Landlords are refusing to cut rents for residential properties despite forecasts that rates would start falling because of the international financial crisis.
Rents in the capital are the same as they were before the downturn, according to Truth Economic Consultants. "We predicted in a study that the prices of residential and commercial properties and residential rents would drop by 15 to 20 per cent, starting last month, because of the impact of the international crisis," Director-General Ridha Muslim told Emirates Business.
"However property prices and rents have not fallen.
"The situation in Abu Dhabi is totally different from the one in Dubai. Most of Abu Dhabi's property projects will not be completed until the end of the current year or next year, so there is no large supply of residential units. The capital suffers from a major shortage of residential units, estimated at 30,000 units at the end of 2008," he said.
Muslim said researchers from his company had over the past few days found a reluctance to drop the asking prices for properties and rents among UAE National landlords in Abu Dhabi.
"The strong financial situation of the landlords was the reason behind their decision not to sell or rent out residential units for less than the market prices that prevailed in 2008."
However, Truth still believes values and rents will drop by 20 per cent by June.
"Landlords will not be able to stand up against the market forces that the UAE, in general, and Abu Dhabi in particular, will see by June this year.
"There will be an exodus of foreign labourers from the emirate as a lot of companies are laying off employees because a significant proportion of the major property developments announced in 2006 and 2007 are being delayed," said Muslim.
"In addition, the economic growth rate in the emirate is falling and a large number of new residential units will enter the market, especially in Abu Dhabi city. Therefore landlords and real estate offices will be obliged to reduce their prices.
"The prices of properties and rents will gradually fall in Abu Dhabi.
"The beginning and middle of 2010 will see a big fall in prices due to the delivery of thousands of residential units at Abu Dhabi's top projects, such as Al Reem Island and Al Raha Beach, along with Manazel's projects.
"Abu Dhabi will see a balance between supply and demand in the real estate sector. Demand will recede, but in a gradual way."
The director-general of the Truth said speculators and the conduct of some banks in the emirate were the main reasons for the huge increases in property prices and rents seen previously. Prices and rents in some parts of Abu Dhabi Island rose by up to 300 per cent.