Abu Dhabi Real Estate Market 2024

Transaction volumes, values and rents increased over the past year as demand remained robust. Looking ahead, the outlook for 2024 remains positive, with analysts forecasting further price growth, especially for residential properties. This blog post will analyse the key trends that shaped Abu Dhabi’s property market in 2023, examine different sub-markets and asset classes, and provide a forecast for 2024 based on available data and expert opinions.

Macro Analysis of the Abu Dhabi Market

Transaction Volume and Value Growth in 2023

Transaction data for 2023 shows continued momentum in Abu Dhabi’s real estate sector. According to official figures, the existing/ready transaction value in Q3 2023 contributed to 13% of the total sales transactions value compared to 36% in Q3 2022, reaching AED 1.873bn ($510m), while transaction values witnessed a notable increase of 25% compared to AED 1.502bn ($409m) in Q3 2022. Regarding transaction volumes, deals grew by 27.2% annually to reach 16,556. This ongoing growth underscores the strength of underlying demand drivers such as population increases, economic expansion, and wealth accumulation in the emirate.

Yas Island emerged as Abu Dhabi’s top-performing sub-market regarding transaction values, recording AED 4.2 billion deals in 2022 alone. Other popular locations included Al Reem Island (AED 3.4 billion), Saadiyat Island (AED 3.1 billion), and Khalifa City (AED 2.7 billion).

In Q3 2023, Abu Dhabi recorded a significant increase in sales transactions, with 4,160 recorded. This represents a 32% increase from the previous quarter and a 102% surge from the same period last year. Key projects launched during this period included Gardenia Bay on Yas Island, Vista 3 on Al Reem Island, Perla 3 in Yas Bay, Al Jurf Phase 2 in the Ghantoot area, Murjan Saadiyat on Saadiyat Island, Icon Tower in Yas Bay, and a new phase of Saadiyat Lagoons.

In addition, several new projects, including residential, commercial, and mixed-use developments, are in the planning and design stage, with official announcements expected in the next six months. This shows buyers’ continued appetite for new developments.

Residential Property Price Appreciation

According to official data, the average residential prices across Abu Dhabi’s freehold areas grew by 1.2% in the first quarter of 2023, pushing the average to AED 964 per square foot. Although this increase was modest, it underscores how stable prices have remained despite rising interest rates and global economic headwinds. Villa values moderated slightly over this period (down 2.2%) but were still 1.2% higher annually. Apartment prices outperformed, rising 0.5% quarter-on-quarter and 1.2% year-on-year to average AED 1,030 per square foot.

When analysing longer-term price performance, it is clear the low-to-mid market segments have seen more robust growth relative to prime locations since the beginning of the pandemic in January 2020. For example, villas in Al Reef and Al Raha Gardens rose 16.8% and 5%, respectively, versus just 0.4% at ultra-prime Saadiyat Island.

This points to continued upgrades by homeowners looking for larger living spaces at accessible prices. Apartment values also saw resilient performances, especially along the Al Raha Beach corridor, now just 2.1% below pre-Covid levels after growing 2.1% since early 2020.

Rents on the Rise Across Segments

Rental rates have been upward for much of 2023 across Abu Dhabi. According to official data, average lease rates stood at AED 60 per square foot in Q1 2023, a decline of just 1.1% year-on-year but an increase of 3.6% versus January 2020 levels at the onset of the health crisis. Villa rents have rebounded the strongest, rising 4.2% annually and eclipsing their pre-Covid peak. This is driven by continued demand to upgrade to larger living spaces on long-term leases.

Luxury villas on Saadiyat Island and Al Raha Beach recorded some of the biggest rental price hikes. In Saadiyat, average rents grew 15.2% over the past year to a sizable AED 84 per square foot, while Al Raha Beach saw 7% annual growth. More affordable locations like Al Reef and Al Raha Gardens have also experienced rent increases, signaling broader-based rising. Going forward, job creation should support further organic growth as occupancy levels remain high across most segments.

Plenty of New Supply

A key factor maintaining the balance between supply and demand in Abu Dhabi’s housing market has been relatively constrained to new project launches over the past several years compared to Dubai. According to estimates, around 29,000 residential units are currently under construction and will be completed by 2025. Of these, 58% or 17,000 units are villas, while around 12,000 are apartments. Some of the largest future projects until 2025 include Yas Island (over 5,400 units), Khalifa City (nearly 5,000 units) and Baniyas North (2,800 villas).

Going forward, newly announced launches are gaining traction but will still be absorbed smoothly, given the small ongoing inventory. Around 5,600 units spread across prime locations like Saadiyat Island, Al Jubail Island, Yas Island, and Mohammed Bin Zayed City remain in pre-construction phases. Major master-planned communities like Ramhan Island, Dhafra City and Zayed City are set to break ground in the coming years with tens of thousands of new homes. The controlled pace of new supply should underpin the stability of Abu Dhabi’s housing sector.

Commercial Real Estate rising

On the commercial real estate side, leasing activity gained strong momentum in 2023 due to rising economic optimism and business expansion plans. The average occupancy of Grade A offices reached 97% across Aldar’s portfolio in Abu Dhabi during the first half of the year, reflecting high tenant demand in central business hubs like Abu Dhabi Global Market Square.

The retail leasing environment also improved, aided by the return of tourists and events. Mall vacancies declined across mature neighbourhoods like Khalidiya, Marina Mall and Marina Square. Upcoming lifestyle destinations like Almaryah Island continue drawing interest as well. The industrial and logistics space has been a champion, too, with vacancy rates in the low-to-mid single digits driven by strong e-commerce adoption. Speculative developments are ramping up here to exploit robust underlying leasing fundamentals.

Abu Dhabi’s commercial real estate segment is gaining traction as the business climate stabilises. While there may be some turbulence in certain asset classes due to global economic conditions, the foundational drivers of demographic growth, infrastructure spending and business expansion should support ongoing rising over the long run. A return of international visitors post-pandemic provides added potential upside as well.

Abu Dhabi Housing Authority Steps

Under the directives of the President of the UAE, Sheikh Mohamed bin Zayed Al Nahyan, Sheikh Khaled bin Mohamed bin Zayed Al Nahyan, Crown Prince of Abu Dhabi and Chairman of the Abu Dhabi Executive Council, inaugurated the Al Wathba housing project. The project provides 347 new homes to citizens at a cost of AED1.1bn ($299.4m). The project was built per the highest international standards and features sustainable design. It will meet the needs of citizens and enhance their well-being and quality of life.

Sheikh Khaled emphasised the importance of ensuring high-quality housing for Emiratis in Abu Dhabi, underscoring the leadership’s commitment to cultivating a secure and stable environment for its citizens. The project covers 875,000 sq m and includes various community facilities, such as four commercial complexes and 64 shops. It also has 15 parks and four mosques.

Following the inauguration, Sheikh Khaled witnessed the signing of a public-private partnership agreement to develop community facilities at the project. Since its establishment, the Abu Dhabi Housing Authority has provided more than 39,000 residential plots and more than 16,000 new homes. It has approved over 44,000 housing loans and facilitated housing loan exemptions for 4,000 beneficiaries. The total value of the housing benefits delivered has been AED141bn ($38.4bn).

Strong demand for off-plan Abu Dhabi developments

According to experts, the rental market in Abu Dhabi experienced annual growth rates of approximately 3% for apartments and 4% for villas.

Average apartment rental rates saw marginal growth over the quarter, while prime and high-end developments recorded notable increases ranging from 4% to 6%. The villa market exhibited robust demand, particularly in new communities. Office rental rates in Abu Dhabi surged by 6% over the quarter and 10 % year-on-year, driven by limited availability of prime office space, expanding businesses, and proactive government initiatives to attract foreign investment.

Apartment sales prices in the city remained relatively stable. In contrast, villa sales prices experienced a modest increase of 1% quarter-on-quarter and 3% year-on-year, primarily driven by the value appreciation of the Hidd Al Saadiyat development. Demand for off-plan developments, particularly high-quality ones, remained strong, with significant interest from foreign investors.

Analyzing Sub-Markets

Let us analyze some of Abu Dhabi’s key sub-markets in more detail based on their recent performance and 2024 outlook:

Saadiyat Island

As one of Abu Dhabi’s most exclusive luxury beachfront enclaves, Saadiyat Island remained highly sought after. According to the Q3 report, the average sales price for villas on Saadiyat Island was AED 8.73 million, with an ROI of 5.83%. The price per square foot averaged AED 1,422. While prices saw corrections earlier in the year, demand will remain strong given the scarce luxury waterfront locations.

Yas Island

Home to world-class attractions, Yas Island saw strong demand with an average villa sales price of AED 4 million and ROI of 4.94% in Q3. The price per square foot was AED 1,239. Over 5,400 new units will launch by 2025, ensuring the community remains vibrant. Rental upside is anticipated as the lifestyle amenities draw more families and professionals.

Reem Island

Centrally located, Reem Island experienced price growth, with apartment prices averaging AED 1.27 million in Q3 and an ROI of 6.57%. The price per square foot rose to AED 1,064. Infrastructure upgrades are enhancing the area’s appeal for residents and investors alike. Nearby ADGM Square offices also maintain high occupancy rates.

Al Raha Beach

As a stable, landscaped coastal community, Al Raha Beach apartments averaged AED 1.66 million in sales price during Q3. The area offers a balanced lifestyle and remains attractive to families and HNIs.

Al Reef/Al Ghadeer

More affordable options, these areas saw price increases in Q3, with Al Reef recording the top ROI of 8.16%. Apartment prices averaged AED 556,000 in Al Ghadeer and AED 785,000 in Al Reef. Upgrades raise values as buyers seek good value close to the city centre.

Abu Dhabi Real Estate Market Forecast 2024

Based on the market dynamics, here are our forecasts for Abu Dhabi’s real estate sector in 2024:

• Residential prices to rise 5-7%: Led by continued strong fundamentals, average residential values across Abu Dhabi are projected to jump 5-7% next year, according to analysts.
• Demand to remain robust: Population growth from expat arrivals and citizens, wealth accumulation, and economic expansion should fuel persistent buyer and renter appetite ** Off-plan sales to stay elevated:* Developers are launching new mega-communities that will drive over AED 10 billion in off-plan transactions during 2024 *** Core-plus yields to declin**e: As prices rise and cap rates compress, core-plus residential assets may offer lower yields, around 4-5%, compared to current 5-6%
• Luxury segment rotation: After correcting this year, prime areas like Saadiyat will stabilise and begin recovering lost ground through 2024
• Rent upsurge: Average: lease rates are expected to jump 5-8% across the board next year on the back of supply constraints and high occupancy levels
• Reem Island take-off: Rents and values at the central business district will surge 10-15% as infrastructure upgrades gather pace through 2024 *** Yas Island continuity:** Steady 3-5% rental and price appreciation expected as new launches are absorbed and amenities enhanced
• New node emergence: Sectors benefiting from infrastructure spending like Mohammad Bin Zayed City and Baniyas to witness outperformance
• Office market rebound: Occupancy to top 98% in core hubs while prime Grade A rents begin creeping up from currently flat levels
• Retail rising: Mall rents which declined during the pandemic expected to start appreciating by 2-4% as spending rebounds

The UAE capital is well placed to ride global uncertainties during 2024 due to large sovereign wealth reserves, a diversified economy and prudent fiscal policies, according to analysts. While price corrections cannot be fully ruled out for ultra-luxury areas, the overall property market is forecast to deliver healthy growth led by the residential space. Macroeconomic stability, new project launches, infrastructure spending and population gains will facilitate an upbeat trajectory.

Best Place to Buy Property in Abu Dhabi in 2024

The real estate market in Abu Dhabi has been thriving in recent years, with many new development projects and demand for property purchases. When deciding where to invest in property, it’s important to consider areas that offer a high return on investment through capital appreciation and rental income potential.

Some of the top areas in Abu Dhabi that are projected to be good investments for buying property in 2024 include:

Al Reef

With an impressive ROI of over 8%, Al Reef has been one of the best-performing areas for apartment investments in Abu Dhabi. It has good infrastructure and is surrounded by amenities. Apartment prices start from around AED 400,000 making it affordable too. With ongoing development projects, demand will likely remain high in Al Reef.

Masdar City

As one of the most sustainable neighborhoods in Abu Dhabi powered by solar energy, Masdar City is increasingly popular among investors looking for green properties. It has a proven ROI of around 7% and is well-connected to the airport. More corporate offices and residents are expected to move to Masdar City, boosting capital values.

Al Reem Island

Benefiting its prime waterfront location and luxurious living, it has consistently seen strong investor demand. Its free internal transport and proximity to facilities have led to high rental yields. Apartment prices are mid-range at over AED 1 million on average. As the island develops further with the likes of Galleria Mall, values will likely appreciate further.

Yas Island

As a major leisure and entertainment hub of Abu Dhabi, Yas Island is constantly growing with new attractions, Hotel apartments and condos. Despite higher average purchase rates of AED 1.4 million, it delivers over 6% ROI through rent. Adding an F1 race track, Warner Bros park etc, the renter pool will expand, making Yas Island one the top buy-to-let destinations.

Al Maryah Island

Al Maryah Island is transforming into a vibrant mixed-use community close to downtown Abu Dhabi and Al Reem Island. Luxury apartments & condominiums are popular plus stellar amenities like Galleria Mall. With an ROI of nearly 9%, it offers high returns for investors. Additional developments will support capital gains.

Saadiyat Island

As the cultural hub and home to iconic landmarks like the Louvre Abu Dhabi, demand for Saadiyat Island property is evergreen among global investors. Despite costs upwards of AED 2 million, villas and apartments yield over 5% rental returns. The scope for Airbnb rentals is further lucrative. Future projects like Guggenheim will bolster appeal.

Conclusion'

In summary, most indicators point to the ongoing rise of Abu Dhabi’s real estate market, strengthening further in 2024 due to strong economic expansion and new project launches. Prices and rents are forecast to increase across all major asset classes, led by enduring demand drivers and moderate new supply timelines.

With infrastructure spending ramping up, emerging suburban hubs will also deliver value upside. Real estate investors can capitalize on the emirate’s positive property market trajectory next year by pursuing a balanced portfolio approach backed by diligent research.