardens and Khalifa City dropping to AED 985 and AED840 respectively. Popular upscale and sought after development Saadiyat Island, dropped once more however prices are just shy of AED1,600 and are valued at AED1,580 per square foot.

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