Rents in Abu Dhabi have reached record high levels and are expected to continue their climb in the next few years because of a worsening supply shortage, according to a semi-official report.
Low- and medium-income expatriate employees are expected to be the main victims of higher rents, which have more than doubled over the past three years while their salaries have remained almost unchanged, says the report from Abu Dhabi Chamber of Commerce and Industry.
After many years of relative stability during 1990s and early 2000s, the real estate market in the capital was jolted in 2006 when strong domestic demand, caused by an economic upsurge, created supply bottlenecks and sent rents to record high levels despite a government decision to introduce rent caps.
According to the Chamber, 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 is projected to go up by over 20,000 this year.
"Most of the housing units that will enter the market this year will cater for the high-income group. The low- and medium-income people will be the victims of the shortage and rent increases," the chamber said in a new report on Abu Dhabi's property market, obtained by
Emirates Business yesterday.
"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 and push it from bad to worse. The rise will affect all economic activities in the emirate and could push inflation to new record levels."
Property dealers said rents in the capital surged by more than 25 per cent in 2007 and 15 per cent in the first quarter of 2008.
They attributed the increase to a sharp rise in demand because of a rapid growth in population, an intensifying influx of expatriate workers because of a surge in projects in Abu Dhabi and other UAE emirates, failure of many landlords to comply with the rent caps, and concentration of real estate developers on costly property that suits only the high-income group.
"The rent situation in the capital is really very bad and it could get worse," said Ahmed Fikri, an Egyptian property broker. "You will be very lucky if you find a flat now and even if you find one, you will have to pay a fortune. I am flooded by phone calls seeking apartments but we do not have enough and sometimes we do not have any."
In statements last month, 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 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.
Abu Dhabi has one of the highest per capita incomes in the world, at Dh215,000 in 2007 and a projected Dh225,000 in 2008.
"Buildings under construction in Abu Dhabi this year will meet only 20 per cent of the demand. This will widen the supply shortage and will combine with a rapid population growth to push rents to new record high levels," the Chamber said. "Since rents account for more than 40 per cent of the consumer spending, the rise will aggravate inflation in the emirate."
Figures by the Department of Planning and Economy showed Abu Dhabi's population surged by nearly 12.6 per cent to 2.14m in 2007 from 1.9 million in 2006, one of the highest growth rates in the world. It is expected to grow by around 7.5 per cent to 2.3 million this year.
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