Property prices in Abu Dhabi are set to fall further in the next six months as 11,000 apartments and villas are completed before the end of the year.
In its latest quarterly report on the housing market, Jones Lang LaSalle, a global property broker, said Abu Dhabi's property sector was becoming increasingly competitive having been at "unsustainable" prices in the past five years.
"Rents are expected to decrease further in line with future additions to supply," said the report. "Significant increases in supply across all sectors during a time of relatively weak demand and tight economic conditions are causing rents to correct from the unsustainable highs of the boom years."
Prices of property to buy and rent in Abu Dhabi have been high compared with other parts of the country such as Dubai, where the market crashed quicker and is now showing signs of recovery.
Jones Lang LaSalle said average residential asking prices in the capital fell 4 per cent in the second quarter of this year to Dh10,500 (US$2,858) per square metre, a decline of 51 per cent from the peak of 2008. Rents also fell 4 per cent in the quarter to about Dh120,000 for a quality two-bedroom apartment, with Al Raha Beach and Reem Island suffering the most significant declines in the past year due to the level of new homes completed.
Jones Lang LaSalle did note many new projects could be delayed in the final stages of completion, affecting supply and the rate of price declines.
"Due to the significant development pipeline, rents will continue to experience downward pressure as the residential sector becomes more competitive, providing tenants with better opportunities to upgrade their housing," the report added.
Most of the supply for delivery before the end of the year is of additional apartments and villas in master-planned developments such as Reem Island, Al Reef Villas, Danet, Saadiyat Island and Rawdhat.
Approximately two thirds of the upcoming supply is made up of apartments, while the majority of new villas will be completed in predominantly Emirati communities of Al Falah and Watani.
About 2,900 additional residential units were delivered in Abu Dhabi during the second quarter of this year, with the majority of these in Rihan Heights and Bloom Gardens in the Grand Mosque District, Burooj Views and Marina Blue on Marina Square and Amaya Towers on Shams.
In total, residential stock in Abu Dhabi now stands at 199,800, following these deliveries and is forecast to reach 238,000 in 2014.