Abu-DhabiThe changing patterns of supply and demand led to a mixed performance for specific pockets of the Abu Dhabi real estate market in Q1 2014.

According to Asteco Q1 2014 real estate report, average apartment sales prices increased by 9%, 2% less than the previous quarter. Average villa sales, climbed 6% during Q1 2014, 3% higher than the previous quarter.

Meanwhile residential rental rates softened further in Q1 2014, especially at the lower end of the Abu Dhabi Island quality scale, with little or no increase in some areas, while high-end properties in investment areas recorded modest increases of between 1-3%, the Asteco report says.

In terms of sales prices, there was robust demand for apartments at Al Raha Beach due to limited availability, with rates now between AED 1,000 and AED 1,550 per square foot. The Gate Towers at Shams Abu Dhabi have also benefited from increases following their recent handover, which saw prices increase by 19% to AED 1,400 per square foot on average.

Low to mid-end developments, such as Reef Downtown, continued to record price increases above market averages, as buyers searched for more affordable options. Prices at Reef Downtown started from AED 900 per square foot, representing a 21% increase from the Q4 2013.

Villa sales price growth was predominantly driven by a lack of supply for freehold villa developments, especially within the affordable segment. For instance, sales prices for Al Reef Villas grew by 50% over the last 12 months. On average a three-bedroom villa now costs around AED 1.95 million compared to 1.65 million a year ago.

Elsewhere, 3BR type properties in Raha Gardens, Golf Gardens, and standard Saadiyat Beach Villas, were priced at AED 2.33 million, AED 2.85 million and AED 5.33 million respectively.

Rental rates for prime two-bedroom apartments on Abu Dhabi Island now average at AED 200,000 per annum, whereas similarly sized properties in the investment areas of Al Raha Beach and Saadiyat Island, currently lease for an average of AED 190,000.

At the lower end of the market, two-bedroom apartments on Abu Dhabi Island are renting for an average of AED 80,000 per annum while the same size apartment in the investment area of Reef Downtown will cost AED 95,000 per annum on average.

In terms of villas, a three-bed property on Abu Dhabi Island now costs on average AED 190,000, compared with Al Raha Beach and Saadiyat Island, where the same sized villa will cost AED 260,000 and AED 300,000 per annum respectively.

Abu Dhabi office leasing rates continued to witness low levels of transactional activity in Q1 2014. However, Grade A office space showed signs of recovery with moderate growth levels last quarter for both shell & core and fitted space. Office leasing rates increased by 3% and 4% for fitted and shell & core offices, respectively, in recently completed buildings. Rental rates for completed older good quality buildings increased by 2%, averaging up to AED 1,020 per square metre per annum.

Rental rates for Grade B office space showed signs of stabilising with no rate fluctuations. Asteco anticipates approximately 600,000 square metres of office stock will be delivered in 2014; however, the vast majority of this stock is owner-occupied and will not be available for lease.