Abu Dhabi - 9th August 2023: Knight Frank, the leading global real estate consultancy, has unveiled its Abu Dhabi Residential Market Review, Summer 2023, providing an in-depth analysis, revealing key insights into the city's residential real estate landscape.

During Q2 2023, Al Reem Island emerged as Abu Dhabi's most active submarket for sales, recording AED 2.1 billion in deals through a total of 816 sales transactions, with villas accounting for 76% and apartments making up 24% of the total. Saadiyat Island followed in second place at AED 1.2 billion, apartments here dominating the sales at 68%. Yas Island ranked third at AED 919 million with villas leading the sales at 65%. The total value of transactions across Abu Dhabi increased substantially to AED 6.1 billion, representing a growth of 103% compared to the same period last year.

Residential values across Abu Dhabi's freehold areas experienced 1.6% growth in Q2, taking average prices to AED 979 per square foot (psf), representing a 2.8% increase on 2022. 

Faisal Durrani, Partner, Head of Research, Middle East and North Africa, commented: “The relative stability and substantive ‘discount’ on the last market peak are two key factors influencing buyer behaviour. Average prices remain 25% cheaper than the 2014 peak and values have remained relatively unchanged for three-and-a-half years now, which is instilling confidence in buyers to transition from renting to owning or upgrading where possible. 
“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%) since early 2020 as buyers use the opportunity to upgrade from apartments to villas”. 

When segmenting by property types, villas (AED 871 psf) are now 16.1% more affordable than 2014 levels, compared to apartments (AED 1,035 psf) which trail the last market high by 27.2%. 

Villa prices grew 4.7% between March and June and are now 5.7% higher than this time last year.

Notably, the growth in villa prices is more pronounced in the low to mid-tier segment of the market, particularly at Al Reef Villas (AED 686 psf) and Al Raha Gardens (AED 826 psf), experiencing price growth of 16.9% and 4.9%, respectively, since January 2020, in contrast to a 0.8% decline at Saadiyat Island (AED 1,337 psf).

Durrani continued: “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. While Saadiyat Island continues to offer excellent relative value for money at around AED 1,300 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”.

Abu Dhabi’s affordability

Assessing Abu Dhabi's affordability scene, Knight Frank’s analysis of average incomes to average house prices reveals that most submarkets remain 'affordable,' requiring households to save under six times their annual income to purchase a property. However, Saadiyat Island's villas stand out as the most expensive, with house prices exceeding 20 times the average household income.

The stability in prices across Abu Dhabi's freehold areas can be attributed to the limited number of new homes currently under construction. A total of 33,700 homes are expected to be delivered by the end of 2027, with 59% of them being villas. This is set to surpass historical completion levels, gradually increasing the total supply and also likely maintaining the price stability being enjoyed by the market, Knight Frank says.

While the overall supply in Abu Dhabi appears relatively low, new project launches are gathering momentum, with approximately 12,700 units still in their launch stage, according to Knight Frank’s analysis. Q2 witnessed the unveiling of 15 residential projects, with the number of villas and apartments released being evenly matched at approximately 6,000 each.

Leasing market
Apartment rents have experienced a 0.3% increase since Q1 but are -0.4% lower than last summer. Villa lease rates, on the other hand, have seen an upswing in demand, except in more affordable submarkets like Al Reef Villas and Al Raha Gardens.

For the city, average annual residential lease rates stand at AED 60 psf, a 0.4% rise from this time last year, according to Knight Frank.

Stephen Flanagan, Partner, Head of Valuation Advisory, Middle East & North Africa, explained: “While rents in general continue to reduce, villas are a star performing subsector in the leasing market, with a notable upswing in lease rates across Abu Dhabi, with the exception of more affordable submarkets, such as Al Reef Villas and Al Raha Gardens, where annual rents stand at AED 42 psf and AED 51 psf, respectively, where rents have been unchanged over the last 12-months. 

“As is the case in the sales market, tenants are upgrading their rental accommodation where possible which in turn is driving up demand and lease rates for larger apartments and villas, in particular”.