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Rents in Abu Dhabi climb 17%
Rents in Abu Dhabi soared 17 per cent in the first quarter, compared to the year-earlier period, according to a study by the Department of Planning and Economy (DPE).
- By Ahmed A. Elewa, Senior Reporter
- Published: 00:11 May 4, 2008
- Landlords are increasingly converting their residential units to hotel apartments in an attempt to escape the five per cent rent increase cap.
- Image Credit: Ravindranath/Gulf News
Abu Dhabi: Rents in Abu Dhabi soared 17 per cent in the first quarter, compared to the year-earlier period, according to a study by the Department of Planning and Economy (DPE).
The soaring rents are a result of a combination of factors - including the growing demand and aggravating construction costs, the study said.
The available data indicate that the increasing rents are the major cause of growing inflation in the emirate, whereas the DPE study conducted in the first quarter of this year indicated that housing and rents constitute 45 per cent of the total consumer spending in the emirate.
The study said that those receiving less income are the most vulnerable against increasing rents, as they allocate more than 50 per cent of their salaries to housing compared to an average of 23 per cent allocated by those receiving higher incomes.
With such influence, rents accounted for 58 per cent of the total inflation rates in 2006 and 2007, compared to 16 per cent for goods and services, 15 per cent for transport and 11 per cent for food and beverages.
During the first quarter of 2008, the shortage in supply of residential and commercial units, especially for middle and lower segments, resulted in a 17 per cent increase in rents compared to the end of last year.
One of the main reasons for the escalation of the problem is the growing number of commercial units as landlords are converting residential units into commercial units.
According to the study, landlords are increasingly converting their residential units to hotel apartments in an attempt to escape the five per cent rent increase cap.
Most developers avoid building for the middle and lower segments of the market, where the demand is the highest.
They prefer the 20 to 25 per cent of yields generated by the mega developments compared to the 10 to 15 per cent of leasing revenues from lower-income segments who constitute about 85 per cent of the total demand.
In addition, the prices of land and building material increased by more than 100 per cent during the past four years. The DPE recommends that the government should address the prevailing demand and supply imbalances in the housing market.
In the shorter term, the department suggests setting ceilings for rents according to classified plots based on the location, quality and area.
The department advises freezing the rent during the first three years of the contract, and establishing a committee for disputes settlement.
Other suggestions include providing plots on the outskirts of the city for a symbolic price or even free for those developers who provide units for 50 per cent less in cost for lower income segments, while the government should subsidise the cost of extending utilities and infrastructure.
| Increasing rents | ||||
| Year / Location |
City Centre
|
Corniche
|
||
| Premises | 2 rooms | 3 rooms | 2 rooms | 3 rooms |
| 2003 | 48,000 | 60,000 | 72,000 | 84,000 |
| 2004 | 52,000 | 62,000 | 76,000 | 88,000 |
| 2005 | 52,500 | 70,000 | 80,000 | 90,000 |
| 2006 | 54,000 | 79,000 | 83,000 | 102,000 |
| 2007 | 55,000 | 90,000 | 85,000 | 131,000 |
| 2008 * | 57,750 | 116,000 | 89,000 | 168,000 |
| * Average rents for the first quarter in 2008. | ||||
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