Abu Dhabi Property Market Trends: forecast for 2022

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Abu Dhabi has actively developed its economic and touristic potential over the past few years, and this trend has had a noticeable effect on the local real estate market as well. With the country actively attracting tourists and encouraging international business cooperation, more and more expats are choosing Abu Dhabi as a desirable place to invest and live in. Throughout 2021, the emirate's property market has shown a steady increase in value and return on investment. Here is a round-up of the key results of Abu Dhabi's residential and commercial property sectors, and a look at trends and projections for 2022.

General real estate market assessment of Abu Dhabi based on 2021

The year 2021 has become a new starting point for the emirate's real estate market. The price index for civil engineering projects in Abu Dhabi was up 1.5% by May 2021. The coronavirus pandemic and all its associated restrictions have had a significant impact on the emirate's property demand structure. The traditionally popular studios and apartments began to give way to larger villas and townhouses.

By the middle of 2021, Abu Dhabi had a total of 265,000 property units, but the structure of properties represented has become imbalanced between supply and demand – an oversupply of apartments and a shortage of villas and townhouses.

According to Asteco, 2,200 residential units were completed in Abu Dhabi in Q3 2021, representing a 6.3% increase from Q2, while 4,600 residential units are expected to be completed by the end of Q4.

According to Bayut & Dubizzle, property prices in Abu Dhabi rose 9% in the first six months of 2021 compared to the same period in 2020. From the Q3 onwards, the increase in property prices started to slow down gradually. At the end of the year, the overall increase in the value of housing sector assets was 2.2%. Prices have risen in both the affordable and luxury property segments. At the same time, rental rates have increased by 2.95% for residential properties and by 4.1% to 5.5% for commercial properties.

In Q1 2021 alone, real estate in Abu Dhabi was sold for a total of AED 11.5 billion (USD 3.13 billion), of which AED 6.5 billion (USD 1.77 billion) came from mortgage loans. Almost half of the homes bought in the emirate were debt-financed, demonstrating the high dependence of the Abu Dhabi property market on available lending rates.

The gradual recovery of the emirate's tourism sector is also noticeable. The average hotel occupancy rate in the UAE as of October 2021 was 78.8%, the highest since 2015.

Best areas to invest in

According to the ValuStrat consultancy, Abu Dhabi's residential property values have been trending steadily upwards since the beginning of 2021. The average gross yield on the emirate's housing sector is 7.4% per annum. At the same time, the average occupancy rate for Abu Dhabi rental properties is estimated at 80%, which is quite high.

The value and profitability of the investment depends directly on the type of property, its purpose, size and location. Below we detail the best areas to buy villas, apartments and commercial properties in Abu Dhabi.

Villas

At the end of 2021, villas showed the most favourable demand/return ratio. Some of the best areas to buy villas include Al Reef, Shakhbout City, Mohammed Bin Zayed City and Khalifa City A, which all showed the highest return on investment at 9.43%. This is mainly due to the limited supply. A limited collection of villas starting from 5-bedrooms are currently available in the Shakhbout City area. Among the mid-priced segment, villas in Mohammed Bin Zayed City also deserve special attention, as they generate between 6.5% and 7.42% per annum. The average price per 1 sq. ft ranges from AED 514 to AED 650 (USD 140 to USD 177).

Among the luxury real estate segment, villas on Yas Island are the most popular. In 2021, their value rose by 4.18% to around AED 1,058 (USD 288) per 1 sq. ft. At the same time, the yield on local villas here is estimated at 5.55% per annum.

The second most popular premium destination in the emirate is the equally famous Al Saadiyat Island. The average cost of housing here, on the contrary, fell by 0.64% to AED 1,358 (USD 370) 1 sq. ft. At the same time, the return on investment remains at 4.8% per annum.

Al Raha Gardens has the highest return on investment among premium villas. In 2021, the return on local villas was up to 5.76% per annum and the average price for 1 sq ft of the property there fell by 0.4% to AED 833 (USD 227).

Apartments

According to the Bayut & Dubizzle Consumer Index, the majority of premium property buyers chose coastal residential developments such as Al Reem Island, Yas Island and Saadiyat Island. In the budget sector, Masdar City, Al Reef, Khalifa City A, Shakhbout City and Mohammed Bin Zayed City were the most popular areas.

Masdar City is in close proximity to Abu Dhabi International Airport with the average yield on local properties at 4.15% per annum, and the average price per sq. ft is AED 1,162 (USD 316). One-bedroom apartments in Masdar City can be bought for prices starting from AED 786,000 (USD 214,000).

The Al Gadeer area also attracts considerable interest from investors as the return on investment here is lower than in other popular areas, at 6.61%. However, the cost of 1 sq. ft of real estate is estimated at only AED 366 (USD 100). One-bedroom apartments in Al Gadeer are available from AED 482,000 (USD 131,300).

The return on investment for property on Al Reem Island is estimated at 6.62%, with the average cost of a 1-bedroom apartment here being AED 801,000 (USD 218,100). Real estate in this area belongs to the premium segment and local housing attracts investors by its relative affordability. For comparison, the average purchase price of a 1-bedroom apartment in Al Raha Beach starts from AED 1,092,000 (USD 297,300), while on Yas Island, starts from AED 921,000 (USD 250,750). It also boasts a unique design and premium quality amenities.

Abu Dhabi's second most popular residential area, Al Saadiyat, has shown a 1.9% increase in residential property values. The average price per 1 sq ft of property here is AED 1,464 (USD 398). An apartment with 1 bedroom in the district starts from AED 2,660,000 (USD 724,200).

Commercial property

Abu Dhabi's commercial property market is starting to recover vigorously after a dramatic downturn at the peak of the COVID-19 pandemic. Due to the growing economic performance and popularization of the local real estate sector, Abu Dhabi's commercial sector is potentially a very lucrative niche. But at the moment, the majority of commercial tenants are state-owned enterprises and related companies, as well as firms that have previously rented residential properties in Abu Dhabi and are now looking for better value and quality deals.

According to Reuters, the UAE economy is expected to grow further by 4.2% in 2022. The strong development of the international business environment will lead to an expansion of both demand and supply in Abu Dhabi's commercial real estate sector.

Prospects for 2022

In 2021, Abu Dhabi's property market showed signs of recovery and saw a gradual increase in prices. Much of the increase in value is due to a change in demand pattern, after a long period of self-isolation and other restrictions, homeowners and tenants have started to prefer larger homes with an abundance of open space.

Currently, residential property has the highest yields. The major share of transactions is in long-term rentals, while the short-term rental market, on the contrary, is very scarce. Due to the popularity of Abu Dhabi as a promising tourist and business destination, the short-term rental sector is expected to expand rapidly for the foreseeable future. According to Asteco, rents for residential and commercial properties are expected to rise further by 7-9%.

According to a study by the risk management and consulting company Willis Towers Watson, employers in the United Arab Emirate’s are planning to increase their employees' salaries by an average of 4% in 2022. Provided mortgage interest rates remain low, this will create additional demand and could be an additional driver for further increases in the emirate's property price levels.

The development of the housing sector is also actively encouraged by the emirate's government. According to the master development plan, over 28,000 new properties are scheduled to be completed in Abu Dhabi by 2023. Foreign investors can buy property in one of the emirate's 15 freehold districts.

If you are considering Abu Dhabi as a long-term investment option, the best decision is to contact a qualified real estate agent. Metropolitan Capital Real Estate LLC offers you a full range of intermediary and advisory services and our employees have extensive experience in working with both private investors and large corporate clients. The professionals in our office will help you find the best option for buying or renting a property and will provide full support at all stages of the transaction. Metropolitan Capital Real Estate LLC is the official representative of the emirate's largest developers, such as Aldar Properties and IMKAN.

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