Housing rents in Abu Dhabi have stopped a rapid and steady growth they have recorded over the past few years and dealers even expect the rates to decline slightly in 2010 as new units enter the market.
A sudden exodus of engineers, technicians and other expatriate workers from Dubai into Abu Dhabi because of an economic slowdown and shelving of some projects sharply boosted demand for houses in Abu Dhabi but this was partly offset by improving supply by key developers, property agents said.
While costs of small housing units have remained almost stable so far this year, the rents of bigger houses have decline by up to 10 per cent to provide some relief to expatriate tenants who could hardly hold their breath during a saga of a sharp increase in rents over the past boom years.
"You can say rents are relatively stable now, in contrast with the rapid rise in the previous years," said Laurence Al Hadi, a dealer at Smart Mark, one of the property management firms in Abu Dhabi.
"Rents of three-bedroom units and other big housing units have even fallen as new units are entering the market and many residents are moving into smaller units… for example, a two-bedroom apartment is now renting at between Dh150,000 and 220,000 compared with Dh350,000 last year.
"Actually, rents could have declined further this year but demand has been strengthened by an exodus of many workers who have lost their jobs in Dubai."
Al Hadi said he expected rents to remain almost unchanged this year but added they might slip down next year when a large number of new units are launched. "A lot of new buildings were added to the market this year but you should think about how many people are coming to Abu Dhabi from Dubai and outside the UAE.
"The reason is that business activity in Abu Dhabi has not been largely affected by the global crisis and I think this will keep rents among the highest in the world. The only solution is that more units are added. When supply is balanced with demand or exceeds it, you will see a big fall in rents," said Al Hadi.
Unlike other emirates, Abu Dhabi has resisted a general downward trend in UAE rents despite massive investments in the real estate sector. Official figures showed Abu Dhabi, the main oil producing emirate in the UAE, attracted nearly Dh180 billion in property investment in 2008 but such projects have failed to push prices down because of extremely strong demand.
"Abu Dhabi is different from other emirates, where business has slowed down… here business is still strong and there is a little counter-exodus… on the contrary, more people are entering the emirate," said Nazir Dafallah, a property expert at the Abu Dhabi-based Darwish bin Salim Real Estate Agents.
"There has been a sort of stability in Abu Dhabi's rents and even a slight decline of about five per cent this year but I don't think there will be a big fall soon. Demand is still strong and many companies are shifting to Abu Dhabi from other emirates… perhaps next year we might see a decline as many units will find their way into the market as major developers have indicated."
Abu Dhabi has one of the highest population growth rates in the world and the emirate projects its population to nearly triple at the end of its 2030 long term development plan, which also involves massive construction work.
Growth in its population has ranged between four and seven per cent over the past decade to peak at nearly 1.559 million at the end of 2008. It is projected to increase by nearly 4.4 per cent to 1.628 million at the end of this year.
"Actually, we were hoping that rents of all units in Abu Dhabi will decline this year but no real decline happened. The only fall was in big houses as small units are still expensive," said Ahmed Khalil, another local real estate agent.
"Let's hope an expected improvement in supply next year will push prices down… this could happen only if developers stick to their promises".
The rapid increase in rents in the UAE capital over the past few years has rendered many of the expatriate workers unable to get their own apartment as the increase sharply widened the gap between the rent and their monthly wages.
In terms of GDP per capita, Abu Dhabi has one of the highest per capita incomes in the world, standing at Dh215,000 in 2007 and around Dh225,000 in 2008.
But many workers in the private sector are considered underpaid, while their financial position has worsened over the past two years because of inflation, which climbed to a record high of 12.3 per cent last year.
Although rents in the UAE's consumer price index, which measures the country's inflation, receded by around 5.7 per cent in June compared with January, they are nearly 2.27 per cent higher in the first half of this year compared with the first half of 2008, according to the Ministry of Economy.
"My feeling is that the rents situation in Abu Dhabi will ease in 2010… besides the expected new units, business activity is gradually picking up in Dubai and this will ease pressure on the sector here," Dafallah said.
Rents stand ground
The housing and commercial rents and property prices in Abu Dhabi remained high despite global crisis and the market could start to see sustained stability within four years, according to a recent research by the Abu Dhabi Department of Economic Development.
The study said Abu Dhabi authorities are still sticking to their policy of building new low-cost housing units in a bid to stabilise the market and reverse a rapid growth in rents. About 20 per cent of the new units would be for low income investors, the department said.
In another study published early this year, the Abu Dhabi Chamber of Commerce and Industry (ADCCI), said it expected rents in the emirate to continue their rapid rise in the next few years because of a worsening supply shortage. The report said low- and medium-income expatriate employees are expected to be the main victim of higher rents which have more than doubled over the past three years while their salaries have remained unchanged.
Its figures showed the capital's real estate market was almost balanced in 2005 as about 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. The gap tripled in 2007.
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