Abu Dhabi housing rents set to rise in near term

Abu Dhabi will face shortage of residential units in near term as population grows, leading to increase in rents, says a new report.

“Housing demand remains strong across all price points driven by population growth. We expect a future housing shortage as near-term supply deliveries are below historic averages at a time of strong demand and predicts further rental increases over the short term,” JLL, a global consultancy, said in its latest report on Abu Dhabi real estate market.

Rents for prime residential units have remained stable at Dh150,000 per annum in the third quarter, while sales prices (apartments and villas) rose by 6 per cent to Dh16,000 per square metre.

The Abu Dhabi Executive Council abolished the annual extension of a 5 per cent cap on rent increases in the city in November 2013.

However, Cluttons, a real estate consultancy, said in September rent rise in Abu Dhabi is set to slow down in the coming months.

“We expect affordability to remain central to the rental value growth equation (in Abu Dhabi), with rent rises likely to slow further in the coming months,” the real estate consultancy revealed in its annual “2014 UAE Property Report.”

Tenants relocation has had an impact on the renal market, with rents rising by 0.9 per cent in the second quarter down from 1.9 per cent in the first quarter 2014, Cluttons said, adding rent prices have risen by only 1.2 per cent on average across the city’s freehold areas.

The Abu Dhabi Municipality has also tightened rules on sharing of houses and has started a campaign that says, “No to mass accommodation.” The municipality has asked landlords to evict bachelors and report workers living in illegal accommodation to avoid violating provisions of the local laws.

New units delivered

In its latest report, JLL estimates nearly 1,200 units were added to the residential stock during the third quarter, which included handover of new houses to Emirati families through the Al Falah scheme. These new deliveries now bring the total residential stock to nearly 242,000 units at the end of Q3 2014.

“The third quarter of 2014 recorded the continued growth of prices in residential market and growth in office rents, with continued stabilization in the hospitality, retail and office sectors. All sectors of the Abu Dhabi market are now positioned in the recovery stage of their cycle, for the first time since 2008,” David Dudley, Head of JLL’s Abu Dhabi office, said.

“Residential remains the strongest performing sector driven by positive investor sentiment and population growth and potential future under-supply. The office market has witnessed growth for the first time after being stable for the past two years. Vacancy rates are reducing due to increased market absorption and a reduction in speculative supply in the pipeline,” Dudley added.

Retail, hotel perform well

The new report reveals retail rents for malls on Abu Dhabi Island have remained stable this quarter, with some malls outside the Abu Dhabi Island seeing a marginal increase in rents as they have witnessed higher footfalls.

The Abu Dhabi hotel sector continues to recover, with the year to August seeing higher occupancies (71 per cent) compared to 2013 (64 per cent).

“For the first time, Abu Dhabi hotels experienced higher occupancies than Dubai in July (55 per cent compared to 50 per cent),” Dudley said.

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