Abu Dhabi’s residential rents up 8% in Q3 2015

Rents for poor quality housing stock in Abu Dhabi have declined but rates for new units remained unchanged, a new report says



Abu Dhabi’s residential rents rose by 8 per cent year-on-year in the third quarter of this year, a report from property consultant CBRE showed.

However the rental growth dipped marginally by 1 per cent quarter-on quarter in Q3 2015, indicating that the property market is feeling the impact of an economic slowdown.

“The market is showing some signs of fragmentation, with older and poorer quality apartments – particularly those in secondary locations – experiencing rental declines and these declines have dragged down the performance of the wider market,” said CBRE United Arab Emirates’ head of research and consultancy Mat Green.

“However, residential villas depict a contrasting trend, recording a small increase of 1 per cent during Q3 2015. The limited supply, particularly within the main Abu Dhabi island, reinforced the steady performance of this segment.”

The report also noted that the demand for smaller units such as studios and one-bedroom apartments was still strong, sustaining rental rates.

The average annual rental rate for high-end properties in this segment ranged from Dhs 60,000 to Dhs 105,000 for studios and Dhs 85,000 to Dhs 150,000 for one-bedroom units. Meanwhile rents fell to Dhs 30,000 to Dhs 50,000 for these smaller units in tertiary locations of the city.

“Higher income individuals and corporate occupiers continue to show a preference for master-planned developments, particularly established communities which offer residents access to facilities and services,” said Green.

“As a result, prime developments across the capital have shown greater resilience to the emergence of more challenging market conditions during the quarter. This is reflected in the widening rental gap, as rentals for new leases remain unchanged from the previous quarter despite the prevailing market conditions.”

Although the ongoing slow down could dampen demand for housing in the capital, the lack of supply in the market is expected to cushion the impact of a potential rental decline, CBRE said.

Abu Dhabi is only expected to see about 8,500 new units per annum over the next three years, compared to the 11,000 units that have been completed annually over the last five years.

The capital’s sales market has also been active with its key areas such as Al Raha Beach and Reem Island recording marginal growth in sales prices, the report said. Meanwhile prices for other communities such as Al Reef and Hydra remained unchanged from last quarter.