Property broker Asteco expects Abu Dhabi rents to fall

The broker said that mergers among Abu Dhabi-based companies including Mubadala and IPIC and NBAD and FGB would help push down rents in Abu Dhabi in 2017.

Average rents for apartments in Abu Dhabi fell by 7 per cent in 2016. Clint McLean for The National

Asteco has become the latest property broker to forecast rent declines in Abu Dhabi this year as 4,000 new homes are expected to come on to the market.

According to the property broker’s data, average rents for apartments in Abu Dhabi fell by 7 per cent in 2016 and average rents for villas dipped by 5 per cent as a result of the economic slowdown caused by low oil prices.

The broker said that mergers among Abu Dhabi-based companies, including Mubadala’s with Ipic and NBAD with FGB, would help to push down rents this year in the city.

“High-profile corporate mer­gers in the pipeline are expected to lead to increased job uncertainty and could affect employee benefit packages, including housing allowances over the next few years, raising the pot­ential for softening demand and therefore declines in market rates,” said John Stevens, Asteco’s managing director.

According to Asteco, annual rents for two and three-bedroom apartments were subject to the biggest falls in rents during 2016.

It found that in the Khalidiya/ Al Bateen area of Abu Dhabi island the average rent for a high-end two-bedroom flat fell by 13 per cent from Dh168,000 at the end of 2015 to Dh146,000 at the end of 2016.

On the Corniche, average rents for high-end two-bedroom flats dropped by 9.8 per cent from Dh153,000 to Dh138,000.

And rents for an average two-bedroom apartment in Mar­ina Square on Reem Island fell by 10 per cent from Dh148,000 at the end of 2015 to Dh133,000 at the end of 2016.

At the top end of the market rents for large villas in Abu Dhabi fell by an average of 8 per cent over the year, Asteco said, the result of a swath of redundancies among high-paid senior executives.

It reported that average rents for five-bedroom villas in Al Raha Gardens fell 13.7 per cent from Dh290,000 in 2015 to Dh250,000 in 2016. In the Mushrif/Karama area they fell 8.6 per cent from Dh255,000 to Dh233,000.

Asteco estimates that 1,400 new homes were handed over in Abu Dhabi last year and it forecasts that another 2,700 apartments and 1,360 villas will come to the market this year, depressing rents further.

“Although delays cannot be ruled out, this will definitely put pressure on rental rates for existing stock,” said Mr Stevens.

“Residential units that were previously able to maintain rental levels due to the reluctance of existing tenants to move, are now more likely to be affected as residents in search of the best value-for-money will become more frequent.”

Property brokers across Abu Dhabi have been forecasting further dips in rents this year as the fallout of the drop in the value of the price of oil over the past two years continues to affect the capital’s economy.

However, in the absence of any publicly accessible database brokers estimate rent falls using information from their own estate agents or from data companies such as Reidin, which means that figures differ.

Earlier this week, Chestertons Mena reported that villa rents in Abu Dhabi fell by 10 per cent during 2016, while apartment rents fell by an average of 7 per cent.

During the final three months of 2016, the broker said that apartment rents fell 1 per cent compared with the previous quarter, while villa rents were down by an average of 2 per cent.

Core Savills last month also predicted further rent and house price falls in Abu Dhabi, especially on Reem Island where it predicts another 2,400 homes will come to the market this year.