Residential rental growth is slowing in Abu Dhabi with high-end properties recording just moderate increases in the first quarter of this year, according to an Asteco report.
Rents at the lower end of the Abu Dhabi Island recorded little or no increase while prime properties saw rates rise between one and three per cent in Q1 2014 and seven per cent on average since Q1 2013.
“Rental rates were driven by tenants relocating from Abu Dhabi Island to higher quality and more modern buildings typically within investment areas,” said Jerry Oates, general manager, Asteco Abu Dhabi.
“However, prime properties situated on the Corniche and Khalidiya did continue to see high occupancy levels and retained strong premiums.”
Most of mid to lower end developments recorded no growth in apartment rental rates except for Reef Downtown, which saw rents rise by 17 per cent. The report attributed the substantial growth in rents in the Reef area to buyers looking for more affordable options.
Rental rates for prime two-bedroom apartments on Abu Dhabi Island now average Dhs200,000 per annum while similar properties in the investment areas of Al Raha Beach and Saadiyat Island, lease for an average of Dhs190,000, the report said.
At the lower end of the market, two-bedroom apartments on Abu Dhabi Island are renting for an average of Dhs80,000 per annum, while similar apartments in the investment area of Reef Downtown cost Dhs95,000 per annum on average.
“Moving forward rental rates are likely to witness moderate growth during the course of the year, as although significant supply was initially forecast for handover, unanticipated delays could push deliveries to early 2015 thereby leading to more stability in supply/demand balance over the year,” said Oates.
Abu Dhabi’s average apartment sale prices rose nine per cent in Q1 2014, down by two per cent from the previous quarter. Villa sale prices grew six per cent quarter to quarter, rising 30 per cent on average since Q1 2013.
The capital’s rents shot up in Q4 2013 as authorities scrapped a five per cent rent cap on the market last year.
Abu Dhabi’s policy makers have also introduced a number of measures in a bid to boost the residential market, which experienced a momentary slump between 2008 and 2012.
In 2012, the emirate issued a mandate that required all public sector workers residing outside the emirate to relocate inside. The move was aimed at addressing heavy over supply in the market.