Rent increases in Abu Dhabi lead to call for new cap

After almost 18 months since the removal of the 5 per cent rent cap which kept rent rises at a minimum, tenants in the capital continue to be hit with hefty increases, prompting calls from real estate industry officials for its reinstatement.

Residents in Al Reef Villas, Abu Dhabi, say increasing rental costs are going to hit them hard. Many have no choice but to pay the rents demanded. Christopher Pike / The National

ABU DHABI // Almost 18 months since the removal of the 5 per cent cap on annual rent increases, tenants say they are still being hit with hefty increases.

And some real estate insiders are asking whether it is time to bring the cap back in the capital.

“Since November 2013 when the Government removed the cap, landlords have been free to raise the rent to whatever they wanted,” said Liam Coady, of MD Real Estate. He said that last year rents rose by an average of 16 per cent across the city.

“Right now landlords hold all the cards,” he said. “The sooner the cap goes back on, the better. It makes a better playing field.”

But Mr Coady said losing the cap also meant owners could bring their underpriced units up to market averages. That led to discontent from tenants who thought they were being gouged by increases.

“The main reason for prices jumping so steeply in places like Al Reef and Hydra Village is when they first became available they were really cheap,” he said, adding there had been enough time for the correction.

Mohammed Al Mahli moved into a four-bedroom villa at Al Raha Gardens with his family seven years ago.

Mr Al Mahli said that after some manageable increases he was recently told his rent was rising by more than 18 per cent.

“I was shocked,” he said.

“My friends have had increases of Dh5,000 to Dh10,000. This is too much.”

Mr Al Mahli said his last annual lease contract was for Dh190,000. Now, the owner of the villa is asking for Dh225,000.

“I am going to pay it, I don’t have a choice,” he said. “I’ve done so many things to this house, I won’t move now because I don’t want to do it all over again.”

Egyptian A B, 36, said the rent for his three-bedroom villa in Al Reef had increased by Dh27,000 in less than two years.

“It is definitely going to create financial hardship,” he said.

Last month, the property manager sent a letter asking him to pay Dh120,000 for another 12 months, and Dh5,000 extra if he split the payment into two cheques.

Eager to avoid the immediate hassle of searching for a new home, he said he asked the property manager for a more favourable rate and a shorter rental term.

Although some factors justify an increase, Mr Coady said some “greedy” landlords were exploiting the situation.

“Landlords have had the chance to catch up,” he said, pointing to Al Reef as an example of why the rate cap should be re-implemented.

Without it, he said rents would always have the potential to become “unsustainable and unaffordable”.

“By having the cap in place it reassures the tenant, and also means they can plan on staying in one place for a prolonged period of time,” he said. “Everybody knows where they stand when there are caps and restrictions in place.”

Mr Coady said he thought the worst could be behind for tenants, and his firm was not expecting to see the same types of increases this year as in previous years.

And he said his firm thought there was the possibility of seeing the cap reinstated this year.

With an expectation to see rents increase, Joanne Tate, a property consultant at LLJ Property, agreed that now was the time to bring back the cap.

Ms Tate said an influx of residents and the effects of recent changes in mortgage rules that were keeping buyers out of the market were factors driving up demand for rental properties.

“Leasing is very busy at the moment,” she said.