Despite the removal of the Abu Dhabi rent cap, rents in most areas of the capital rose by less than 5 per cent over the third quarter of 2014.
According to data published by MPM Properties, the property arm of Abu Dhabi Islamic Bank, more than half of all the rent increases it agreed in the three months to the end of September in all areas of the city were between 0 and 5 per cent.
MPM, which based its findings on the more than 1,000 lease renewals it handles every month, said that the biggest rise came in Al Zahiyah, formerly the Tourist Club area, in which 21 per cent of homes received rent rises of more than 20 per cent.
MPM, which also rents out properties in the off-island districts of Khalifa City, Mohammed bin Zayed City and Shakbout City, said that in these areas more than 80 per cent of lease renewals completed in the third quarter were for less than 5 per cent.
In Khalifa City, rents rose less than 5 per cent in 79 per cent of homes, while 2 per cent received rises of 10 to 19.99 per cent. It added that the largest rental increases were mostly for properties at the bottom end, typically with rents below Dh40,000 per year.
The rent cap had been introduced, capping payments for existing tenants in 2006 and was set at 5 per cent in 2010, before being removed last November.
MPM said that it did not favour a return to a rent cap in Abu Dhabi but instead proposed government intervention to increase affordable housing in the city.
“The current market is effectively a three-tier market,” said Paul Maisfield, MPM chief executive.
“Our portfolio is made up of predominantly ‘mid-tier’ properties. The mid-tier properties, which a lot of our portfolio sits within, are seeing rents remain fairly stable with the common trend being within the 5 per cent increase range, reflecting the fact there is a ready supply of such properties and thus landlords are mindful not to push rents too high and risk occupancy levels falling.”
“At the top end with a shortage of supply, occupancy levels are now high within the popular developments and communities and with a shortage of choice tenants are facing rental increases of 15 to 20 per cent at lease renewal.
“At the bottom end there is also a shortage of supply which is pushing up rents and in percentage terms these have been hit the hardest.”
lbarnard@thenational.ae
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