Housing rents in Abu Dhabi rose by 12 per cent last year and another 2 per cent in the first quarter of this year despite the oil price retreat, figures show.
Average rents increased by between 2 and 3 per cent each quarter for the past 15 months, according to data from the property broker CBRE, increasing fears about the spiralling cost of living in the emirate.
This followed an initial spike in rents at the end of the final quarter of 2013 after a cap limiting rent increases for existing tenants to 5 per cent a year was removed by the Abu Dhabi authorities.
In a report published yesterday ahead of the opening of Cityscape Abu Dhabi, CBRE warned that, with inflation during the first three months of the year at 4.3 per cent, the growing cost of housing and utilities is likely to push up the cost of living further this year, despite the oil slump expected to slow the economy.
It said that rents for two-bedroom apartments in the city averaged Dh141,000 a year, while those in prime developments stood at between Dh150,000 and Dh205,000, with St Regis Residence on Saadiyat Island commanding the highest prices.
“Although not operating in isolation, Abu Dhabi’s substantial fiscal surpluses will help the emirate to combat the negative effects of lower oil prices,” said Matthew Green, the head of research at CBRE’s Dubai office.
“Many residents in the capital are becoming increasingly concerned over the escalating cost of living, particularly as utility rates are also on the rise,” Mr Green added.
CBRE reiterated its estimate made at the start of the year that an additional 35,000 homes are expected to be completed in the emirate over the coming four years, most of which are due to be apartments built on Reem Island.
Nonetheless, Mr Green predicted that house prices in the emirate would remain “relatively stable” in the short term as few new projects came to the market and many investors were prepared to sit on their hands until current economic uncertainties cleared.
Most market analysts predict that rent rises in Abu Dhabi will slow further this year as the economy absorbs the impact of a weaker oil price. However, a lack of good quality supply is likely to equate to small increases over the coming year.
Wouter Molman, director of Cityscape Group at Informa Exhibitions, the organisers of Cityscape Abu Dhabi, said that the slump in oil prices had so far had no effect on the amount of exhibition space sold or the number of visitors expected.
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