Abu Dhabi rents steady after surge on rent-cap removal

Rent increases in Abu Dhabi slowed down to more “sustainable levels” in the second quarter of 2014, after witnessing a first quarter surge buoyed by the removal of 5 per cent per year rent cap.

“A slowdown in transaction volume and more sustainable levels of rental and capital appreciation  a defined Abu Dhabi’s residential sector performance,” property consultancy Asteco says in its Q2 2014 real estate report on the Abu Dhabi market.

The report maintains that Abu Dhabi’s “rental rates remained relatively stable, with quarterly growth rates ranging from 0 to 7 per cent across the board”.

Nevertheless, the average cheapest properties to rent in Abu Dhabi are studio apartments in off island developments of Mohammed Bin Zayed City and Khalifa City, available for a minimum of Dh40,000 per year, according to the Asteco report. This reflects an average 3 per cent quarter-on-quarter growth, and a 12 per cent hike over a one-year period.

Low-end properties in Abu Dhabi Island, particularly in Central Abu Dhabi, rose the most (7 per cent) this quarter, with the rents of two-bed units now ranging between Dh70,000 and Dh100,000, and three-bedroom apartments renting for between Dh90,000 and Dh145,000 per year.

“With the removal of the rent cap, several lower end properties leased at reduced historic rates have reverted closer to market rents that have witnessed some moderate increases this quarter, from 2 to 8 per cent, especially in areas such as Central Abu Dhabi and Khalidiya/Bateen,” the report states.

A low-end three-bedroom apartment in the Khalidiya/Bateen area can now fetch as much as Dh140,000 per annum, according to Asteco data, which is an 8 per cent increased over one year and 4 per cent on average in the most recent quarter.

The report also highlights that “high-end developments in Investment Areas witnessed the highest levels of growth, reflecting a clear tenant preference for newer, master planned communities compared with traditional supply on the Main Island.”

Rental rates for prime two-bedroom apartments on Abu Dhabi Island rose by 5 per cent to reach up to Dh200,000 per annum, while similarly sized properties in the investment areas of Al Raha Beach and Saadiyat Island, also hit the same levels, up just 1 per cent quarter-on-quarter.

“Ongoing tenant preference for newer, master planned communities drove demand for apartments in prime developments within investment areas, while affordable villa locations continue to be popular,” said Jerry Oates, General Manager, Asteco Abu Dhabi.

“Market sustainability will be further buoyed by Abu Dhabi’s plans to launch its own rental index this year, designed to create a more transparent market for UAE national investors, regulating maximum rental increases,” he added.

In terms of villa rentals, the report shows a similar slowdown in growth. “With limited new supply for villas entering the market, rental rates have remained stable this quarter, with moderate increases ranging from 0 to 5 per cent in Q2 2014,” the report said.

“For villas, a three-bed property on Abu Dhabi Island can still be rented for an average of Dh190,000, whilst the affordable locations of Hydra Village and Al Reef let for Dh95,000 and Dh140,000 per annum, respectively. At the top end, Saadiyat Island’s luxury three-bedroom residences rent for up to Dh310,000, a 5 per cent growth since Q1 2014,” Asteco noted.

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