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High Property Rents Prevail in Abu Dhabi

ABU DHABI — Property rents in Abu Dhabi remained stable for the fourth consecutive month in September, according to a survey by the Khaleej Times and Asteco, a property management firm.

The result of the survey, which is used to create the KT-Asteco Rental Monitor, indicate that stability in the capital’s rental market prevailed despite continued increase in apartment availability in the city.

While about 88 apartments in three buildings became available for leasing in September in Mussafah, four new buildings with 186 apartments are expected to come on stream in October.

However, tenants seem to be waiting for rents to come down before tapping the increased availability. Some tenants might even be looking to shift to Dubai if the rents stay at the current level, the survey found out.

Earlier surveys until June had suggested that apartment rents in Abu Dhabi were declining. Growing availability of units, cash crunch experienced by many tenants, and an internal shift of population were some of the important factors that contributed to the slide. But that downward trend ceased for the first time in July, when rents remained unchanged at the previous month’s level. Since then, rents remained steady through August and September.

The latest edition of the survey found that the cash crunch being faced by tenants in Abu Dhabi continued unabated. There has not been any indication of a reversal of the recession-induced cuts on the house rent allowances that many employers were receiving during the real estate boom period early last year. So most tenants believe rents in Abu Dhabi are still expensive vis-a-vis the quality of the apartment. As a result, many Abu Dhabi residents now opt for shifting residence to Dubai where they have better quality apartments at attractive rentals, the survey shows.

Landlords have not given up their hope that rents will go up in the near future, and are unwilling to reduce their prices. They seem to be ready to face the risk of revenue loss and keep their units vacant rather than pushing the prices down. Some of the apartments were known to be remaining vacant for the past six months or so.

A five per cent cap on annual rent hikes, as stipulated in the existing tenancy rules of Abu Dhabi, could be a major factor preventing the landlords from not lowering rents further.

The rent levels in October might give some hints about the future trend in the capital, as it is the first month after the long summer and Ramadan holidays.

The survey shows that demand for two- and three- bedroom apartments continued to be strong in Abu Dhabi. Rents for three-bedroom villas off the island are currently lower than three-bedroom apartments on the Abu Dhabi Island and therefore in big demand, the survey suggests.

However, transactions continued at a slow pace in September. The average rentals for one-bedroom flats on the much sought-after Corniche, Khalidiyah and Bateen areas, and in up-scale Khalifa Street and Salam Street areas, remained unchanged at Dh120,000 in June, July, August, and again in September.

Average rates for two-bed apartments in these areas stood at Dh150,000, while average rents for three-bedroom flats also were unchanged at Dh180,000, the survey found.

Rents were also unchanged for apartments in Passport Road, Defence Road, Tourist Club Area, Airport Road, Hamdan Street, and in outer areas such as “Between the Bridges,” Mohammed bin Zayed , Khalifa A and Khalifa B, the survey showed.

The average annual rent for a one-bedroom apartment on Passport Road, Defence Road, Tourist Club Area, Airport Road, or Hamdan Street was about Dh100,000 in June, July, August and September. Two-bedroom apartments were being rented for about Dh120,000, and three bedroom flats for Dh150,000 in all these four months.

The trend was different in April and May. At that time, the average rates in these areas came down from Dh125,000 to Dh100,000 for one-bedroom flats, from Dh165,000 to Dh120,000 for two-bedroom flats, and from Dh190,000 to Dh150,000 for three-bedroom units.

· ramavarman@khaleejtimes.ae