Reem Island registers biggest rent gains in Abu Dhabi

Mid-range apartments increased on average by almost 6 per cent in the three months to the end of September, but less so elsewhere despite the rent cap removal.

The exterior of Sky Tower on Reem Island, along with Gate Towers and The Arc. Silvia Razgova / The National

Abu Dhabi’s Reem Island recorded the biggest rent gains in the capital during the third quarter, according to Cluttons, the property consultancy.

Mid-range apartments increased on average by almost 6 per cent in the three months to the end of September.

But the jump only brought average rents on the island back to the level of a year ago after the completion of new apartments at the Gate and the Arc buildings hit demand.

Overall, rents in Abu Dhabi’s freehold areas increased by just 2.7 per cent during the first nine months of the year despite the removal of the rental cap last year.

Cluttons said that average rents in the newer parts of the city in which foreigners are able to purchase property, increased by 1 per cent in the third quarter of the year – up from an increase of just 0.5 per cent in the second quarter.

The agent said that the modest rent rises compared with a 9 per cent rise recorded during 2013, confounding fears that the government’s decision to scrap the rent cap last year would lead to spiralling costs.

“Landlords have been sensitive to the threat of affordability emerging as a core issue for tenants, with many containing rent increases in order to avert an increase in vacancy levels. This behaviour is occurring despite the removal of the government enforced rent cap,” said Steve Morgan, the chief executive of Cluttons Middle East.

The report chimes with data released by MPM Properties, the property arm of Abu Dhabi Islamic Bank, which reported last month that despite the removal of the rent cap, rents in most areas of the capital rose by less than 5 per cent during the third quarter of 2014.

However, other local agents disagree with the findings, reporting far higher rises.

“We’ve seen fairly substantial rent increases in most of the freehold areas we deal with,” said Ben Crompton, the managing director of Crompton Partners. “We’ve seen the largest rent rises not in Reem, where there has been a lot of new stock coming on to the market which has somewhat subdued prices, but rather at Al Raha Beach, where I would estimate rents have increased by on average around 10 per cent for one and two-bedroom apartments.”

Cluttons also said that as in Dubai, house prices in Abu Dhabi are continuing to slow as new mortgage caps introduced last year by the Central Bank make it harder for buyers to get finance.

Cluttons said that house prices increased by just 1.6 per cent during the third quarter, taking total growth during the first nine months of 2014 to almost 19 per cent.

Last year by comparison the agent reported price increases of 39 per cent during the 12 months.

Prices for villas in the city dropped fractionally during the third quarter as mortgage caps continued to bite into buyers’ finances while apartment prices rose 4 per cent during the period.

Prices for high-end villas on Saadiyat Island experienced the biggest falls, dropping nearly 2 per cent.

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