Abu Dhabi realty posts record capital gains amid supply squeeze

14/05/2025 05:22 AST

Abu Dhabi's real estate market has posted its strongest capital gains in three years during Q1 2025, driven by robust demand and limited supply, according to a ValuStrat research report.

Despite a slowdown in sales volumes, rising prices and rents across residential, commercial, and hospitality sectors signal sustained investor confidence in the emirate's property market.

The ValuStrat Price Index (VPI) for residential properties surged 2.1 per cent quarterly and 7.2 per cent annually, reaching 125.6 points (Q1 2021 baseline: 100). Villas led the charge, with prices climbing 2.7 per cent quarter-on-quarter (QoQ) and 9.7 per cent year-on-year (YoY) to 134.7 points, while apartments grew more modestly at 1.5 per cent QoQ and 4.5 per cent YoY to 116.9 points.

Haider Tuaima, ValuStrat's managing director and head of real estate research, attributed the gains to constrained supply, with only 2.0 per cent of the anticipated 2025 housing pipeline delivered in Q1.

Rental values also saw significant increases, with the residential rental VPI rising 2.2 per cent QoQ and 9 per cent YoY to 121 points. Apartment rents outpaced villas, growing 3.4 per cent QoQ and 11.6 per cent YoY to 117.6 points, while villa rents rose 6.3 per cent YoY but remained flat quarterly at 124.8 points. Gross yields averaged 7.8 per cent, with apartments at 8.3 per cent and villas at 6.7 per cent, reflecting strong rental demand amid an estimated 88.1 per cent occupancy rate.

Saadiyat Island emerged as a hotspot, recording the highest annual villa price gains at 21.2 per cent, followed by Al Raha (8.2 per cent) and Mohammed Bin Zayed City (4.7 per cent). For apartments, Al Reef led with 7.5 per cent annual growth, followed by Saadiyat Island (6.2 per cent) and Al Muneera (5.7 per cent).

Average home values in Abu Dhabi reached Dh10,226 per square metre, with apartments at Dh10,979 and villas at Dh8,407.

Apartment asking rents in Abu Dhabi City averaged Dh114,000 annually, with Al Reef (3.4 per cent), Al Bandar (2.8 per cent), and Al Muneera (2.5 per cent) posting the strongest quarterly growth. Citywide villa rents averaged Dh245,000 per annum, with Al Reef (1.5 per cent) and Al Raha (1.1 per cent) leading quarterly increases.

Typical annual rents included Dh63,000 for studios, Dh89,000 for one-bedroom apartments, and Dh180,000 for three-bedroom villas.

Despite the price surge, sales activity presented a mixed picture. Off-plan sales dropped due to fewer project launches, though transaction values rose. Ready home sales fell QoQ but grew YoY, with mortgage-backed purchases dominating, indicating stable domestic demand. "Major developers are pushing forward with projects in Saadiyat Island, Zayed City, Ghantoot, and Masdar City, reflecting long-term confidence," Tuaima noted.

The commercial and hospitality sectors also performed strongly. Office prices and rents rose amid high occupancy in central business districts, while retail remained resilient with robust foot traffic. The hospitality sector saw exceptional growth in occupancy and revenue, fueled by a tourism boom.

According to a Knight Frank report, Abu Dhabi's hotel occupancy rates reached 78 per cent in Q1 2025, up 5 per cent YoY, driven by events like the Abu Dhabi Grand Prix and cultural festivals. Analysts attribute the market's strength to Abu Dhabi's economic diversification and government initiatives. A CBRE report highlighted that infrastructure investments and visa reforms have bolstered demand from expatriates and investors. However, limited supply remains a challenge. "The constrained pipeline is pushing prices higher, but sustained development activity could balance the market in the long term," said a CBRE spokesperson.

According to property market analysts, as Abu Dhabi's real estate market continues its upward trajectory, stakeholders are optimistic about its resilience. With tourism and economic growth fuelling demand, the emirate is further stregtheningits status as a prime investment destination, though addressing supply constraints will be key to sustaining momentum.

Khaleej Times