Abu Dhabi Sees Record Real Estate Gains Over Past 3 Years

Abu Dhabi's real estate sector has recorded its most significant capital gains in three years, according to ValuStrat's latest Q1 2025 report. The ValuStrat Price Index (VPI) for the residential sector rose by 2.1% quarter-on-quarter (QoQ) and 7.2% year-on-year (YoY), reaching 125.6 points, with a baseline of 100 established in Q1 2021.

Residential Market Hits 3-Year Capital Gain High

Villa prices led the growth, appreciating 2.7% QoQ and 9.7% YoY to reach 134.7 points. Apartment prices also increased, rising 1.5% QoQ and 4.5% YoY to 116.9 points. ValuStrat attributes this surge to a combination of limited new housing supply and sustained demand from domestic buyers.

Rental values mirrored this upward trend. The residential rental VPI increased by 2.2% QoQ and 9% YoY, reaching 121 points. Apartment rents saw a notable rise of 3.4% QoQ and 11% YoY, while villa rents grew by 6.3% YoY but remained stable over the quarter. The demand for rental properties continues to outpace supply, contributing to these increases.

New Supply Remains Limited

Despite these positive indicators, new housing supply remains constrained, with only 2% of the anticipated pipeline for 2025 delivered during the quarter. However, major developers are progressing with significant residential projects across key areas such as Saadiyat Island, Zayed City, Ghantoot, and Masdar City, reflecting ongoing confidence in the market.

Sales activity presented a mixed picture. Off-plan sales experienced a significant decline, dropping 57.7% QoQ and 79.2% YoY, primarily due to fewer new launches. In contrast, ready home sales were down QoQ but showed an annual increase in values. Mortgage-backed purchases dominated the market, indicating stable domestic end-user demand and buyer confidence.

Commercial Sector Sees Strong Uptick

The office market also exhibited strong performance, with rising prices and rents, particularly in central business districts where occupancy levels remain high. ValuStrat reported that office asking rents grew by 8% QoQ and 31.8% YoY, showcasing the demand for quality office space in the emirate.

Retail performance remained resilient, bolstered by robust foot traffic and tenant sales. Shopping centers are thriving, with strong demand supporting occupancy rates. The hospitality sector is experiencing exceptional results, with hotel occupancy and revenue metrics showing significant YoY growth, driven by increased tourism activity.

According to the Department of Culture and Tourism – Abu Dhabi (DCTAD), the capital welcomed 5.2 million guests in 2024, marking an overall increase of 28.7%. The average room rate for hotels reached AED683, reflecting a notable 37.1% annual increase, while the Revenue Per Available Room (RevPAR) rose 38.7% to AED594. These figures underscore the ongoing recovery and growth of Abu Dhabi’s tourism sector.

Economic Growth Fuels Real Estate Momentum

ValuStrat’s report also highlights macroeconomic factors contributing to the real estate market’s success. The UAE economy is projected to grow by 5% to 6% in 2025, with key sectors such as technology, renewable energy, and infrastructure driving this growth. Abu Dhabi’s economy alone grew by 3.8% in 2024, supported by the non-oil sector and significant contributions from manufacturing and construction.

As the market outlook remains positive, ValuStrat anticipates that modest price increases for residential properties will continue throughout 2025. The interplay between demand, limited supply, and ongoing development projects positions Abu Dhabi’s real estate market for sustained growth.