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Increased supply drives down rents in Abu Dhabi, says Asteco

ABU DHABI - Villa and apartment rents in Abu Dhabi have continued to fall around seven per cent while the market reported a more pronounced drop of up to 15 per cent for lower quality properties, according to the latest report by the property services company Asteco.

The report attributes that arrival of more supply was the main driver in pushing down the rents in the capital emirate in the first and second quarters of this year, and according to Asteco experts the trend is likely to continue.

“It is estimated that 4,500 apartments have been constructed with delivery underway, with an additional 8,000 apartments due for completion by the end of 2010,” the report said.

According to the report, villa rents in the capital have continued their downward trend in the range of two to eight per cent for the traditional UAE national-owned investment villas. On the other side, there have been more significant declines of up to 20 per cent for the five-bedroom expatriate-owned villas in Al Reef.

This is indicative of the desire to achieve occupancy to cover property expenses, the report says.

“The Abu Dhabi real estate market is in a period of transition of moving away from an under-supplied landlord-controlled market to one with improving quality and choice, offering tenants more negotiating power. These changing market dynamics will continue to put downward pressure on rents, particularly older stock, which should be interpreted as a healthy move for an improvement in business,” the report said quoting Elaine Jones, CEO of Asteco Property Management.

However, Asteco says prices for apartments have remained unchanged and demand continues to be entirely focused on those developments close to completion.

“Sales activity was relatively flat, but with the first phases of Reem Island and Al Raha Beach completing, we anticipate improved demand from owner-occupiers. Quality will be the catalyst and Al Bandar at Raha Beach is likely to be the most sought after place to live in Abu Dhabi,” the report said quoting Paul Maisfield, General Manager of Asteco’s Abu Dhabi office.

Villa sales also have not seen any significant fluctuation in price over the last quarter. This is due to a number of contributing factors, such as low levels of transactions, and UAE nationals enjoying good rental returns from their investment properties, the report said.

“We have not witnessed significant numbers of commuters looking to move back to Abu Dhabi, but with more quality supply to come within the next six months on Al Raha Beach and Reem Island, that could well change, subject to education, health and lifestyle infrastructure also being available,” Paul said.

ramavarman@khaleejtimes.com