Housing rent increases in Abu Dhabi are set to slow this year as the emirate feels the effects of declining oil prices and a slowing global economy.
A report by the property broker CBRE predicts that rents which had rocketed by an average of 17 per cent last year will slow “significantly” as thousands of new homes come to the market just as the global economy hampers corporate expansions.
According to CBRE, two-bedroom apartments in the St Regis development on Saadiyat Island currently bring in rents of between Dh150,000 and 210,000 a year, while similar units in Al Raha Beach have rents starting from Dh140,000 a year.
Annual rents for a typical four-bedroom villa on Abu Dhabi Island start from Dh190,000 a year with rates going as high as Dh350,000 a year in prime locations.
Similar residential types in off-island locations are currently being rented between Dh140,000 and Dh180,000 a year.
“The delivery of new supply in recent months has increased competition for tenancies, resulting in a more cautious approach by some landlords who have become more realistic with their rental requests,” said Matthew Green, CBRE’s head of research and consultancy for the UAE.
The news comes as property analysts in Dubai predict that both rents and prices are set to fall this year as the market suffers a correction.
Last week the property broker JLL predicted that new build property in Dubai would drop by an average of 10 per cent during 2015 with homes on the edges of the city likely to be hardest hit.
Market commentators observe that the property market in Abu Dhabi tends to lag that of Dubai by between a year and 18 months.
However, property brokers in the capital currently predict that average rents in the city will continue to increase – albeit at a slower rate than during the first half of 2014.
In the final three months of the year, CBRE reported that average housing rents in the capital grew by 3 per cent after rocketing 12 per cent between January and June 2014.
The rent increases follow a government decision to remove a rent cap in the city in November 2013 which had restricted landlords to increasing rents for existing tenants to 5 per cent a year.
“For now, we expect the recovery in residential rental rates to continue, albeit at a slower pace than during the first half of 2014,” Mr Green.
“As the cost of living has risen over the past 12 months, there has been a more noticeable increase in demand for low to middle-income units and also for non-prime areas of the capital. This in turn has driven rental growth in more affordable locations as a flight to quality continues.”
CBRE said that sales prices for homes in the capital were relatively subdued during the final three months of the year, with a 2 per cent average price increase.
Average prices in Abu Dhabi investment areas now typically range between Dh13,725 and Dh18,300 per square metre, CBRE said. The firm said that “with transaction volumes down, and uncertainty prevailing, it is likely that the sales market will remain slow in the coming quarters”.
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