With rental prices dropping and a 3 per cent municipality fee now charged on rent, many tenants in Abu Dhabi are tempted to shop around for cheaper accommodation.
The number of searches for Abu Dhabi rental property on Propertyfinder.ae has increased by more than two-thirds over the past 12 months, the portal revealed, but given the high cost of moving, is it really be worth all the effort involved?
Few would dispute that rents in the emirate have been dropping, particularly for apartment dwellers. During the 12-month period until December 1, research by propertyfinder.ae found that apartment prices plunged by 11.6 per cent in the capital and 5.2 per cent for villas.
But with landlords reluctant to negotiate significant rent decreases with their existing tenants, it’s those who are willing to move who are snapping up the biggest bargains.
British housewife Janine Thompson and her family moved to a four-bedroom home in Al Raha Gardens in November for Dh175,000.
“Sadly I just heard that the previous family had moved out of the house in July, because the landlord wanted Dh220,000,” she says.
Another Al Raha Gardens resident, admin assistant Sana Ghazal, from Yemen, says her annual rent increased by Dh7,000 last month and her landlord was unwilling to negotiate. But nevertheless, she and her family decided to stay put. “The increase wasn’t enough to justify costs and new deposits,” she says.
Ms Ghazal may well have been right to stay put. The cost of moving can be as much as Dh25,000 once you’ve factored in the commission that estate agents charge (usually 5 per cent of annual rent), Dh1,000 admin costs for signing a new lease and removals costs, which Alan Kaye, head of sales and leasing at District Real Estate, estimates to be between Dh6,000 to Dh15,000. But it’s also possible to pay much less.
When Orla Murray, an Irish occupational therapist, moved apartments in September, she avoided the Dh5,000 commission fee by dealing directly with a private landlord and only paid Dh1,000 for a closed 3-tonne lorry and three movers. “We did lots of haggling to bring the price down,” she admits. “With so many expats having left in the last year, business is down, so I was able to negotiate a better deal.”
Altogether, Ms Murray was able to save Dh40,000 on her rent by moving from one two-bedroom apartment in Al Raha Beach to a similar-sized property on Reem Island. “When renewal time came, we were offered the same rent as last year, which we challenged, and the landlord then dropped it by Dh10,000,” she explains. “But it was still very expensive given the current economic climate, so we decided to move. [Where we live now] is a cheaper place to live, but we like it just as much – and we were able to pay over four cheques.”
Bargain hunters need to first know which areas to look, as there are huge variations in the Abu Dhabi rental market depending on the area, says Mr Kaye. “Some luxury one- and two-bedroomed apartments, like those at the Eastern Mangroves, World Trade Centre and on Saadiyat Island, are still in quite high demand – the rents haven’t really changed there at all. On the other hand, you can now find a new one- bedroom flat on Reem Island for only Dh75,000. Some properties are being substantially reduced by individual landlords who don’t want their places empty.”
Mr Kaye references one prime development that has 85 empty apartments. “That’s the equivalent of an entire tower. Normally there are only about six flats available,” he says adding that some landlords are now willing to accept 12 cheques over a year, just to get someone in.
In some cases, landlords prefer to lure tenants in by offering sweeteners, rather than dropping rents.
“Property management companies will give you a free month, no commission, shopping vouchers or a combination of the lot,” says Mr Kaye. “There’s a lot of availability at Sas Al Nakheel at the moment, so Khidmah, who manage properties there, are offering no commission and a free month’s rent.”
AlCharifa Yumen Al AlFadel says that when she was flat hunting, several landlords offered to fix the rental price for two or three years to entice the family into signing. The Syrian-French housewife spent four months with her husband and 18 month-old baby visiting more than 50 apartments in their search for the right home. Eventually, the family settled on a flat on Hamdan Street, which they moved into on Christmas Eve. Surprisingly, although they found “significant reductions” in rent prices across Abu Dhabi, their new flat is Dh85,000, which is Dh15,000 more expensive than their previous abode.
“Even though it was more money, it’s double the size of our last flat, and it’s all completely refurbished,” says Ms AlFadel. “I feel as though we’re saving money in the long term because we don’t have to worry about repairs.”
Some people, who want to take advantage of the sliding rents but don’t want to leave their existing neighbourhoods, have been enticed into moving apartments within the same complex.
“We moved from the 56th floor to the 50th floor in the same tower on Reem Island, to exactly the same style of apartment but bigger, for Dh21,000 less,” says Indian resident Narita Khan.
Mr Kaye claims that moving within the same building to save money isn’t unusual. “I’ve heard of people saving up to Dh25,000 by moving in the same block,” he says.
Others are moving to new buildings, but within the same part of town. The Jackson family was reluctant to move from their Reem Island neighbourhood, so when their landlord put up the rent on their two-bedroom flat from Dh152,000 to Dh160,000, they opted to move to a brand new three-bedroom flat also on Reem, for the same rent. “We’ve now got a fully integrated kitchen that’s so beautiful it looks like a woman designed it,” says Maggie Jackson, a Texan-New Zealand sales representative. “Plus an extra bedroom. I love the extra space.”
Ms Jackson says her former landlord is now after just Dh135,000 for her old apartment. “It should be about maintaining good tenants but they pushed us out,” she says. “Many people I know are also moving into bigger properties on Reem Island to get better value for money. People like living on Reem. The buildings are really nice, the facilities are good and you’ve got the convenience of the city – you can’t beat it. Staying here means the kids can continue going to the same school and we can maintain the same lifestyle.”
But those contemplating a move should be warned that the bargain season may be coming to an end. The reintroduction of the rental cap last month, which prevents rent from being increased by more than 5 per cent, has made some landlords reluctant to reduce the rent further, and Mr Kaye thinks the rental market will begin to bottom out this year.
“Previously we’d been saying to landlords ‘Look, it doesn’t matter how low you go this year, because next year you’ll be able to increase the rent.’ Well, obviously that argument doesn’t hold any more. Landlords are starting to think to themselves ‘If I can only increase the rent by up to 5 per cent, then it’s going to take some time before it goes back to where I really want it to be.’”
Shilpa Gorantiwar, a housewife from India, says that although her own rent was reduced by 5 per cent in September, she recently discovered that her landlord is now trying to rent out another flat in the same building for a higher price. “He stated that because the 5 per cent cap is back, he’s now increased the rent by 5 per cent, so it’s now the same price as it was in September 2015.”
But any effect on rental prices from the rent cap has to also be offset by the effect of the municipality fee, as well as rising water and electricity charges, on expats’ wallets.
The fee, announced last February but introduced at the beginning of this month, is payable by every expatriate tenant living in Abu Dhabi emirate and equivalent to 3 per cent of a tenant’s annual rent.
“Residents should bear in mind when they move homes within Abu Dhabi that they will still be liable for paying the municipality fee on their former property, which will be backdated from February 2016 onwards, although at the moment it’s unclear how the money owed on the previous property will be collected,” says Mr Kaye.
Ben Crompton, managing partner of Crompton Partners Estate Agents, thinks these factors will depress rents further by making tenants negotiate harder. “The market in 2017 will turn very sharply on government spending, as it always does in Abu Dhabi,” he says. “If spending either remains stagnant or they continue to cut jobs, then certainly we will see prices slide. This will happen in areas where there is higher delivery of new units, such as Reem Island and the Corniche.”
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