Real estate firm Core Savills has forecast that prime and mid-prime villa prices in Abu Dhabi will fall by at least 15% this year while apartment prices are set to drop by 7%.

The firm said that the drop in values this year would be close to 2016 levels as similar market conditions persist, implying a drop of almost 30% in just two years.

Its latest market outlook for 2017 also forecast that mid-market communities, particularly buildings with smaller units, are predicted to show some resilience with rents and sales prices staying flat. 

The report said the reinstatement of the 5% rental cap has been received with mixed reviews while the 3% municipality fee payable only by expatriate tenants is adding stress to overall rising household costs. 

Core Savills CEO, David Godchaux, said: “We have seen landlords in mainland areas, who have been inflexible with re-negotiating better rents, losing tenants to outer, more affordable areas.”

He added that almost 2,400 units are expected to come to the market in Reem Island in 2017, and the excess supply will be hard to absorb, most likely causing a noticeable drop in both rental and sales values.