Apartment values projected to outshine villas as residential capital growth hits 16 percent

Abu Dhabi enters 2026 on a foundation of macroeconomic stability and heightened market optimism, a new report revealed. Sustained momentum in non-oil sectors and consistent population growth continue to drive demand across the residential, commercial, industrial, and hospitality landscapes. These structural pillars, paired with a disciplined supply pipeline, position the emirate for a year of robust performance and enduring investor appeal.

Apartments outperforming villa appreciation

According to a new report from global consulting and valuation firm ValuStrat, the residential market is forecast to maintain its upward trajectory, with capital value growth accelerating to 16 percent in 2026, compared to 13 percent the previous year.

A notable shift in market dynamics is emerging, indicating that apartments are projected to outperform villas in terms of capital appreciation. This trend reflects a growing preference among buyers for modern, lifestyle-oriented communities that offer superior value and convenience. Average residential rents are expected to rise by 6 percent, further supporting this trend. Although the development pipeline for 2026 appears substantial, historical patterns suggest that actual handovers will be lower than anticipated. This expected supply tightness is likely to maintain upward pressure on both rental rates and sales prices.

Read more: Abu Dhabi’s real estate market records strongest capital gains in three years: ValuStrat

Prime office supply scarcity

Abu Dhabi’s office sector is experiencing a notable “flight to quality,” with new international businesses entering the market and existing occupiers expanding. However, the market is facing a significant supply-demand imbalance, especially regarding Grade A space, where vacancy rates have reached record lows. With limited new stock scheduled for 2026, this environment is expected to drive rental growth of up to 20 percent in prime business districts. Additionally, there will be pricing resilience, as property values continue to appreciate as investors seek high-quality, efficient workspaces in well-connected hubs.

Expanding luxury hotel inventory

The hospitality sector is poised for a productive year, bolstered by an expanding inventory of four- and five-star properties. These new openings are part of Abu Dhabi’s long-term strategy to diversify its tourism offerings and attract a broader demographic of global travelers. The outlook for occupancy is positive, with expectations for an increase driven by strong seasonal events and family-friendly attractions. Additionally, average daily rates (ADR) are trending upward due to a rise in luxury international arrivals. Revenue per available room (RevPAR) is also strengthening, supported by robust domestic demand for mid-scale and affordable segments.

Sustaining record market momentum

This positive outlook is supported by record-breaking performance in 2025. Data from the Abu Dhabi Real Estate Centre (ADREC) shows that the emirate recorded a staggering AED142 billion in property transactions during 2025, a 47 percent increase compared to 2024. This growth was fueled by a 35 percent surge in foreign direct investment (FDI), with investors from 97 different nationalities entering the market, particularly in investment zones like Saadiyat and Yas Islands.

The commercial sector’s projected 20 percent rental growth follows a year of extreme supply-demand imbalance. In late 2025, Grade A office rents in Abu Dhabi’s Central Business District (CBD) had already climbed by 35 percent year-on-year, driven by the expansion of the Abu Dhabi Global Market (ADGM) into Al Reem Island. With occupancy in prime assets reaching 96 percent in early 2026, the market remains heavily tilted in favor of landlords until new major deliveries, such as One Maryah Place, arrive in late 2027.

In the residential segment, a 7.5 percent population increase in 2024 has driven sustained demand for urban living, leading to an expected 6,500 to 7,000 new apartment units in 2026. Analysts describe the market as “measured” instead of speculative. Additionally, mortgage affordability improved after the UAE Central Bank reduced interest rates to 3.65 percent in December 2025, easing entry for first-time buyers in mid-market areas like Al Reef and Masdar City.

The hospitality sector is entering 2026 after a landmark 2025 where Abu Dhabi recorded its highest-ever RevPAR and ADR figures. October 2025 alone saw occupancy peak at 86.2 percent, supported by major events like “Showdown Week” and the UFC. This momentum is expected to be sustained by 2026’s packed event calendar, including the Esports World Cup and continued cultural pull from the Saadiyat Cultural District.