Abu Dhabi property update

Wednesday, 10 March 2010

Jesse Downs

Property prices and transactions in Abu Dhabi are not likely to increase on the back of mortgage rate cuts and delivery of new units expected to take place at the end of the second quarter, according to real estate consultancy Landmark Advisory.

The limited transaction activity observed during the end of 2009 continued into January and February 2010, with existing demand continuing to focus on close-to-completion developments such as Marina Square, Al Reef Villas, Sky Tower and Al Bandar.

“The market has reached a standstill due to the ongoing postponement of delivery dates, especially for projects like Al Bandar and Marina Square,” said Jesse Downs, director of research and advisory services at Landmark Advisory. “This trend extends to Al Reef Villas, where the slow handover process is weakening investor confidence.”

Transactional prices in the capital have experienced only marginal declines of up to four per cent as demand levels decrease and sellers become increasingly competitive, added Downs.

According to Landmark Advisory, the majority of buyers in Abu Dhabi (up to 70-80 per cent) purchase property through finance.

Commenting on the recent announcement that the government plans to reduce the cost of home loans in the capital, Hesham Ikhwan, branch manager in Abu Dhabi at Landmark Properties, said: “Due to the recent rate reduction, projects financed by Abu Dhabi Finance should start to see more demand. At present, Abu Dhabi Finance finances six out of the fourteen towers in Marina Square and we expect that these towers will receive the most interest.”

Downs added that with lower rates available and the initial completion of freehold supply, more buyers will be encouraged to purchase rather than lease.

“The market is currently at a standstill. While these changes are expected to stimulate demand, the improvement will be moderate in absolute terms," she said. "We do not expect the volume of transactions to increase significantly in the near future, even for close-to -completion developments. Buyers are now waiting for distressed sales, which are expected to materialise closer to handover, when the largest payment plan installment is due."