What Abu Dhabi's rental index will mean for tenants, landlords and prices

Landlords and agents say portal to energise property market but tenants worry about rising rents

Abu Dhabi is becoming increasingly popular for relocation, which has driven up rental prices. Khushnum Bhandari / The National

Landlords and property agents have welcomed the launch of Abu Dhabi's first residential rental index, but tenants worry it could lead to higher rents.

The rental index is now available on the Abu Dhabi Real Estate Centre (Adrec) website, highlighting average rental costs across the capital.

It offers reliable data on properties, including past and current rental rates, to help residents and those living abroad better understand the market, said Adrec.

Mubarak Al Amry, owner of Mi Casa Real Estate, said it is a big step for the city and has the potential to bring “great benefits”, but at the same time there are possible downsides that may affect agencies' bottom line.

Tenants also worry it could prompt landlords to fix prices unfairly.

When Yas Acres resident Ryaan Sharif moved home in 2021, much of his decision making relied on trusting his agent's opinion on pricing. "Had the Abu Dhabi index benchmark been available during our search, it would have been incredibly valuable," he told The National.

"While we were fortunate to secure a property at what seems to be a reasonable rate, having access to a benchmark report would have provided us with a more informed basis for negotiation. Unfortunately without such a resource, many people ended up overpaying, only realising it after it's too late."

Mr Al Amry highlighted this as one of the biggest benefits of the index, offering tenants greater transparency and giving them the tools to make smarter choices.

It will also offer real estate agencies a clear guide to set rental prices, he added. "It helps [agencies] understand the market better and might even spark a bit more competition."

Greater transparency in a market indicates continuing development, highlighted Svetlana Politova, chief operating officer of Whitewill Abu Dhabi, who believes the index is a valuable tool for everyone.

“It allows individuals to make more informed decisions, while policymakers can address issues such as affordability, rent control and housing supply, which is beneficial for the overall market."

The index will also allow property agencies to build trust and credibility with tenants by offering accurate rental estimates, Ms Politova added.

Paola Erazo of Sunday Morning Real Estate, who along with her husband owns five properties on Reem Island, and is a tenant herself, agreed it will help ease negotiations with potential renters.

“When someone first arrives in the country, you never know if [agents] are giving them good or bad prices for a property,” she said. “For tenants, it’s going to be good because they’ll know which area they want to choose and the average prices.

"As a landlord, it’s also going to be good because you can tell them to check prices on the index and it’ll be easier to have negotiations."

Potential downsides

Esther, a school administrator who rents in Khalifa City A, said the transparency of information that the rental index offers will undoubtedly be useful for landlords and renters.

“But while it’s good for investors to know there has been an increase in yearly rent, I hope it doesn’t compel them to hike these prices unnecessarily,” she added.

Ms Erazo said it is possible some landlords might take advantage by increasing the price of a property to match or even exceed that of the index, when its true value is less.

“Some properties are not in shape to be increased that much, or to cost that much, but the demand and the offer will decide. Often people demand really high prices but can’t keep a tenant for more than two or three months. And while a lot of properties don’t deserve that price, when you have a need to rent, you’ll go for it.”

Locations such as Sigma 2 Tower on Reem Island are particularly popular among tenants. Victor Besa / The National

Ms Erazo said in the end it often comes down to supply and demand.

"The index may say one thing but some buildings always have a waiting list. A property might go up for rent in the morning and by the afternoon you always have a proposal.”

Blind dependence on the index, meanwhile, could also lead to tenants and industry professionals overlooking other crucial factors that influence rental rates, said Ms Politova, “such as property conditions, neighbourhood amenities and local market trends. [An index] doesn’t always capture the nuances and variations of local rental markets.”

This is particularly true for premium and luxury properties, which are in high demand across Abu Dhabi. “The index might not capture their true value,” said Mr Al Amry. “This can make it difficult to set higher rents and could impact our revenue.

“And since the index makes pricing so transparent, tenants might start moving to more affordable areas. This could boost competition and potentially reduce rental returns for some properties.”

A 'buzzing' rental market

The new announcement comes as rents continue to rise in the Abu Dhabi market, which Mr Al Amry described as “buzzing”.

Apartment rents increased by 2 per cent annually in the capital during the second quarter, while villa rents jumped 5 per cent, according to the latest report from Asteco.

A separate report by CBRE, a global leader in real estate services, showed average apartment rents increased by 6.6 per cent in the second quarter compared to a year earlier, and average villa rents grew by 2.5 per cent. Average costs stood at Dh66,375 and Dh166,261, respectively ($18,070 and 45,260).

The emirate also recorded a significant increase in residential rental contracts during the first half of this year, with 49,135 contracts registered, according to data released by the Statistics Centre – Abu Dhabi.

This is an increase of 24,811 contracts compared to the same period last year, demonstrating a 102 per cent growth.

This demand is often outweighing supply in many areas, which has in turn led to an increase in rental costs.