Tenants are worried over high rents in Abu Dhabi

High rents in Abu Dhabi are scaring tenants, especially those who are on a fixed income or who do not receive accommodation from their employers.

The Abu Dhabi Department of Social Services and Commercial Buildings (DSSCB) attributes strong demand for the high rents. At the same time, it acknowledges mounting pressure by landlords demanding higher rents for quicker profits.

Real estate observers said the high rents in Abu Dhabi are justified by economic and market factors, but not when it comes to poor tenants and bachelors on a fixed budget.

Due to strong demand and the high cost of living in the city as well as the absence of major building projects, observers rule out any downward trend in Abu Dhabi apartment rents any time soon.

Ayman Mohammad travelled the streets of Abu Dhabi three years ago looking for an apartment for more than three weeks before he finally found a suitable one. It was a one-bedroom apartment and rent was set at Dh30,000. Today, he is paying Dh35,000.

Bowing to pressure by national landlords, who control the bulk of Abu Dhabi's more than 20,000 commercial buildings, the DSSCB told most tenants last year that rents would be raised 10 to 15 per cent.

The decision has already been implemented and tenants are now adopting a wait-and-see position, expecting another increase in the coming years.

"There are many reasons for the high rents in Abu Dhabi, although we do not have a decision to keep rents high. You can attribute high rents to strong demand and other market conditions," said Juma Mohammad Al Mansouri, rent manager at DSSCB.

"We have set up a committee to estimate apartments and consider applications by landlords who keep demanding higher rents for their buildings. The committee takes decisions after checking buildings and their specifications," he told Gulf News.

It is not only the market that determines rents in Abu Dhabi (because rents have not been low in the capital for 30 years).

A host of factors have allied with the demand to add pressure on tenants and pump profits into the pockets of building owners.

Real estate agents cite the high cost of living in Abu Dhabi and the government's decision three years ago to temporarily ban new buildings. Another factor is that there is a strong demand by the government and semi-government departments to accommodate their employees and the number of civil servants has always been high.

"Another extremely important element is that the operational life of buildings in the UAE is now estimated at between 30 to 50 years. This is too short compared with other countries," said Zuhair Kaswani, a real estate agent.

"To ensure profits and high investment return from such projects, rents have to be high, otherwise no one would be interested in investing in real estate. For this reason and others, I don't see a let up and I think rents in Abu Dhabi will always remain high."

Abu Dhabi emirate has one of the highest population growth rates in the world and will remain so in the long-term as fertility rates among nationals is also one of the highest.

Another reason is that the emirate is recording steady economic growth and this means more jobs and more companies could join the market.

Abu Dhabi had only 140,000 residents in 1980 while its population now exceeds 600,000. The figure is projected to leap to 1.35 million in 2020, a staggering increase of 230 per cent, according to the Department of Planning.

The emirate also has one of the highest per capita incomes in the world, peaking at about Dh109,000 last year compared with Dh87,000 in 1998 and Dh40,000 in 1990.

Economists attribute the high per capita income to a sharp increase in oil production and prices as well as growth in gas and other sectors.

They said the emirate's economy has grown at a quicker pace than the population over the past five years and this explains the steady increase in the per capita income, which is calculated by dividing the GDP over the population.

High rents in Abu Dhabi have spawned other problems in the real estate sector, including the difficulty in finding an apartment, the monopoly by some agents and blackmail by caretakers.

The main victims are those with low incomes, including bachelors looking for one-room units. It could be as low as Dh500 to 1,000 but they might end up paying a higher commission.