Residential rents in Abu Dhabi rose 20 per cent year-on-year in the first quarter of 2014, with affordability fast becoming a concern for many residents, according to a new report released by property consultant CBRE.
The UAE capital removed its five per cent rent cap earlier this year, and the impact of the move is already being felt by tenants, the report stated.
Rents grew 10 per cent quarter-on-quarter in Q1, with housing units in off-island locations recording increases of up to 14 per cent.
“With landlords now effectively controlling rentals, there have been an increasing number of tenants choosing to relocate upon lease expiry as they are unwilling to meet with landlord-imposed rent rises,” said CBRE.
This situation has been found most prevalent in cases where tenants have been in occupation for long periods and are still paying historical rates, it added.
Mat Green, head of Research & Consultancy UAE, CBRE Middle East, said, “With affordability fast becoming a concern for many residents, there has been a steady rise in demand for more affordable housing options, with off-island locations such as Khalifa City A and Mohammed Bin Zayed City becoming popular choices for the more budget focused tenants.
“Units within master-planned developments in mainland locations are now commanding rentals that are significantly higher than similar non-community based properties.”
Rents for two bedroom apartments currently range between Dhs80,000 –105,000/unit/annum within the Al Reef Downtown development, and between Dhs65,000-85,000/unit/annum within the Al Ghadeer and Hydra Village developments.
Annual rents for a typical two bedroom city centre apartment stand at Dhs95,000–130,000/unit/annum, whilst similar residential units within prime developments have rentals between Dhs150,000 –210,000/unit/annum.
Green added: “With most of Abu Dhabi’s prime residences having been completed within the past three years, rentals have actually remained relatively stable even after the removal of the rent cap.”
In a bid to better regulate the rental market, the Abu Dhabi government is soon set to launch a new property rental index, the CBRE report confirmed. The proposal is to divide Abu Dhabi into 10-12 zones, with corresponding rental guides being published for each zone.
The index, still in the planning stages, is expected to help landlords and tenants set appropriate rental levels in the emirate.
In terms of residential sales, the report found that rates saw very little movement during the quarter, typically ranging between Dhs10,225– 15,070/m2 for areas such as Al Raha Beach and Reem Island. “However, with market conditions improving, we anticipate escalating sales growth in the coming quarters amidst rising rentals and stronger investor demand,” CBRE said.
“Abu Dhabi residential market looks set for a period of sustained price and rental growth. This follows on from 12 months of steady recovery during 2013,” stated Green.