Stability may be in sight for the Abu Dhabi property market by the end of the year, but for flats and offices in the city there will be another six months of falls in rents and sale prices.
According to the property brokers CBRE and Jones Lang LaSalle, rents across the capital will continue to slide over the coming months as Abu Dhabi continues to struggle with an oversupply.
CBRE calculated that housing rents across the city fell 3 per cent to between Dh70,000 (US$19,057) and Dh150,000 a year for a two-bedroom flat during the first three months of the year and looks set to sink lower this summer as 17,000 new homes come to the market this year.
The property agent calculates that this will be followed by another 18,000 new homes hitting the market in 2014 and 13,000 more completing in 2015. About 40 per cent of the homes will be built on Abu Dhabi's Reem Island.
However, on the sidelines of the Cityscape Abu Dhabi property exhibition yesterday, Matthew Green, the head of research for CBRE's Dubai office, predicted that falls in residential rents would "diminish to close to zero by the end of 2013", as the market finally begins to stabilise.
He added that the news was prompting a limited number of new project starts. The Taiwanese developer Far Glory is planning to build the first phase of its 153,000 square metre mixed-use scheme on Al Maryah Island as luxury apartments after buying four plots of land from Mubadala in 2010.
CBRE said that sales levels remained occupier-driven with average prices stagnating at between Dh9,150 and Dh13,500 per sq metre, with "many owners simply unwilling to drop any lower, even if it means holding units indefinitely".
Jones Lang LaSalle was slightly more optimistic in its take on the Abu Dhabi market. It pointed to the fact that both housing rents and sales prices in what it described as the prime parts of Abu Dhabi rose 8 per cent during the first quarter of the year compared with the previous quarter as government employees living in Dubai return to the capital following a decree mandating them to live in the emirate.
David Dudley, the head of the Abu Dhabi office at Jones Lang LaSalle, said that although prime parts of the city only represented perhaps 20 per cent of the overall market it could be seen as "the first sign of recovery and an improving market".
"It seems that the worst is now behind us and we are turning the corner," he said. "While not in full recovery we see that recovery is at least in sight for prime areas."
But both firms remained pessimistic about Abu Dhabi's over-supplied office market. According to CBRE, the vacancy rate for offices rose to a record high during the first quarter to nearly 35 per cent.
And with competition for tenants intensifying, agents found that landlords were offering generous incentives to lure tenants, which include 10 months of accommodation free of charge on a five-year lease.
CBRE said rents for secondary offices fell 3 per cent during the first quarter of the year to between Dh675 and Dh1,250 per sq metre per year and prime offices remained stable at about Dh1,900 per sq metre.