Abu Dhabi rents to fall amid surge of new homes

Rents in the UAE capital are set to slide next year with nearly 25,000 homes scheduled for completion, real estate consultancy Asteco said in its latest report. Rates in the emirate stabilised in the fourth quarter, aided by a delay in home handovers, but will be squeezed by an expected 18,800 apartments and 5,950 villas due for completion in 2012. “The delay in handover this year will only exacerbate the volume of new supply delivered in 2012, and consequently, rents will again come under further downward pressure,” said Elaine Jones, CEO of Asteco. More than 12,000 residential units will enter the market in the first half, the report said, spurring new competition between landlords to retain tenants. “Approximately 8,000 of these units would represent a significant improvement in quality compared to existing stock, providing tenants as well as buyers with significantly better value-for-money options,” Jones said. The average yearly rent for a one-bedroom apartment on the Corniche in the fourth quarter was AED95,000 while a two-bedroom apartment cost AED152,500, the report noted. Annual rents for one and two-bedroom apartments at Al Raha Beach were AED112,500  and AED152,500 respectively. Sales prices in the city stayed flat throughout 2011 as limited supply and high prices dissuaded potential buyers from investing, the report said. Just 6,680 apartments and 3,600 villas were handed over during 2011, far below forecasts, thanks to handover delays in major projects. A four-bedroom villa in Al Raha Gardens in the fourth quarter cost between AED1.9m and AED2.6m while a four-bedroom villa in Al Reef Villas cost between AED 1.5m and AED1.6m. The UAE's property boom ended in 2008, with house prices in Dubai plunging by about 60 percent, forcing many developers to abandon projects. More than half of the projects in Gulf country were scrapped or cancelled as project finance dried up. Abu Dhabi more recently has seen an emirate-wide slowdown of large infrastructure projects, as the government scales back its project spending in line with current economic realities. TDIC, Abu Dhabi’s tourism arm, said on Oct 29 that it would delay the completion of the Zayed National Museum and branches of the Louvre and Guggenhem due to the “magnitude of work”. “Clearly, on some high level, steps are being taken to reappraise everything across the board. Abu Dhabi is of course a long way away from being in trouble, but it may be looking ahead,” said David Butter, regional director for Middle East and North Africa at the Economist Intelligence Unit. “ The value of construction projects scrapped or on hold across the whole of the UAE soared to $958bn in the 12 months to October, Citigroup said on a report issued on Tuesday. The Gulf nation now has $604bn worth of projects planned or underway, a decline of 33 percent on the year-earlier period, Citigroup said. Just $14bn worth of new projects were announced in 2011, representing a 58 percent fall on the previous year.