A lack of retail facilities at several of the new residential developments in Abu Dhabi has to be addressed as it is dragging down prices of property in the capital, a property consultancy warns.
This year is likely to prove challenging for the Abu Dhabi residential market as more supply comes in, with further declines in values and rents expected in most locations, Cluttons said in its latest report on the capital.
"A shortage of retail facilities at many of the new residential developments needs to be addressed, the lack of which is seen as a culprit to falling values," according to the report, released today to coincide with the start of the property exhibition Cityscape Abu Dhabi.
"We do expect to see improvements in infrastructure and amenities, however, with the announcement of several retail units due to open in Marina Square in the second quarter of 2012."
Apartment rents have dropped by up to 10 per cent over the past six months in some projects, Cluttons said. But the decline in rents has had some positive effects.
"In the first quarter of 2012 we have seen stronger interest in apartments on Abu Dhabi island, as it becomes more affordable," Cluttons said.
There has been a softening of prices of apartments in the capital in particular in the first quarter, the consultancy said.
"Apartment values have been affected the most, with Al Reem and Marina Square apartments falling 7.4 per cent and 7.3 per cent, respectively, on third-quarter 2011 prices," the report stated. "Al Raha Beach apartments have shown similar falls, down 6 per cent."
Villa prices were less affected by the increase in supply but have still experienced declines.
Prices for villas in Al Raha Gardens were down 4.8 per cent in the first quarter compared with the third quarter last year, while prices for villas in Al Reef declined 2 per cent over the same period.
The announcement by the Government earlier this year to push ahead with a number of landmark projects is a positive for the market, the report added.
There has also been a shift in the way landlords are letting their properties in Abu Dhabi, Cluttons highlighted. Individual private landlords and corporate investment companies are increasingly approaching brokers to let their residential properties, the consultancy said.
"Heightened competition in the marketplace means owners face a growing battle to preserve healthy occupancy rates whilst also maintaining satisfactory levels of rent," said Matthew Green, the regional head of research at CBRE, which also released its own research on the capital's property market.
Average residential rents in the capital fell 18 per cent in the first quarter compared with a year earlier according to CBRE's data. That represented a 3.5 per cent decline from the previous quarter.
One major talking point at this year's Cityscape exhibition will be the proposed merger of two of Abu Dhabi's largest property developers that have together been responsible for building the majority of new homes and offices in the capital over the past seven years. Aldar Properties and Sorouh Real Estate said last month they were studying a merger that could create a company with combined assets of more than Dh55.09 billion (US$14.99bn).
The impact such a merger would have on a market where the project development pipeline is already concentrated among just a handful of players is likely to dominate the agenda of Cityscape this week.
In total, 86 companies are exhibiting at this year's show, less than half the number it attracted five years ago.
scronin@thenational.ae