Villa prices in Abu Dhabi have registered a 5.7 percent growth over the past year, a new report finds, but it is still lower than the 2014 market peak.
“The relative stability and substantive ‘discount’ on the last market peak are two key factors influencing buyer behaviour,” said Faisal Durrani, Partner, Head of Research at Knight Frank for the Middle East and North Africa.
“Average prices remain 25 percent cheaper than the 2014 peak and values have remained unchanged for three-and-a-half years now, which is instilling confidence in buyers to transition from renting to owning or upgrading where possible.”
The growth in villa prices is more pronounced in the low to mid-tier segment of the market, particularly Al Reef Villas and Al Raha Gardens which experienced price growth of 16.9 percent and 4.9 percent respectively since January 2020.
“Home upgrades are driving price growth in certain segments of the market, with more affordable villa locations, such as Al Reef Villas for instance, registering the strongest price growth in the villa market (17 percent) since early 2020 as buyers use the opportunity to upgrade from apartments to villas,” Durrani added.
Affordability
Most of Abu Dhabi’s submarkets remain “affordable,” the Knight Frank report revealed, as households need to save under six time their annual income to purchase a property.
However, villas in the city’s prestigious Saadiyat Island stand out as the most expensive, with house prices in the area exceeding 20 times the average household income.
“On Saadiyat Island, which remains Abu Dhabi’s most expensive freehold villa submarket, prices appear to be stabilising once more after a near 12-month decline,” said Durrani.
“While Saadiyat Island continues to offer excellent relative value for money at around AED1,300 per square foot, particularly when compared to similar Dubai neighbourhoods, there is a clear price sensitivity threshold here, beyond which buyers appear nervous to commit”.
Al Reem Island emerged as Abu Dhabi’s most active submarket for property sales during Q2, recording a total of AED2.1 billion in deals made through 816 sales transactions. Villas accounted for 76 percent of this number while apartments made up the remaining 24 percent.
Residential values across Abu Dhabi’s freehold areas experienced 1.6 percent growth in Q2, taking average prices to AED 979 per square foot (psf), representing a 2.8 percent increase on 2022.
Abu Dhabi construction boom
The price stability across the UAE capital’s freehold areas can be attributed to the limited number of new homes currently under construction.
By the end of 2027, a total of 33,700 homes are expected to be delivered by the end of 2027, more than half (59 percent) of which will be villas. This is on par to surpass historical completion levels, gradually increasing the total supply and also likely maintaining the price stability being enjoyed by the market.
Though the overall supply in Abu Dhabi’s property market appears to be relatively low, new project launches are beginning to gather momentum, with approximately 12,700 units still in their launch stage, according to Knight Frank’s analysis.
The second quarter of 2023 witnessed the unveiling of 15 residential projects, with the number of villas and apartments released being evenly matched at approximately 6,000 each.
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