High supply cuts Abu Dhabi rents down 7% in Q3

High supply depressed housing rents in Abu Dhabi by around seven per cent in the third quarter of 2011 to maintain a downward trend recorded over the past year and make the oil-rich capital a more affordable place to live.

While rents in such prime locations as the seaside Corniche road remained relatively high, those of units in other areas slumped by as high as 10 per cent and they are expected to decline further in the coming period, according to a report on the property sector in Abu Dhabi, the main UAE oil producer.

The report by CB Richard Ellis (CBRE), a global real estate services firm, said the flow of new housing units onto the Abu Dhabi market continues unabated as supply emerges from both stand-alone and master-planned schemes.

It said the growing residential inventory is leading to heightened competition with some landlord’s slashing their rates in order to remain competitive.

Off-island properties outside new master-planned communities are typically suffering the most, with a combination of sustained supply growth and inadequate facilities the main drivers of the rapid depreciation witnessed in areas such as Khalifa and Mohammed Bin Zayed City, the report said.

It said well located properties are able to maintain rates at levels well above the market average as lease rates in areas such as Bateen, Corniche and Khalidiya remain in extremely high demand with prime rents for 1-BR and 2-BR units currently at around Dh90,000 and Dh110,000 respectively.

According to the report, high demand and the limited supply of “lifestyle” properties in prime areas have resulted in massive disparities between rents within the same location.  It said some upscale residential dwellings in attractive areas of the capital have achieved premiums of over 45 per cent compared to slightly lower quality properties within their immediate locale
“Overall, average residential rents fell by seven per cent from the previous quarter.  Older and inferior units performed the worst with rates declining by over 10 per cent  as the wider availability of new product and increasing competition from new developments took its toll….as rents remain under deflationary pressure, the capital continues to become more affordable for its residents.”