Abu Dhabi Forecast 5% Growth in Luxury Apartment Market

Rental rates for premium apartments in Abu Dhabi surged 10% in 2014, leading to expectations of a further 5% increase in 2015.

In a report published by real estate services firm Asteco, rental rates for a prime two-bedroom apartments are shown as generating incomes of around €45,000 annually, with apartments at the low-end achieving between €23,000 and €30,000.

Luxury properties in Saadiyat Island and Reem Island's Marina Square recorded the biggest increases in rental rates, due to upward price pressure from consistently high occupancy levels.

Despite rental rates being considerably higher than in previous years they remain around 40% lower than the peak before the financial crisis in 2008. Strong demand for luxury properties, particularly from overseas investors has given buoyancy to prices at the upper end of Abu Dhabi's rental market.

Head of research at international property consultancy CBRE UAE, Matthew Green said: "There was a stronger first half of the year than it was in the second half. For good quality residential supply, we're not in massive undersupply but it's not easy to get hold of good quality apartments in good locations and that is reflected in the price growth we've been seeing".

There is plenty of apartment supply in Abu Dhabi's development pipeline, particularly in areas where demand is highest such as Reem Island, which will be allocated around 30% of all residential supply over the next few years.

The UAE has had to shift its economic dependence on oil-related sectors to other contributing markets such as tourism and real estate. It is expected that should oil prices remain low for the rest of 2015, demand for UAE property may be negatively affected.

"These global events are a strain really because they basically generate negative sentiment and obviously, that acts against investor decisions. But there still isn't enough quality supply to push rents down at this point and demand is high," Green said.