The lowest amount of new housing coming to the market in the past six years is set to keep rents rising over the coming year, property experts predict.
As the Cityscape Abu Dhabi property show started in the capital yesterday, brokers warned tenants in Abu Dhabi are likely to face further exacting rises as the level of new housing supply falls to its lowest since 2009.
Despite a recent economic slowdown caused by a slump in global oil prices, landlords and brokers across the emirate said that a scarcity of new stock would continue to push rents north.
According to the major Abu Dhabi landlord MPM Properties, just 750 new homes were delivered in the first three months of 2015 in all of Abu Dhabi.
These comprised 312 furnished apartments at Time Hotel’s Meera Time Residences at the Saraya project on the Corniche and 120 apartments at Adnic’s Amwaj 2 project at Raha Beach.
Another 5,800 are expected to be completed during the remainder of the year, equating to housing stock growth of just 2.9 per cent compared to an average annual growth over the past five years of close to 5 per cent.
MPM, the property arm of Abu Dhabi Islamic Bank which based its findings on the more than 1,000 lease renewals it handles every month, said that residential rents have risen an average 4 per cent over the first three months of 2015, and are likely to continue to rise further this year.
The property broker JLL agreed, estimating that average housing rents in the city increased 4 per cent during the first quarter – up from 11 per cent growth the previous year when prices rose unsustainably quickly following the government decision to remove a cap limiting rent rises for existing tenants to 5 per cent.
“The most significant event to happen in Abu Dhabi in recent months has been the decline in oil prices which we believe has impacted the market,” said David Dudley, regional director and head of JLL’s Abu Dhabi office addressing an audience of several hundred people at yesterday’s Cityscape show.
“Following the decline in oil prices, we expect there to be a reduction in government spending this year which will slow down the pace of demand growth,” he said.
The broker Asteco reported that occupancy rates for rented homes in prime projects stood at close to 100 per cent during the quarter.
“Prime and high-end residential units continue to dominate demand and command higher rental rates compared with other market locations, especially for one and two-bedroom apartments. We are also witnessing a significant increase in demand for affordable units this year,” said Jerry Oates, general manager of Asteco Abu Dhabi.
Asteco said that one and two-bedroom units in Shams Abu Dhabi are renting for up to Dh120,000 and Dh180,000 respectively. In central Abu Dhabi they came in at Dh70,000 and Dh90,000. In Khalifa City and Mohammed bin Zayed City, average annual rents stood at Dh55,000 and Dh80,000 per annum respectively.
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