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Abu Dhabi office market set to weather lower oil prices
Lower oil prices could lead to possible implications for the Abu Dhabi real estate market but commercial property should be able to shrug off such concerns, according to a new analysis. The region’s medium to long term prospects remain strong and there is a limited office supply pipeline which has led to vacancy rates dropping for Prime and Grade A offices in the to 26%. Overall the commercial sector saw a marginal slowdown in the number of enquiries in the second half of 2014, according to the latest Abu Dhabi office research report from international real estate firm Knight Frank. The fall may be due to companies reviewing the impact in falling oil prices and nearly 80% of enquiries were between 100 and 500 square meters, data in the report shows. The overall effect on market rents over 2014 was minimal, but the firm suggests there could be further improvements in headline rents, as little prime or Grade A supply enters the market. Take up during 2014 was still dominated by the oil and gas sector at 16% and government at 15%, which positively impacted the absorption of new accommodation in Abu Dhabi. The leisure and hospitality sector witnessed an increase in the number of enquires, which reflects the government’s efforts in diversifying the economy and growing this sector. Prime office rents edged up in Abu Dhabi in the second half of 2014 to AED1,800 per square meter whilst rental values for Grade A shell and core office space remained steady at AED 1,200 per square meter. Market sentiment through the diversification of the economy continues to improve with mega projects such as Khalifa Port, registering a growth rate of 24% from January to September 2014, compared to the corresponding period in 2013, the report points out. With the Midfield terminal due to be completed in July 2017, this will be expected to positively impact the economy further, in both trade and tourism and the Abu Dhabi Global Market (ADGM), the newly formed international financial centre in Abu Dhabi, announced that it has signed a 50 year lease for the Financial Building, Al Maryah Island which is owned by a Mubadala subsidiary. The report explains that ADGM will be responsible for establishing a legal jurisdiction, registering entities within the freezone and regulating all financial services activity on the island in line with international standards and under English Common Law. ‘The market dynamics continue to change in Abu Dhabi as the city expands further from the main island,’ said Matthew Dadd, head of Abu Dhabi commercial leasing at Knight Frank. ‘Regardless of economic trends, Abu Dhabi real estate continues to offer a good depth and breadth of opportunities for occupiers, although there is a limited pipeline of new office accommodation which will impact the market in the coming years,’ he added. Continue reading
Acute supply problems affecting residential building land in Australia
The residential land market in Australia is suffering for acute supply problems with prices rising and turnover falling, a new report reveals. Turnover in the national land market declined by 16.7% during the September 2014 quarter and at the same time, price growth accelerated to 3.3%, according to the latest report from the Housing Industry Association and CoreLogic RP Data. ‘There are clearly pressures building in terms of new residential land supply. During the September 2014 quarter, the number of land market transactions fell, while price growth accelerated which are classic hallmarks of a market which is fast running into supply problems,’ said Shane Garrett, chief economist of the HIA. ‘It is important that land supply policy across Australia is consistent with the goal of housing affordability. The process of delivering new land supply and the requisite infrastructure for new housing is currently too slow and too expensive,’ he explained. ‘It appears that shovel-ready residential land is starting to dry up against the backdrop of record new home building activity. Policymakers have to intervene in order to allow for Australia’s long term housing needs to be met,’ he added. During the September 2014 quarter the weighted median price of residential land rose by 3.3% to $212,727 per lot, an all-time high for land prices nationally. The data also shows that capital city land prices saw growth of 4.7% during the quarter, and were 10% higher than 12 months earlier, however some of this was due to an increase in the size of land lots transacted. In regional Australia, land prices rose by 0.7% during the quarter and were 3.5% higher compared with a year earlier. Land prices reached an all-time high in both the capital city and regional markets. According to RP Data research director, Tim Lawless the increase in land prices is a concerning development particularly given that dwelling approvals and construction are currently at record high levels. ‘Dwelling commencements are currently at a record high and the Reserve Bank has previously highlighted that their hope is to extend this current period of heightened construction over a number of years,’ he said. ‘Given that land sales have been trending lower since the June 2013 quarter, it does not bode well for this period of heightened construction to come to fruition. The vacant land which is being sold is selling for an increasingly expensive price, remember that it is the high cost of vacant land which significantly contributes to the increasing cost of housing,’ he explained. ‘Ideally we should be seeing more land bought to the market and sold during this period of low borrowing costs. This would help to curtail the increases in the cost of this vacant land,’ he added. Continue reading
Northern UK cities catching up in house price growth terms
UK house prices in key cities rose by 7.9% in the 12 months to January 2015, however prices were up just 1.1% in the last quarter of the year as the slowdown continued. The data from the latest Hometrack cities house price index shows that year on year house price growth ranged from 4.1% in Glasgow, where house prices average four times average earnings, to 8.6% in Oxford and London where house prices average 12 times average earnings. The high growth cities of 2014 continued to see the rate of growth slow with London down to 13.6%, Bristol at 10.8%, Oxford at 8.6% and Cambridge at 5.3% while six out of the 20 cities hit their post downturn lows just two years ago, but are now up by an average of 9% and will drive future growth. It means that house prices have risen by as much as £144,000 in cities that bottomed out in 2009 but as affordability has affected growth elsewhere Overall the impetus behind continuing UK house price growth is shifting towards cities like Liverpool, Sheffield and Glasgow, which bottomed out only two years ago, away from the cities that started to recover in 2009 but have since slowed due to pressures on affordability. Over the last six years, London and Oxford have experienced house price growth of 55.2% and 42.1% respectively since the trough. However affordability pressures will limit growth in the medium term with both cities registering over 12 times the price to earnings ratios, almost twice the UK average of 6.3 times. By contrast in cities that only started their recovery two years ago such as Edinburgh (10.7%), Leeds (10.1%), Newcastle (8%) and Glasgow (6.3%), house prices are averaging between three and six times the average earnings. There are 14 UK cities in total that have been recording house price growth since 2009, but the length of the recovery does not provide a guide to the level of house price growth. While London has seen the average house value increase by 55% or £144,000, the rebound in house prices in Manchester and Birmingham have been just over 10% or £12,500 over the same period. The six cities that have been recovering for the last two to three years have recorded an average increase of just 9% or £11,000 led by Belfast and Edinburgh. The weakest growth has been seen in Glasgow with average prices up 6.3% or £6,300 since July 2012. ‘A focus on average UK house price movements masks critical trends at a city and sub-regional level. This is important for both businesses operating in the housing market and policy makers trying to address the challenges of growing housing supply,’ said Richard Donnell, director of research at Hometrack. ‘House price growth within cities reflects the strength of their local economies and the demand for housing. While Manchester and Birmingham saw prices bottom out in 2009, growth has been more subdued than in other cities… Continue reading
