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Abu Dhabi tenants to pay less for rents

dubai - New residential supply expected to put more pressure on rents

Average rents in Abu Dhabi for apartments and villas fell by seven per cent and five per cent respectively during 2016 and are expected to soften further in 2017, according to consultancy Asteco.

The decline will be exacerbated by new supply to the market. Approximately 1,400 residential units were handed over during 2016, and around 4,000 units - including 2,700 apartments and 1,360 villas - are expected to be handed over this year.

"Although delays cannot be ruled out, this will definitely put pressure on rents for existing stock," said John Stevens, managing director, Asteco.

The continued macroeconomic uncertainty will also negatively affect rents as tenants search for more affordable rates.

"Residential units that were previously able to maintain rental levels due to the reluctance of existing tenants to move are now more likely to be affected as residents are in search of the best value for money," added Stevens.

Fragmented market
Average apartment rents fell by seven per cent over 2016, while prime and high-end apartments declined by six per cent and nine per cent respectively year on year. The average annual rent of a high-end two-bedroom property on Abu Dhabi Island fell 10 per cent to Dh141,000 in 2016; and a two-bedroom apartment in Khalidya/Bateen dropped by 13 per cent, on average, to Dh146,000. Mid and lower-end apartments experienced a five per cent drop, primarily during the second half of last year.

Villa rents declined by five per cent on average in 2016, with the greatest decrease witnessed in the Al Raha Beach area (10 per cent).
"Mature villas, which previously recorded high rental rates, have been affected the most, which resulted in an increase in vacancies in some communities," said Stevens.

Average rents for villas on Saadiyat Island remained relatively stable over the year, which was mainly due to a large percentage of owner occupier properties.

Cheaper to buy
Apartment sales prices, meanwhile, decreased by four per cent on average in 2016, with properties in Marina Square and The Gate both experiencing average drops of Dh125 per sqft. Apartments in Raha Beach/Al Bandar and Reef Downtown both saw average price increases of Dh50 per sqft compared to 2015.

In terms of average villa sales prices, there was an average four per cent decline during 2016. Villas in Raha Gardens fell by Dh65 per sqft and Golf Gardens by Dh60 per sqft on average. Saadiyat Beach Villas held their value year on year.

Stevens said: "The anticipated delivery of new residential projects is expected to increase investment opportunities, which in turn will have a positive effect on transaction volumes. Off-plan projects offering attractive sales rates and payment plans will continue to achieve good demand levels."

- business@khaleejtimes.com