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29 March 2024

Abu Dhabi rent hikes drive tenant migration

Published
By Parag Deulgaonkar

Landlord imposed arbitrary rent hikes is driving tenants to relocate within Abu Dhabi with budget focused tenants preferring to move to off-island locations, says a new report.

“With affordability fast becoming a concern for many residents, there has been a steady rise in demand for more affordable housing options, with off-island locations such as Khalifa City A and Mohammed Bin Zayed City becoming popular choices for the more budget focused tenants,” CBRE said in its Q1 report on Abu Dhabi property market.

The consultancy said that tenants were starting to feel the pinch of rising rentals after the removal of Abu Dhabi’s 5 per cent rent cap.

“With landlords now effectively controlling rentals, there have been an increasing number of tenants choosing to relocate upon lease expiry as they are unwilling to meet with landlord-imposed rent rises,” the report said.

The situation, however, was more prevalent in cases where tenants were occupying a unit for long periods and paying historical rates. Newer tenants were more insulated against price hikes since they are mostly paying closer to the prevailing rates, CBRE pointed out.

Though average rents in capital jumped by nearly 10 per cent, off-island locations saw rent rose 14 per cent in the first quarter.

Rents were “significantly” higher in master-planned developments in mainland locations, including Al Reef Downtown, Al Ghadeer and Hydra Village, compared to non-community based properties.

Two-bedroom apartments in Al Reef Downtown development are currently being leased for Dh80,000 to Dh105,000/unit/annum, while similar property types within the aforementioned mainland locations have rentals between Dh65,000 and Dh85,000 per annum.

Annual rents for a two-bedroom city centre apartment ranged between Dh95,000 and Dh130,000 per annum, while lease rates for similar residential units within prime developments stood between Dh150,000 and Dh210,000 per annum.

--Prices steady

On the price front, sales rates saw little movement during the quarter and ranged between Dh10,225 and Dh15,070 per square metre for areas such as Al Raha Beach and Reem Island.

“With market conditions improving, we anticipate escalating sales growth in the coming quarters amidst rising rentals and stronger investor demand,” the report said.

CBRE asserted that the Abu Dhabi’s residential market looked set for a period of sustained price and rental growth, which follows on from 12 months of steady recovery during 2013.