Social distancing measures, coupled with Covid- 19’s economic impact, affected Abu Dhabi market performance over Q2, with the capital’s residential sector seeing an overall reduction in agency activity.
Average values declined moderately over the second quarter, with apartment and villa prices falling by 1.4% and 1.3%, respectively, broadly in line with the pace of declines witnessed over Q1.
The economic impact of Covid-19 was more evident across Abu Dhabi’s rental sector, with average apartment rents falling by 2.2% quarter-on-quarter (q-o-q) and 4.7% year-on-year (y-o-y), with villas seeing more moderate declines of 2% q-o-q and 4.6% y-o-y. This compares to quarterly declines of just 1% for apartments and 0.6% for villas over Q1 2020.
Although social distancing policies broadly restricted rental activity over April and May, agents reported a clear rise in enquires over June, largely driven by tenants either looking to reduce rental costs or take advantage of lower rents to upsize.
The proactive policy response from both UAE and Abu Dhabi authorities served to ease Covid-19’s overall economic impact over Q2. The residential sector further benefited from March decisions by both Abu Dhabi authorities to waive municipality fees and the UAE Central Bank to increase the loan-to-value ratio for first-time buyers.
The outlook for Abu Dhabi’s residential sector will be closely tied to the performance of the wider economy. Over the second half of 2020, we expect residential prices and rents to decline further, driven by a fall in the expatriate population and an overall economic contraction. With current forecasts projecting a return to economic growth next year, we expect to see greater stability across both prices and rents over 2021.