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Economy slowing and lower oil prices affecting Abu Dhabi’s rental markets
Average housing rents in Abu Dhabi have fallen for the first time in three years, driven by thousands of job cuts and an increase in the cost of living. The first signs of long expected falls in housing rents in Abu Dhabi started to appear in the second quarter, according to new reports from property brokers JLL and CBRE. Residential property rents in Abu Dhabi have fallen for the first time in three years at a time when jobs are being cut and the cost of living is increasing. The average rental price of a prime two bedroom apartment fell by 2% in the second quarter of 2016 compared with the first quarter, according to the latest report from real estate services firm JLL. The latest report from property firm CBRE also shows that there was a 2% fall in apartment rents in the second quarter of the year while it adds that villa rents fell by an average of 1%. ‘While supply remains stable, the reduction in demand has now started to cause vacancy rates to nudge upwards, indicating we have now reached a tipping point with rents declining for the first time in three years,’ said David Dudley, head of JLL’s Abu Dhabi office. The firm believes that plans by the state owned oil company Adnoc to cut 5,000 jobs by the end of the year, and staff cuts at other government companies, means fewer people are attracted to the emirate and apartments are left empty. JLL is forecasting that rents will fall further this year as more expats and their families are expected to leave as their tenancies expire at the end of the academic year. ‘We expect the impact of these job cuts and reduced incomes to become more pronounced over the summer, as some people look to either leave or downsize. This will push vacancy rates up further and cause rents to decline,’ explained Dudley. The CBRE report also points to a drop in incomes as being behind demand falling for rental apartments with tenants looking for cheaper lets due to a combination of falling wages, a reduction in allowances and benefits, the removal of fuel and water subsidies and a new 3% municipality fee on Abu Dhabi expat rentals. ‘With economic challenges expected to continue in the short term, we anticipate further deflation of high end luxury rates as reduced corporate demand creates a more tenant led market,’ said Matthew Green, head of research in CBRE’s office. He believes that with just 14,500 new homes expected to come to the market over the next two and a half years, around 5% of the current housing stock most of which will be aimed at the upper end of the market, rents for more afford¬able homes are likely to remain fairly flat. ‘With limited stock against current requirements, rental rates for affordable units have remained steady with minimal fluctuation recorded against the general slowdown observed in the upper segments,’ he added. But… Continue reading
Brexit analysis shows vote has affected UK prices and sales
Overall, both property prices and sales in the UK have fallen by around 8% since the referendum decision to leave the European Union, but there are wide regional variations. London, the Home Counties and Northern Ireland have been the hardest hit by Brexit, according to a survey covering the four weeks before and after the vote on 23 June carried out by ReallyMoving. It found that sales fell by 8% and prices also fell by 8% across the country but sales were down much further in London by 44% while prices in Scotland increased by 15%. Sales volumes fell markedly, down 12% for the month after the vote compared to the month before, based on the 35,000 people who registered for quotes for conveyancing, surveys and removals with the firm. Although some summer seasonal decline is expected, typically around 4% to 5%, the firm says that this is a seasonally adjusted 8% fall, an unusually high volume drop and the fall of 8% in average property is a significantly larger month on month change than seen at any point in the previous five years. Looking at the breakdown in prices and transaction volumes across the UK reveals striking regional differences. While London remains by far the highest-priced region, prices have fallen 12% since Brexit, and property purchases down 44%. The number of property purchases has fallen in all regions, most strongly in London, the Home Counties, and Northern Ireland, while Wales saw a drop of just 3%. Although prices fell significantly in London, there were even bigger declines in the North East of England and Northern Ireland, as both fell 17%. But, prices rose by 15% in Scotland, and by a more modest 7% in Wales. International moves have increased markedly since Brexit, but only for moves away from the UK, which have increased by 43%. Moves to the UK are broadly unchanged. The most popular destinations for international moves from the UK are to Spain, USA, Canada, Australia, Germany and Italy. ‘Brexit has had a marked impact on the UK property market. The drop in transaction volumes has been striking, particularly in London, the Home Counties and Northern Ireland,’ said Rob Houghton, chief executive officer of ReallyMoving. ‘In the medium term we would expect volumes to pick up if the price falls are maintained, but it is clear that many prospective home movers are sitting tight until there's greater clarity over the post-Brexit economy and our likely new relationship with the rest of the EU,’ he added. Continue reading
Call for funding changes for more homes to rent in UK
New UK housing minister Gavin Barwell is being urged by property industry commentators to support the building of more new homes to rent by relaxing the rules around public funding in the sector. The appeal has been launched in response to an independent report published this week by the Centre for Economic and Business Research and commissioned by the National Housing Federation which predicts that the UK economy could contract by £145 million in the next 10 years if the rate of growth in new housing completions falls at the same rate as it did in 2008. Spokesmen for the National Housing Federation and the Chartered Institute of Housing argue that building more homes for rent or shared purchase would help keep housebuilding and the economy going in a time of economic austerity. Up to 300,000 units could be built by housing associations by 2020, according to the NHF, if funding is made available even in the face of economic uncertainty. CIH statistics show that during the last recession the number of homes built by non-profit housing associations increased by 22% between 2007 and 2009, while private development dropped by 37%. The call from the sector bodies for the government to redirect some of the current funding to allow construction of new housing association homes for rent is likely to be welcomed by would-be occupants, demand from whom currently outstrips supply. Reallocation of the central budget to allow housing associations to build more rental homes would also mitigate the negative effects of a general slowdown in the housebuilding sector, widely anticipated as a result of Brexit, according to James Howard, partner in Clarke Willmott LLP’s social housing development team. ‘A change in funding strategy to switch the balance to building more for rent than for sale should allow for a supply of new homes to continue despite the gap private sector housebuilders might leave behind,’ he said. According to Jonathan Hulley, Clarke Willmott’s head of housing and asset management, the Government’s flagship Starter Homes scheme would lead to the undermining of sales of more affordable shared ownership properties and fails to address the urgent need for more affordable homes to rent. ‘The social housing sector argues that housebuilding is needed now more than ever. People are in need, waiting lists are still growing, so the policy of building more homes for sale only needs to be revised and adapted to allow for the building of more homes for rent,’ he said. ‘There is also a worrying lack of capacity on the ground to deliver which needs to be addressed, and a question mark over what appetite there is for outright purchase of houses on large scale,’ he pointed out. ‘On the other hand the kind of shared ownership offered by housing associations puts… Continue reading
