Property Deals May Not Pick Up Fast In Abu Dhabi In Short Term

Property prices and transactions in the capital emirate are unlikely to increase significantly in the coming months, due to mortgage rate cuts announced recently by the government as well as by some of financial institutions and developers jointly, according to forecasts by Landmark Advisory, a property consultancy firm. The firm expects that delivery of new units will take place only at the end of the second quarter in Abu Dhabi, and the rate cuts announced were likely to jack up the demand for some of the properties which are nearing completion, Hesham Ikhwan, Branch Manager-Abu Dhabi, Landmark Properties, told Khaleej Times. “The limited transaction activity observed during the end of the fourth quarter of last year continues into January and February 2010, with existing demand continuing to focus on close-to-completion developments such as Marina Square, Al Reef Villas, Sky Tower and Al Bandar. “The market has reached a standstill due to the ongoing postponement of delivery dates, especially for projects like Al Bandar and Marina Square,” said Jesse Downs, Director of Research and Advisory Services, Landmark Advisory, in a Press statement on Tuesday. “This trend extends to Al Reef Villas, where the slow handover process is weakening investor confidence.”

Transactional prices in the capital have experienced only marginal declines of up to four per cent as demand levels decreased and sellers became increasingly competitive, the statement said. According to Landmark Advisory, majority of buyers in Abu Dhabi (up to 70-80 per cent) purchase property through finance. On the recent announcement that the government plans to reduce the cost of home loans in the capital, the statement said quoting Ikhwan: “Due to the recent rate reduction, projects financed by Abu Dhabi Finance (ADF) should start to see more demand. At present, ADF finances six out of the fourteen towers in Marina Square and we expect that these towers will receive the most interest.” With lower rates available and the initial completion of freehold supply, more buyers will be encouraged to purchase rather than lease,” added Ms Downs.” The market is currently at a standstill. While these changes are expected to stimulate demand, the improvement will be moderate in absolute terms. We do not expect the volume of transactions to increase significantly in the near future, even for close-to -completion developments. Buyers are now waiting for distressed sales, which are expected to materialize closer to handover, when the largest payment plan installment is due,” said Ms Downs.