Abu dhabi’s residency rules starting to effect housing market

The real estate firm’s report said that leasing volumes have increased as a result, despite rents across the capital falling by 3 per cent from the previous quarter. After a four-slide in the housing sector with stock level rising, many consider such interventions as “vital” to rejuvenate the housing sector.

“The impact of sustained growth in overall housing stock is reflected in the continued decline of lease rates and reduced tenant loyalty amidst abundant and more affordable options in the market,” explains CBRE’s report. “With an estimated 17,000 new units to be delivered during 2013, residential stock in Abu Dhabi is set for a period of sustained growth, with inevitable consequences for both occupancy and rental rates.”

Overall, Abu Dhabi property sales are mostly driven by occupiers, notes CBRE, although this is in the context of “very low levels” of investment activity. Many homeowners are unwilling to lower prices, even if it means holding units indefinitely, which has prompted average sales prices to stagnate at around AED9,150-13,500/sqm.

“In the hope of creating new interest and in anticipation of a future market revival, a number of financial institutions have announced reduced mortgage rates”, adds the report, “whilst some developers are looking to offer would-be investors with more innovative schemes and product offers (e.g. rent-to-own schemes) in order to attract buyers.

“With the Abu Dhabi property market viewed as a key indicator of the emirate’s overall economic health and an essential tool for attracting new inward investment, we may expect to see further government-led interventions take place to stimulate the market.”

CBRE concludes: “As the residential market appears to have reached a floor on sales prices, we expect to see relative stability prevail during 2013. However, we do not see an immediate pick up in transaction activity as investors await clarification on the emirate’s real estate laws and final details on new legislation, such as the proposed Mortgage Cap.”