Developers in Abu Dhabi are still pressing ahead with plans to sell hundreds of off-plan homes at Cityscape next week despite price and rent falls in the mainstream housing market caused by redundancies and cuts to housing allowances.
Aldar, Abu Dhabi’s largest listed property developer, said that there has been a strong appetite for smaller off-plan apartments despite reports that house prices and rents in the capital fell again in the first three months of this year.
Speaking at the Cavendish Maxwell property briefing in Abu Dhabi yesterday, Maan Al Awlaqi, a director at Aldar Properties, said the company was continuing with its plan of marketing smaller units to consumers through attractive payment plans.
Aldar is expected to launch sales of its Shams Marina project next week ahead of the Cityscape Abu Dhabi property show. It will comprise 329 apartments, 192 serviced apartments and a 262-room four-star hotel on Reem Island. The Abu Dhabi developers Bloom Properties and TDIC are also expected to launch off-plan projects despite the soft market.
“The trend that we have been seeing for the past year or so is that people are looking to spend less,” Mr Al Awlaqi said. “Depending upon where you are in the market, payment plans are also playing a large part in that. So our land sales such as Al Merief and Nareel, those tended to be sold on 50/50 payment plans, but if you look at the Mayan development or Yas Acres, the payment plan is 30/70. There is an extremely healthy appetite for these products.”
Ben Crompton, a managing partner at Crompton Partners estate agents, told delegates during the same event that investors were still buying off-plan property because they could purchase smaller, cheaper apartments off-plan amid expectations of a market uptick by 2020.
“There’s not a lot on the market available at the moment in terms of things that are priced to sell because not a lot of people want to sell,” Mr Crompton said. “People are hoping that the market will come back. Off-plan is not a bet on the market as it is now, it’s a bet on what the market will be in three years’ time. A lot of people are saying if I buy in the market now, in three years’ time the market will have made a certain amount of capital appreciation.”
Chris Taylor, the chief executive of the real estate financier Abu Dhabi Finance, told delegates that since the UAE Central Bank changed lending regulations in 2014 to restrict bank lending on off-plan property, some UAE developers were offering payment plans which only required full payment up to eight years after the development was completed.
“Actually the people who have been doing under-construction mortgages for the last two years since the Central Bank changed the regulations have been the developers,” Mr Taylor said. “The developers entered the mortgage market. If you can move in and pay over eight years, it sounds like a mortgage.”
Thousands of off-plan properties in Abu Dhabi were abandoned or delayed in the aftermath of the global financial crisis in 2009 as property prices crashed and banks slashed lending.
However, since then the Government has cracked down on off-plan development, tightening the criteria required for developers to sell property.
Meanwhile, redundancies and housing allowance cuts resulting from high-profile government-backed company mergers are continuing to push down rents and house prices in Abu Dhabi, a situation that is exacerbated by continued supply.
Property broker Cavendish Maxwell estimates that about 1,200 new homes were completed in investment zones in the capital in the first three months of this year, with another 7,800 due to be completed over the remainder of the year, primarily in Reem Island and Abu Dhabi city.
According to Cavendish Maxwell, rents in Raha Beach fell 1.1 per cent in the first quarter of this year, while in Al Ghadeer they were down 0.6 per cent; in Al Reef Downtown they dropped 0.4 per cent and in Reem Island they were 0.3 per cent lower.
Rents for villas also continued to fall, with Raha Gardens down 1.1 per cent during the quarter and rents in Al Reef down 0.6 per cent.
Cavendish Maxwell’s figures echo those of rival broker Cluttons, which reported on Sunday that average rents in Abu Dhabi are now 15 per cent down on a year ago. Cluttons said capital values in investment areas dropped by 1.9 per cent in the first quarter, meaning the year-on-year decline in values was 7.6 per cent, compared with a 6 per cent year-on-year decline recorded at the end of 2016.
lbarnard@thenational.ae
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