Dubai:  Pressure is mounting on Abu Dhabi's landlords to scale back on their rental demands as tenants search for more affordable options.

This is forcing rents at the top end of the market to soften, so much so that the gap between rates in Dubai and Abu Dhabi has narrowed considerably.

If in the first quatert of the year, the difference for one- and two-bedroom apartments between the two emirates was Dh20,000 per annum, this is now closer to Dh10,000, according to the latest Asteco report.

In the mid-range residential segments, Abu Dhabi’s rates have scaled back by Dh5,000 on average, since Q1-16, whereas Dubai’s rates were down by Dh1,000.

According to John Stevens, Managing Director of Asteco: “The ongoing redundancies across various industry sectors and the reduction of staff housing allowances continues to negatively affect demand with a number of tenants opting to downsize and/or move to more affordable developments.”

Rental drops

In Abu Dhabi, villa rentals were down on average by 2 per cent from the previous quarter.

The highest drops were in Al Raha Gardens (by 6 per cent) followed by the Al Raha Beach Villas (4 per cent).

Demand for older villas inside Abu Dhabi City was also down with premium units most affected, with an average decline of 10 per cent since the same period last year, according to Asteco.

Saadiyat Beach Villas were the only exception with rates remaining stable since the beginning of the year.

“The majority of vacant apartments, which were offered at reduced rates in Q2, have now been leased, especially the smaller unit types," said Stevens. This indicates that there is demand in the market, but value for money is the most important factor.

"In comparison, rental rates for larger and more expensive three- and four-bedroom duplexes and townhouses have fallen by 10 per cent since the last quarter decline since the last quarter, with a high percentage remaining vacant for over six months.”