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Dubai And Abu Dhabi Set For A Stable Year

Property prices in Abu Dhabi are expected to experience a gradual increase in 2015, but the dizzying rises of 2014 are not likely to be repeated in the new year.

That’s the news from leading property firm Cluttons, which believes that there is still significant investor appetite in Abu Dhabi, but that its effects will be tempered by other factors.

Cluttons also said it expected to see more off-plan housing launches in 2015, from firms like Aldar and TDIC as well as by some private developers.

However, William Neil, head of Cluttons in Abu Dhabi, warned that there’s a danger that residential rents could continue to go up.

Bermuda‘With no rental cap in place in Abu Dhabi,’ he said, ‘if there is a lack of supply then the market could face some of the same issues it faced back in 2007 when rents were so expensive that many people were forced to commute here each day from Dubai.’

That’s seeming more likely in the face of rising residential rents throughout Abu Dhabi. That’s compared to a rise in rents of just 2.7% across Abu Dhabi in the forst nine months of 2014.

In tandem with this, a lack of building room in central Abu Dhabi has pushed institutions out to the city’s fringes – and residential building is following. ‘A shortage of sites in central Abu Dhabi has meant that new schools have begun to mushroom in more fringe locations on the mainland, which is driving the creation of new residential communities in areas previously considered to be too remote, offering more options in a supply-starved market,’ said Steve Morgan, chief executive Cluttons Middle East.

Landlords have also faced the issue of rental affordability, and even with the removal of Abu Dhabi’s rent cap last year, rental prices have risen only slightly. ‘Most mature markets around the world operate freely without government intervention and Abu Dhabi’s rental market is now subject to market influences, along with the fundamental demand-supply equation,’ opined Cluttons’ international research and business development manager, Faisal Durrani.

Another major factor affecting Abu Dhabi’s markets is the proposed financial free zone on  Al Amryah Island. ‘With Yas Mall now open, we are predicting growth for retail rents in the city,’ said Mr Neil. However he pointed to the risk of oversupply from the large number of shopping centres due for construction this year.

Meanwhile, Dubai’s property sector is expected to emerge as a more mature market in 2015, one in which demand comes from end users and long term investors rather than from speculation. Mohamed Alabbar, chairman of Emaar properties, says, ‘the concerted efforts of the Dubai government have helped manage the supply pipeline and at the current trends of population and tourism growth, demand is set to remain healthy.’

Written by Les Calvert of - overseas property reporter

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