Rents in Abu Dhabi decline despite relocation by government staff

Relocation of Abu Dhabi government employees is leading to increase in leasing activity across the UAE capital, but  rents continue to fall as new residential stock enters the market, according to property consultants CBRE.

It is certainly good news for residents as rents have declined by four per cent in the second quarter of 2013 and 10 per cent in the past one year.

“Despite a noticeable rise in leasing activity during the first half of the year and record sales transactions, average rents continued to fall. Rental rates have dropped a further four per cent during the quarter and are now down around 10 per cent over the last 12 months,” Mat Green, Head of Research & Consultancy UAE, CBRE Middle East, said in its latest “MarketView” report.

In May, Emirates 24|7 reported that Abu Dhabi government-owned companies were sending reminders to their staff, asking them to relocate to the capital before September or lose out on their housing allowance.

One company circular stated: “Staff currently living outside the emirate of Abu Dhabi will have a one-year grace period from September 2012 to relocate to the emirate in order to be eligible for housing allowance after September 2013. Those who wish to remain resident outside Abu Dhabi beyond September 2013 will not be entitled to any housing allowance.”

The Executive Council decision was made to ensure the safety of employees commuting long distances, often in bad weather conditions. Government statistics reveal the number of employees and their families who live outside the emirate at 23,000.

In July, Jones Lang LaSalle said residential rents in Abu Dhabi had not registered any increase in the second quarter despite employees of Abu Dhabi government companies having started to relocate to the capital.

Property owners were optimistic of witnessing a surge in demand and eventually increase in rental income when the decision to relocate was made in September 2012.

Although a decline in rents may augur well for residents, Green said completion of a significant number of new residential units was encouraging internal relocation with tenants capitalising on prevailing affordability as they search for new and better quality housing options.

On average, CBRE said the current rents for two-bedroom units in upper middle and high-end focused accommodation ranges from Dh90,000 to Dh145,000 per annum.

Prime developments around Raha Beach and Saadiyat Island remain “hotspots” for luxury housing with two-bedroom apartment units at St Regis leasing from Dh168,000 to Dh192,000 per annum. On the main island, similar units at Etihad Towers were leasing from Dh135,000 per annum.

Quality developments such as Marasy Abu Dhabi and Nation Towers are commanding high rental rates and the trend reflects sustained demand for true high-end residential properties.

According to CBRE, after a long period of inactivity, investors are now starting to refocus on Abu Dhabi’s residential sector, with rising interest levels for completed properties in key Investment Zone locations.

Average sale prices for units in Al Reem Island and Al Raha Beach development now ranges from Dh9,700 to Dh14,000 per square metre.

“The residential sector is expected to return to positive growth territory by the end of the year, with occupier and investor activity intensifying,” Green added.

The Executive Council circular

Circular No.14/2012 regarding the policy on housing allowance in Abu Dhabi states:

-No housing allowance should be applied for any employee who resides outside the Emirate of Abu Dhabi; the housing allowance shall not be paid to any employee who has opted to reside outside the emirate of Abu Dhabi.

-The new amendment shall be applied in relation to all locals and expatriates employed by any department, institution, or company fully owned by the government of Abu Dhabi or any subsidiary fully owned by such departments, institutions, or companies.

-The employees shall be granted one-year period to comply with this amendment. However, any employee, recruited after the issuance of this amendment, shall comply immediately with provisions of this amendment.

-This amendment shall not apply for the employees recruited by branches located outside the emirate of Abu Dhabi.

-Periodical reports shall be presented to the Civil Service Council in respect of the implementation of this amendment.



 

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