Land held by developers in Abu Dhabi has lost as much as 30 per cent of its value from the peak in the middle of 2008 as residential sales remain subdued, figures from the property consultancy CB Richard Ellis (CBRE) show. Land prices at some of the capital's key developments such as Reem Island range between Dh180 (US$49) and Dh250 a square foot, compared with as much as Dh375 at the peak.
Average prices at Raha Beach, a project by Aldar Properties, are now Dh400 a sq ft, down from about Dh550. "Land transactions have fallen in light of the global economic conditions impacting on the local market and in particular reduced availability of credit and reduced liquidity," said Noura Yassin, the director of valuation and consultancy at CBRE Middle East. "We have witnessed a significant lessening of market activity, particularly during 2009."
As the financial crisis took hold, progress on some of the most significant projects in Abu Dhabi slowed, and other projects have been scaled back or construction tenders revised to accommodate the slower conditions. The developer behind Masdar City, the carbon-neutral city conceived in 2006, recently said the project would be smaller but more sustainable. Meanwhile, the Tourism and Development Investment Company has benefited from a fall in construction costs by re-tendering construction contracts at the Louvre Abu Dhabi and the Guggenheim Abu Dhabi, museums planned for Saadiyat Island.
But as many as 8,000 new homes, sold before the financial crisis hit the UAE's property sector, are expected to be completed by the end of this year, CBRE said, with the new units mainly located on Reem Island and at Raha Beach and Al Reef. Asteco, another property consultancy, estimates that as many as 20,000 homes could be ready by the end of the year. The influx, coupled with low demand, will continue to depress residential property prices for as long as two years. Prices fell by as much as 7 per cent in the first quarter of this year from the previous quarter, said Saud Masud, the head of research at UBS.
"The residential story is unfortunately going to remain a challenging one with our view [being] that rents and prices will continue to slide for another 18 to 24 months," Mr Masud said. "Abu Dhabi, however, is a strong story when it comes to infrastructure." The international property firm Cushman and Wakefield said in a report that Abu Dhabi would see a marked shift in the quality of office space by the end of next year, with between 8 million and 10 million sq ft of "grade A" space becoming available.
This would lead to 90 per cent of commercial villas being converted to residential and rental rates for second-tier offices declining by between 25 and 30 per cent, the report said. "This sudden and dramatic increase in the availability of quality office space will have a large impact on the demand for existing stock and also associated rental values and incentives," the report said. firstname.lastname@example.org