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16 April 2024

Will low-cost Abu Dhabi housing lead to exodus?

By Parag Deulgaonkar

Will the release of more affordable housing options in Abu Dhabi lead to a mass relocation of tenants from the fringe communities of Dubai? And will that, in effect, lead to a further decline in Dubai rentals?

Real estate experts have a diverse opinion on the subject, with some believing there certainly will be a rush of people packing their bags to Abu Dhabi while others imagine the new supply won’t entice cost-conscious commuters.

Craig Plumb, Head of Research Mena, Jones Lang LaSalle (JLL), says more supply will come onto the market in Abu Dhabi this year, and this will depress rentals and  “…therefore reduce the number of people commuting from Dubai.”

Matthew Green, Head of Research, CB Richard Ellis (CBRE), however, believes that new supply in the affordable housing segment will not be enough to entice cost-conscious commuters to the capital.

“With rents in Dubai remaining far lower than the capital, it is unlikely that new supply will be enough to entice cost conscious commuters back as yet, particularly as many expatriate’s prefer the lifestyle options that are available to them in Dubai,” he said.

Low-cost housing options are currently being offered in outer areas of Abu Dhabi, around Khalifa A and Mohammed Bin Zayed City, and this is helping to address some of the existing requirement for more affordable homes in the capital.

The scheduled handover of units at Al Reef Downtown in 2012 will also expand the market for mid-level accommodation, after the successful handover of parts of the project’s villa component.

Mario Volpi, Sales & Leasing Manager, Cluttons Dubai office, says more affordable housing is very much on the radar for developers and the government alike.

“What will continue this migration of tenants from one place to the next is quality and price from any sector – be it private or developer,” he adds.

Kuwait Financial Centre said last November that organic demand within Abu Dhabi will not suffice to absorb the forthcoming residential supply during 2012-13 and tapping the potential latent demand will aid in mitigating the oversupply.

It had identified three different sources of pent-up demand: From people employed in Abu Dhabi but living in Dubai and commuting on a daily basis; from people in low quality units, and from multiple households sharing a single housing unit.

Market sources claim that people who commute between Dubai and Abu Dhabi will also be looking at Sorouh’s Alrayyana project, which is targeting the mid-level income residents, with over 1,200 units being offered for lease. This website reported earlier that landlords have already started offering incentives such as rent-free periods to paying utility bills to hold on to their tenants.

Global Investment House said last year that the total existing stock in Abu Dhabi stood at 185,000 units at the end of 2010. It said there would be an influx of new 65,000 units through 2013, representing an addition of 35 per cent over the existing stock.