The wider economic outlook for the UAE is encouraging, according to the Asteco Q3 2022 Real Estate Report, fuelled by a proactive government with a clear focus on economic progress and sustainability. Business reforms and government initiatives, such as the Golden Visa, a rebound in global travel, increased tourism, and retail activity from the FIFA World Cup in Qatar in Q4 2022 and more general efforts towards transitioning to a digital-driven economy are also sighted as important drivers going forward.

Abu Dhabi Residential and Office Market

In Abu Dhabi, the residential market recorded the delivery of approximately 1,000 apartments in Q3 2022 across Al Raha Beach, Reem Island, Yas Island and Saadiyat Island communities.

While several other projects have been launched in the last four to six months, the third quarter also recorded a number of noteworthy project launches including Al Jubail Island - Ain Al Maha Village comprising approximately 240 villas, and Yas Park Gate, which will bring around 500 residential units to the market once completed.

Despite the fact that apartment rental rates remained more or less unchanged over the last three months, Asteco has recorded marked rental growth for a selection of prime and high-quality developments. In contrast, there have been marginal rental rate declines for several lower-quality buildings located on the Abu Dhabi main island. This is predominantly due to the increase in relocations from the city to areas that have seen the delivery and handover of a significant amount of new supply over the years, including Al Reem Island.

Villas and townhouses continued to achieve strong levels of demand, particularly within well-developed communities. Average villa rental rates increased by 2% in Q3 2022, while prime quality villa communities achieved rental growth of 4% to 6% over the quarter and in excess of 10% annually.

As for the sales market, residential sales activity continued strongly in Q3 2022 with high levels of demand for new off-plan villa projects, as well as completed villas, particularly within well-developed communities.

Over the last twelve months, the villa sales market performed exceptionally well. High-quality villa communities, predominantly located on Saadiyat Island and Yas Island, recorded increases of 3% to 8% in Q3 2022, and over 10% compared with the same period last year. In comparison, apartment sales prices rose marginally by 1% on average over the last three months and 4% since Q3 2021. Projects in Al Raha Beach saw a notable increase in demand over the last six to twelve months

Although office rental rates were relatively stable over the last three months, there was an increase in demand for new space, which is likely to be reflected in an improvement in rental rates in the next quarter.

Dubai Residential and Office Market

The strong momentum in Dubai's real estate market continued unabated in Q3 2022, with a steady slew of new project launches and handovers, backed by strong transactional activity for off-plan and completed properties across all asset classes.

In the third quarter, 6,000 apartments were delivered, similar to previous quarters. Meanwhile, villa supply increased significantly. In H1 2022, just under 800 units were handed over, compared to 2,000 properties added in the previous three months alone. The vast majority of new villa deliveries were concentrated in upcoming developments such as Damac Hills 2 and Dubai South.

Average apartment and villa rental rates continued their upward trajectory in Q3 2022 with quarterly increases of 4% and 5% respectively. Annual rental growth in the villa market remained substantial at 22%, while average apartment rental rates rose by 15%.

Asteco anticipates rental rates to remain elevated towards the end of the year and into 2023, but rental growth is expected to slow with oversupply being a lingering concern.

With regard to sale prices, transactional activity remained strong, both in terms of sales volumes and values. Average apartment, villa and office sales prices rose by 3%, 3% and 5% over the quarter, and 17%, 19% and 21% annually, respectively.

Al Ain and Northern Emirates Market

Apartment rental rates across the Northern Emirates recorded some notable gains over the last three months with average quarterly and annual increases of 3% and 8%. High-end properties marginally outperformed typical stock as a result of buoyed market sentiment and new additions in that sector.

Average apartment sales prices in Sharjah increased by 3% over the quarter and by 8% compared to the same period last year. According to the Sharjah Real Estate Registration Directorate (SRERD), the Sharjah real estate sector recorded a 23% growth in property transactions during the third quarter, registering 16,781 transactions worth AED 5.7 billion due to increased demand from investors and end-users.

Sharjah office rental rates continued their upward trajectory on the back of improved business confidence and government incentives, growing 5% on average over the last three months and 11% compared to the same period last year.

In Al Ain, while the real estate market remained relatively stable across all asset classes, Asteco noted some adjustments, upwards and downwards, in line with current market rates.

Whilst average apartment rental rates recorded no quarterly or annual movement, villa rates declined marginally by 1% over the last three and twelve months. There were no significant new completions and existing good-quality residential communities continue to record high demand levels.

Although average rental rates remained broadly unchanged, landlords continue to offer discounts and incentives, including flexible payment terms. Asteco also registered some interest in office space resulting in stabilised rental rates in Q3 2022.