Housing projects to bring Capital rents down

A massive construction drive to tackle supply bottlenecks in Abu Dhabi's housing sector could finally bring relief to tenants reeling under unbearable rent surges, an official was quoted as saying yesterday.

As spiralling rents have become a major cause of domestic inflation, the government has ordered the implementation of giant property projects to bridge the widening gap between supply and demand caused by a rapid population growth and an economic boom, said Butti Al Qubaisi, executive director of planning and statistics at Abu Dhabi Department of Economy and Planning.

Quoted by the Abu Dhabi-based Sama Emirates magazine, Qubaisi said soaring rents were to blame for nearly 60 per cent of Abu Dhabi's inflation in 2007.

"Because of this, the Government of Abu Dhabi has ordered the construction of massive housing projects in the next three years to alleviate this crisis, which in turn will contribute to tackling inflation," he said.

"In case such projects attain their goals of achieving a balance between supply and demand in the housing sector, then rents will begin to climb down. I would like to point out that we have conducted studies, which will be presented to the Abu Dhabi Executive Council. They include several solutions to the problem and I believe if all those projects are carried out, the problem will resolved."

Qubaisi gave no details of the projects but according to the Abu Dhabi Chamber of Commerce and Industry, investments in the construction and property sector will exceed Dh700 billion in the emirate in the next five years.

In a recent study, the chamber said a surge in domestic housing demand has allied with relatively slow supply to sharply boost rents, which have jumped by more than 50 per cent over the past three years.

Its figures showed the capital's real estate market was almost balanced in 2005 as the nearly 287,000 housing units were enough to cover domestic demand.

But a surge in demand in 2006 was not met with a similar supply growth, creating a shortage of around 3,000 units. In 2007, the gap more than doubled to nearly 8,000 and it is projected to jump to more than 20,000 this year.

"Most of the housing units that will enter the market this year will cater to the high-income people… the low and medium income people will be the main victim of the shortage and the rent increases," the chamber said.

"Our expectations for this year are that there will be a record supply shortage in housing units, exceeding 20,000… this will aggravate the emirate's property situation in 2008… the increase will affect all economic activities in the emirate and could push inflation to new levels."

In statements early this year, the president of Abu Dhabi Department of Planning and Economy, Nassir Al Suweidi, said the government had asked major property developers in the emirate to build low-cost houses to curb soaring rents. He said this would partly tackle the problem but added it would take time.

Officials said such houses are needed on the grounds the bulk of the emirate's 600,000-strong workforce are low to medium income employees.

The rapid increase in rents in the capital over the past two years has rendered many of them unable to get their own apartment as the increase sharply widened the gap between the rent and their monthly wages.

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