Abu Dhabi house prices have risen by as much as 26 per cent over the past year, helped by an influx of government employees relocating to the capital and improving investor sentiment.
According to the property broker Asteco an influx of Abu Dhabi government employees moving to the capital to comply with a government housing decree and a general improvement in sentiment pushed up average house prices in the city 14 to 26 per cent over the year to September.
The news comes as the UAE real estate industry prepares to gather for the biggest property show in the region, the Cityscape exhibition, which is expected to attract an increase in exhibitor and visitor numbers on the back of soaring Dubai house prices.
Asteco said that a shortage of new homes on the Abu Dhabi market was pushing up prices as the city continues to recover from the global financial crisis, during which house prices boomed and then plunged by more than half.
Prices of apartments at Aldar’s Al Raha Beach on the outskirts of the city rose 19 to 26 per cent in the year to the end of last month, with some of the smaller units in Al Bandar sold at Dh1,520 per square foot.
The broker reported that apartment prices in Tamouh’s Marina Square on Reem Island rose 14 per cent over the year while prices at Aldar’s Sun & Sky Towers, also on Reem, rose 18 per cent.
Villa prices also rose during the year, the broker said. Reef Villas experienced the biggest price increases, Asteco reported, with prices for five-bedroom villas increasing 24 per cent to Dh2.6 million in the 12 months to the end of September. Prices for villas in Golf Gardens rose 9 per cent over the year, while those in Al Raha Gardens rose 13 per cent.
However, the broker said that despite the increases house prices in the capital remain 20 to 50 per cent below their 2008 peak levels.
“While prices are moving upwards very quickly, investors should be confident that there is no bubble scenario imminent. If we compare [third quarter] 2013 prices for these developments to the 2008 boom, it’s an altogether different picture,” said Jeremy Oates, the general manager of Abu Dhabi at Asteco Property Management.
He added that apartments in Marina Square which were completed in 2012, are currently selling for rates 43 per cent below the rates they were selling off plan in 2008. Those in Sun & Sky, a development completed in 2011, are worth 50 per cent of their 2008 off-plan price.
Reef Villas remain 29 per cent lower than their 2008 peak, while sales prices for villas in Golf Gardens and Al Raha Gardens are still 28 per cent and 26 per cent below 2008 levels.
Asteco predicted that house price growth is likely to slow as the amount of new supply coming on to the market increases, with Aldar beginning to hand over 3,500 new apartments in its The Gate Towers project before the end of the year.
It added that if Tamouh completes its 13-building City of Lights scheme as scheduled by the end of next year price growth in the city could be further slowed. However, it suggested that further delays on the vast project seemed likely.
Unlike neighbouring Dubai, where house prices started to rise last year, the Abu Dhabi housing market experienced little movement until mid-2013. Last week brokers reported that apartment prices in Dubai rose by up to 42 per cent over the year to September, while villa prices increased 26 per cent.
Asteco said housing rents in the investment areas of Abu Dhabi were also rising quickly as government workers who had been forced to relocate to the capital moved into newer apartments.
Rents for luxury apartments in the city rose by 20 to 29 per cent over the year, Asteco reported, although in some buildings this was restricted by the majority of tenants remaining put.
“Prime properties such as Nation Tower and St Regis Residences have seen little growth, given the limited availability in the market. However, if any of the desirable units were to become vacant, we believe that potential tenants would be willing to pay a significant premium on current rates,” said Mr Oates.