Average rental rates in Abu Dhabi fell six per cent in the third quarter of 2012 compared to the previous quarter, according to the latest report released by property consultancy CBRE.
However, the property landscape in the emirate is highly fragmented, with some properties seeing static rents and others seeing declines of between three and nine per cent, the report added.
“At this point in the development cycle we see no immediate end to this trend with better quality inventory entering the market, adding pressure to ageing and/or inferior units,” it said.
Location and age-specific factors are becoming important for occupiers in determining fair rental value, resulting in an “ever-growing” disparity between primary and secondary locations and between new and ageing properties.
Newly delivered luxury properties such as Etihad Towers, Eastern Mangrove Residences and St. Regis Residences have “impressive rental rates, with solid occupancy and strong corporate demand helping to underpin rates, despite notable downside across the majority of housing projects,” said CBRE.
“However, as the market awaits further delivery of high-end offers from World Trade Center Residences, Nation Towers and Landmark Tower, we may expect to some gradual softening of rents as competition increases.
“This will provide a good indication of the sustainability of the luxury market, which has historically been an undersupplied segment of the housing inventory in Abu Dhabi,” it added.
According to a recent report by the Abu Dhabi Statistics Centre, 3,302 residential units in the emirate were completed in the second quarter, up 17 per cent from 2,816 in the first quarter.
Out of the total of 1,516 buildings completed in Q2 2012 in Abu Dhabi, 68 per cent are situated in and around the city.
“Abu Dhabi’s rapidly increasing housing inventory is creating greater affordability for residents as average rental rates remain fixed on a downward track,” CBRE said.
However, despite the reduction in rents, the capital’s properties are still found to be slightly more expensive than in Dubai. For instance, the average annual rent for a studio in Dubai is now slightly under Dhs40,000 per unit per annum as compared to Dhs45,000 per unit per annum for a similar property on the main island of Abu Dhabi.
The rent drop has been lesser for residential villas in Abu Dhabi and quarterly declines range between two to five per cent, said the report.
“Well-managed projects in core locations with quality facilities and amenities continue to attract the strongest demand and are consequently also receiving the highest rents,” it added.