Abu Dhabi Residential Villa Deals Pick Up in Q1-2023

The average prices of residential villas have shot up to $262.53 per sq ft across Abu Dhabi’s freehold areas and they grew by 1.2%, after showing signs of moderation for six consecutive months in the first quarter of 2023, global property consultancy, Knight Frank, said.

The stability in prices across Abu Dhabi’s freehold areas is largely due to a limited number of new homes currently under construction, the consultancy said in its latest Abu Dhabi Residential Market Review.

“Around 29,000 homes were set to be completed by the end of 2025, with villas making up 58% of this number,” the consultancy firm said.

However, the pace of new project launches is quickening, with 15 new residential projects unveiled in Q1 of 2023 alone. At present, 5,600 homes have been announced, but construction is yet to commence on these, it added.

According to the Abu Dhabi’s Department for Municipalities and Transport (DMT), Yas Island recorded a staggering $1.14 billion in property transactions during 2022, followed closely by Al Reem Island at $930 million, followed by Saadiyat Island at $840 million.

The total value of transactions across the city rose by 8.5% in 2022, and the number of deals saw an increase of more than 27%, it added.

Trailing 2014 Peak

Faisal Durrani, Head of Middle East Research, said that while residential transactional activity seemed to be picking up pace, average home values still trailed the 2014 peak by around 26%.

“This ‘discount’ is undoubtedly contributing to rising deal activity, but the market’s performance remains fragmented, with the headline figures masking more nuanced trends at a submarket and price-band level, Durrani noted.

 According to him, households in general were continuing to use the relatively low-price environment to upgrade where possible, with demand cascading upwards – those in smaller apartments upgrading to larger ones and those in smaller villas doing the same.

He pointed out that this trend was most noticeable in locations such as Al Reef Villas, one of the most affordable freehold villa communities in Abu Dhabi, where prices have risen by 16.8% since January 2020, fuelled in large part by those upgrading to villa living from apartments.

“While villas appear to be a favourite amongst buyers, prices are moderating and currently stand 1.2% up on this time last year. This yo-yo like behaviour of villa prices suggests a price ceiling may have been reached, beyond which buyers are reluctant to commit,” he added.

Stephen Flanagan, Partner, Head of Valuation and Advisory MENA, said that they have been observing a significant upswing in new project launches. With the city’s strong economic growth driving job creation, we expect an upturn in demand for rental properties, particularly in the villa market.

“Like the sales market, tenants are seizing the opportunity to upgrade their accommodation wherever possible, which is leading to a strengthening of the villa lease rates,” he said.

According to Knight Frank, there has been a rise in villa rents, which have recovered to pre COVID-19 levels and currently stood 3.6% above January 2020 figures.

Notably, Saadiyat Island ($22.88 per sq ft) and Al Raha Beach ($18.79 per sq ft) have experienced the highest growth in rents since the onset of the pandemic.

Real Estate Deals

The DMT also said that Abu Dhabi recorded real estate deals to the tune of $7.6 billion involving 5,472 deals, between January and March this year, as the Emirate’s property market remarkably grew due to various initiatives launched by the government besides broader economic recovery.

The value of the transactions more than doubled during the three-month period, while the volume of transactions, which include property sales and mortgages, grew 66 per%, the DMT data showed.

The value of property sales more than tripled to $4.41 billion, while mortgage deals rose 70% to $3.19 billion.