How to choose an investment property in Abu Dhabi
As the UAE’s economy continues to recover from the effects of the coronavirus pandemic, its capital has witnessed outstanding demand for real estate among both local and overseas buyers throughout 2021. Buyers and renters are opting for larger homes with outdoor amenities amidst the rise in remote working and learning, thus, villas and townhouses continue to lead the sales numbers. Meanwhile, the average cost of residential properties in Abu Dhabi rose by 2.2% in the first 8 months of 2021, confirming investors’ confidence in the Emirate’s real estate market. According to Haider Tuama, Head of Real Estate Research at ValuStrat consultancy, property prices are set to increase even more in 2022 due to the accelerated vaccination programme and economic reforms. Let’s take a look at the overall performance of Abu Dhabi’s real estate sector in 2021, its ongoing trends, and what property buyers can expect in 2022.
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The first half of 2021 has been highly productive for the property sector of Abu Dhabi, as the Department of Municipalities and Transport registered 7,046 transactions worth AED 23.5B (USD 6.4B). In particular, there were 3,621 mortgage deals recorded, worth AED 14.55B (USD 3.9B) and 3,425 real estate transactions bringing in another AED 9.02B (USD 2.45B). Similar to last year, Al Reem Island remained the favorite among end-users and investors with total sales of AED 2.07B (USD 563.5M), with Yas Island following the lead with AED 1.61B (USD 438.3M). Meanwhile, Saadiyat Island took the third position, having registered a total of AED 1.36B (USD 370.2M) worth of transactions. Not forgetting Khalifa City and Al Raha Beach which were ranked fourth and fifth, with a total of AED 388M (USD 105.6M) and AED 316M (USD 86M) worth of property deals respectively. As stated by Dr. Adeeb Al Afeefi, Executive Director of the Real Estate Sector at DMT, the real estate sector of Abu Dhabi has seen tremendous growth in the first half of the year, in spite of drastic changes in the global markets.
As well as all the above, in H1 2021, a whopping 22.5% reduction in service charges were registered for ready-to-move-in developments from January 2020, amounting to savings of AED 138M (USD 37.5M) for property owners and investors. In fact, service charges decreased by 13.5% in 2020 and 9% in 2021. It is worth noting that in September 2021, the Abu Dhabi Department of Municipalities and Transport announced a new requirement for developers and companies regarding service charges. Now it is forbidden to raise or impose new service charges to owners of both commercial and residential properties without prior approval from the DMT. This initiative aims at guaranteeing the rights of real estate owners and potential investors, as well as bolstering a more competitive economy.
Speaking of rentals, throughout the first half of 2021, the Abu Dhabi tenant movement was dominated by residents opting to upgrade or upsize, particularly in terms of villas and townhouses. In fact, according to ValuStrat, villa rental prices rose by 6.2% Y-o-Y, while apartment rental prices increased by only 3%. Landlords have been offering various incentives including rent-free periods, multiple cheques and discounted/waived agency fees to create a spike in demand.
Meanwhile, the Q3 ValuStrat Price Index (VPI) for capital values in the residential investment zones of Abu Dhabi saw quarterly improvements for the fourth time in a row. The valuation-based index grew 2.3% quarterly and 9.8% annually to 68.8 points. As for rentals, the values softened 3.4% quarterly to reach similar levels of last year. Abu Dhabi’s gross yields averaged 7.4%, with apartments at 7.6% and villas at 6.8%. It is worth mentioning that the locations with the highest annual gains were villas in Al Reef (13.9%), Al Raha (13.3%) and Saadiyat Island (11.7%), as reported by consultants of ValuStrat. According to a statement by the Department of Municipalities and Transport, the third quarter of 2021 brought a total of 3,292 property transactions worth AED 16.2B (4.4B) which continued the momentum.
The estimated fourth-quarter 2021 ValuStrat Price Index for Abu Dhabi’s residential capital values saw gains of 2% quarterly and 10.9% annually to reach 70.2 points. At the same time, apartment asking rental prices rose 4.1% and villa rentals were up 2%, both reaching pre-pandemic levels.
According to Asteco, the handover of about 2,200 residential units in Q3 2021 was recorded, including 3 buildings on Reem Island, as well as a number of villas and buildings across various areas of the UAE capital. It is estimated that Abu Dhabi will witness the delivery of more than 300 villas and 10,300 apartments in total in 2021.
Moreover, Abu Dhabi’s largest-listed developer Aldar Properties, revealed a range of new developments this year, including the last 2 phases of Yas Acres, The Magnolias and The Dahlias, The Dunes at Saadiyat Reserve, as well as the third phase of its best-selling Noya project. All these developments quickly sold out, within a maximum of 1 month after their launch, as end-users and investors opt for spacious units with on-site amenities and green spaces. Other noteworthy new releases of 2021 include Perla I, Perla II and Maryah Vista 2 by Reportage Properties, as well as a collection of villa plots and townhouses on the highly-anticipated Jubail Island.
In terms of affordable apartments, investors prefer calm, suburban areas such as Al Reef and Ghadeer, with the price-per-square-foot between AED 673 (USD 183) and AED 733 (USD 199) respectively. Another trend nowadays is sustainability, as many buyers are searching for eco-friendly properties to reduce their carbon footprint. In this case, the most popular is Masdar City, offering properties at a cost of AED 1,183 (USD 322) per sq. ft. This area also offers the best ROI in the Emirate at 8.2%.
Note: If you are interested in buying an apartment in Abu Dhabi, then we suggest you read the list of TOP-6 projects to buy apartments in Abu Dhabi.
When it comes to luxury apartments, the year of 2021 has witnessed high demand in beachfront developments such as Al Reem Island, Al Raha Beach, Yas Island and Saadiyat Island. The sales price-per-square-foot in Al Reem Island has averaged at AED 1,000 (USD 272), while Al Raha Beach offers apartments at AED 1,176 (USD 320) per sq. ft. Finally, Yas Island and Saadiyat Island have average prices per sq. ft standing at AED 1,202 (USD 327) and AED 1,468 (USD 399) accordingly. In particular, Yas Island continues to generate the best yields for luxury apartments at 7.36%.
The best areas to buy villas among the budget segment are Al Reef, Hydra Village, Khalifa City A and Shakhbout City, which still remain prime areas for real estate purchases. Al Reef and Hydra Village offer an average price-per-square-foot of AED 685 (USD 186) and AED 515 (USD 140) respectively. Meanwhile, Khalifa City A and Shakhbout City have properties averaging AED 774 (USD 210) and AED 412 (USD 112) per sq. ft respectively. The latter area offers the highest ROI in Abu Dhabi in terms of budget-friendly villas, with yields of 8.4%.
Upscale villas were particularly popular in waterfront areas such as Saadiyat Island, Yas Island and Al Raha Gardens. The average price-per-square-foot in Saadiyat Island is AED 1,382 (USD 376), while in Yas Island this indicator amounts to AED 1,112 (USD 102). Al Raha Gardens offers the cheapest options out of these 3 districts, averaging at AED 809 (USD 219) per sq. ft, as well as also having the highest ROI for luxury villas, which has reached 6%, as of Q3 2021.
The top areas for renting affordable apartments in Abu Dhabi are Khalifa City A, Al Khalidiya, Al Muroor and Hamdan Street. Below we will review the annual cost of 1-bedroom apartments to rent in these districts:
As for luxury apartments, tenants keep opting for Al Reem Island, Al Raha Beach, Corniche Area and Corniche Road. The annual prices for 1-bedroom properties here are as follows:
Meanwhile, Mohammed Bin Zayed City, Khalifa City A, AL Reef and Shakhbout City continue to appeal to those searching for budget-friendly villas. The average annual cost for a 1-bedroom apartment in these areas are stated below:
Finally, tenants of luxury villas have been showing increased interest in Al Bateen, Al Raha Gardens, Yas Island and Saadiyat Island. The annual rental prices are as shown below:
Important! The above-mentioned prices may vary due to the current market conditions.
Abu Dhabi has established itself as a family-friendly Emirate, with a wide range of both luxury and affordable properties. In fact, Abu Dhabi ranked third in a new study released by comparethemarket.com.ae regarding the world’s 5 best cities to acquire a holiday home. The report assessed many factors, including average property prices, average temperature and average rainfall, restaurants per 10,000 people, crime score and the cost of living for a family of 4. It was also rated the safest city in the crime index score among 50 cities researched in the same report. As well as that, the UAE capital ranked fourth in the Relocation Report, compiled by Money.co.uk, which evaluates numerous economic and social aspects, from the weather to the number of green spaces, and the average internet speed. Thus, it is not surprising that next year is expected to be highly successful for the real estate sector of Abu Dhabi, continuing to appeal to overseas buyers.
According to ValuStrat, a further boost in demand will be promoted by a successful vaccination programme and the gradual opening of international borders. Moreover, capital values in freehold villas and apartment communities are set to increase, taking into account the fact that the market outperformed the previous forecasts of the ValuStrat analysts. At the same time, risks include the government re-introducing movement restrictions due to the latest spread of the Omicron variant of the COVID-19 virus. In terms of rentals, Asteco expects a 7-9% increase in price both for residential and commercial spaces, while the annual cost of luxury properties is set to rise to 9-14% in Q1 2022 in the entire UAE.
As well as the above, there will be a predicted influx of talents and investors coming to Abu Dhabi due to the latest initiatives from the UAE government. These include federal freelance visas and green visas aimed at self-employed individuals, 100% foreign ownership in onshore companies, as well as a 4.5-day workweek, among others.
Metropolitan Capital Real Estate LLC is one of the leading real estate agencies in the UAE market, known for its extremely high standards and excellent expertise in the Emirate’s real estate market. Our agents are well-versed in all areas of Abu Dhabi, allowing us to match you with the best option for buying property based on your budget, the number of people living there and your personal requirements. Our brokers are ready to help you get the best mortgage deal when buying and renting different types of properties, so you can rely on us to manage the entire transaction, from handling the paperwork, price negotiations, and closing the deal.
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