Abu Dhabi rents to rise in 2015 as supply tightens

The capital’s housing stock saw the lowest level of growth in the last five years, potentially pressuring rents to rise



Abu Dhabi’s residential rents rose 3 per cent during the second quarter of 2015 thanks to a slowdown in new supply, according to a new report by Abu Dhabi Islamic bank.

The data in the report was collated from transactions within the portfolio of units managed by MPM Properties, the real estate arm of ADIB.

Just 1,647 units entered the market in Q2 bringing the total number of units supplied this year to 2,397, the bank said. An additional 4,200 units are expected to be completed by the end of this year.

But the 2015 supply represents just a 2.9 per cent increase in total housing stock in the capital and is also the lowest level of increase in the last five years. The slowdown in supply could in turn increase rents within the emirate, the company said.

Unlike Dubai, Abu Dhabi’s property sector is struggling to match supply with demand in the market. The recurrent mismatch has led to consistent growth in rents across the capital.

According to another report by Asteco, apartment rents in Abu Dhabi rose by an average of six per cent quarter-on-quarter in Q2 2015.

The majority of prime, high and mid-quality developments increased by 4 to 6 per cent upon contract renewal while new leases were on average 8 per cent higher than in Q1 2015.

Popular prime developments such as Eastern Mangroves and St Regis Residences by TDIC even recorded rent renewal rises of 12 per cent and 10 per cent respectively, with long prospective tenant waiting lists.

Rents for prime villa developments also remained high in the emirate due to a lack of supply.

Abu Dhabi’s rental woes have been exacerbated by the removal of a rental cap designed to limit increases.

In a recent interview with Gulf Business, real estate consultancy CBRE said that it was optimistic a rental matrix would be introduced by the government to control the growing cost of living in the capital.

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