Expat ‘off-island’ owners in Abu Dhabi launch rent war

Expatriates, who own villas ‘off island’ in Abu Dhabi, are looking for continued cash flow and are ready to lease at lower than market rates, according to Landmark Advisory.

In its November 2010 Leasing Guide, the real estate consultancy said off-island villas saw the largest decline of four per cent overall, with Al Reef villas predominantly suffering, experiencing a 15 per cent decline due to factors such as disappointing quality, inconvenient location and landlord competition.

“Majority of landlords in this area are expatriates, meaning that they are more interested in continued cash flow rather than holding out for higher rents,” Jesse Downs, Director of Research & Advisory, Landmark Advisory said.

“Being located off-island means they are more susceptible to commuter demand and there is very little demand for some of the larger off-island villas. The cost of renting a large villa is prohibitively expensive for many. However, those who can afford these large villas are now spoilt by choice in Dubai and most would rather do the additional commute from Dubai to enjoy a higher quality lifestyle, as well as higher quality units for comparable or cheaper rents. As such, demand for large off-island villas is very limited.”

Three-bedroom Al Reef villas are being currently leased for Dh110,000 to Dh120,000, four-bed from Dh130,000 to Dh140,000 and five-bed from Dh160,000 to Dh170,000.

Three-bed villas Between The Bridges are being rented for Dh190,000 to Dh 230,000, four-bed from Dh260,000 to 290,000 and five-bed from Dh250,000 to Dh300,000, while Al Raha three-bed villas are being leased out for Dh175,000 to 205,000, four-bed from Dh205,000 to Dh240,000 and five-bed from Dh245,000 to 260,000, according to the November lease guide.

Residential rents declined by an average five per cent since July till date, with the Corniche area registering steep declines of a 16 per cent.

“New supply has resulted in intense competition from those landlords looking to poach tenants from older buildings where the quality in no way matches the rent being charged. Those landlords of older or poorer quality buildings, who now have vacancies, are being forced to lower their apartment rents significantly in order to attract demand,” said Downs.

“As expected, lease rates have continued to decline since our last lease guide in July 2010. This has impacted some areas more than others, particularly those where new supply is being delivered.”

She believes that lease rates in the capital will need to compete with Dubai, where there is oversupply, causing steep price declines.

Besides, landlords need to be acutely aware of the market when considering how to price their units:

“New developments such as Al Bandar and Marina Square have the potential to create competition for both the current Abu Dhabi market and the Dubai market. These new developments will upset the market, leading to a complete recalibration of rents around the new developments, which often offer better amenities and facilities.”

The latest guide found that commercial rents have fallen six per cent since June 2010, however this was exacerbated by an extreme 23 per cent decline on-island. According to Landmark, the majority of companies prefer to remain in their existing offices while they wait for further price reductions and higher quality supply.

Follow Emirates 24|7 on Google News.