Sale prices and rentals of villas in Abu Dhabi are likely to drop as fresh supplies are entering the market and a number of people are shifting to live on the outskirts of Dubai due to its “affordable rates”, said real estate officials.

Already villa prices have dropped in various projects. “We expect this trend to continue during 2010 as more units are expected to be handed over and the number of people relocating from Abu Dhabi to ‘more affordable’ Dubai continue in the short- and medium-terms,” said Mohanad Alwadiya, Managing Director, Harbor Real Estate.

Currently, in Al Reef Villas a two-bedroom villa goes for Dh1.1 million, a three-bedroom villa for Dh1.6m, a four-bedroom villa for Dh1.7m and a five-bedroom unit for Dh2.3m.

“Villa prices in Abu Dhabi are starting to soften as more units start to flow into the market. This trend has affected the attitude of landlords and sellers and has forced them to be more flexible when it comes to price points and payment terms,” said Alwadiya.