Property | UAE
Abu Dhabi rents drop due to growing supply
In some areas in the capital, the rental reduction is up to 15 per cent
- By Nicole Walter, Senior Reporter
- Published: 00:01 July 13, 2010
- Image Credit: Virendra Saklani/Gulf News
- The Abu Dhabi real estate market is in a period of transition, moving away from an under-supplied landlord controlled market to one with improving quality and choice, offering tenants more negotiating power.
Dubai: Rents in Abu Dhabi continue heading south by 7 per cent on average and up to 15 per cent on lower quality property, according to Asteco.
"There is still some influx into Dubai, but the trend is starting to reverse, Abu Dhabi residents which have moved to Dubai are going back to Abu Dhabi. This is only a nascent trend but will pick up over the year," said Jesse Downs, heading Landmark's Advisory's research and advisory department.
Although Paul Maisfield, general manager, Asteco Abu Dhabi, said most enquiries are still coming from existing tenants relocating within the city, which is a healthy sign. They are taking advantage of lower rents, he said.
According to the Asteco second quarter report, on the one end of the scale are traditional UAE national-owned investment villas where rents continue to fall by 2 to 8 per cent. On the other end, there are expatriate buyers trying to recoup investments by reducing rents, up to 20 per cent, for large villas in Al Reef.
Well-planned master communities such as Al Raha Gardens and Sal Al Nakhl though are maintaining rental yields. But new supply in Khalifa City and Mohammad Bin Zayed City, the lower-end of the market, has corrected the most with rental reductions from 5 to 15 per cent, according to the report.
Years to level out
Downs reckons that the demand and supply balance will take years to level out.
Adel Hamaizia, sales and marketing manager at real estate agent, RE/MAX Abu Dhabi, says typical summer movement and clients preference for quality rather than quantity are freeing up rental stock.
"There is a filtering process going on in Abu Dhabi causing the 30 to 40 per cent gap between Dubai and Abu Dhabi to melt away," he said.
Hamaizia recently saw a three-bedroom duplex apartment in sought after Kahlidya, which previously commanded annual rent of Dh340,000, going for Dh200,000. He said, it is now possible to get a one-bedroom apartment in Abu Dhabi for the same price than in Dubai Marina.
"Tenants are realising that they have the upper hand. The one-year upfront rent cheque is yesterday's story. Now two to three cheques is the norm and in extreme cases four cheques," he said.
The deals refer mainly to Abu Dhabi's peripheral areas such as Khalifa City A, Mohammad Bin Zayed and Officers City. Many of these are not apartment buildings but rather units in partitioned villas.
The municipality is expected to put pressure on partitioned villas because they are fuelling the supply, Hamaizia said.
Looking ahead it will be the likes of Reem Island, Al Raha Beach and Al Reef raising the supply. The Asteco report highlights 4,500 apartments are on way to delivery with another 8,000 due for completion by year end.
"The Abu Dhabi real estate market is in a period of transition moving away from an under-supplied landlord controlled market to one with improving quality and choice offering tenants more negotiating power. These changing market dynamics will continue to put downward pressure on rents...healthy for business," said Elaine Jones, CEO, Asteco Property Management.
Khalifa City in demand
According to Propertyfinder.ae which measured the preferences of around 450,000 visitors to its site searching over 120,000 properties covering 200 brokers, in Abu Dhabi Khalifa City A is the top contender among Abu Dhabi districts for rental properties.
Findings also revealed that those searching for a home to rent are taking Abu Dhabi property more seriously than before thanks to the drop in prices.
Top areas as far as potential purchases are concerned are Al Reef and Al Reem.
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