Abu Dhabi rents slip 3% in Q1, says CBRE

New report says more gov't led incentives expected to stimulate property market in UAE capital



An Abu Dhabi government ruling for its employees to live in the emirate is starting to have an impact on the local property market, CB Richard Ellis has said in a new report.

The real estate firm said the initiative had lifted leasing volumes in the emirate although residential rents still fell by an average of three percent in the first quarter of 2013 compared to the previous quarter.

CBRE said it expected to see further government-led interventions to take place to stimulate the market in the future but did not elaborate on what they might be.

In the short term, CBRE expects average rents for both commercial and residential propertiesto dip further as a result of the sheer volume of new units and space due to enter the market, although we anticipate that prime developments in both sectors are likely to outperform the market.

While relative stability is likely in the sales market during 2013, the report said an immediate pick up in transaction activity was unlikey while investors await clarification on the emirate’s real estate laws and final details on new legislation, such as the proposed mortgage cap.

It added: "The residential market continues to receive strong backing from the Abu Dhabi Government in a concerted effort to rejuvenate the sector after a four year slide.

"The mandate for all government employees to reside in the emirate in order to qualify for housing allowances is one of the key initiatives in this regard, with the general feeling in the market that this ruling is slowly starting to have an effect on leasing volumes."

CBRE said that with rising stocklevels, interventions such as this are considered vital in order to "induce additional housing requirements and combat the occurrence of further declines".

The report said the first quarter witnessed the delivery of several high-end residential complexes on the main island, including Al Bateen Park (347 units), Marina Bay (348 units) and Marasy (350 units).

However, the majority of the residential development pipeline for 2013 will come from off-island investment zone developments such as Al Reef Downtown and Al Reem Island, and the government’s Watani housing initiative for local Emiratis.

Average annual rents for two bedroom and three bedroom apartments in the city centre range between AED50,000-120,000 per annum and AED70,000-150,000 per annum respectively, the report said.

It added that the relatively stable supply picture in the city centre has helped to maintain comparatively strong rents and occupancy rates, despite declines across similar products in other locations.

The impact of sustained growth in overall housing stock is reflected in the continued decline of lease rates and reduced tenant loyalty amidst abundant and more affordable options in the market, CBRE said.

With an estimated 17,000 new units to be delivered during 2013, residential stock in Abu Dhabi is set for a period of sustained growth, with inevitable consequences for both occupancy and rental rates, it added.

Join the Discussion

Disclaimer:The view expressed here by our readers are not necessarily shared by Arabian Business, its employees, sponsors or its advertisers.

NOTE: Comments posted on arabianbusiness.com may be printed in the magazine Arabian Business

Please post responsibly. Commenter Rules

  • No comments yet, be the first!

All comments are subject to approval before appearing

Further reading

Features & Analysis
Trading bricks: The growing popularity of real estate investment trusts in the Gulf

Trading bricks: The growing popularity of real estate investment trusts in the Gulf

Investor interest in real estate investment trusts (REITs) has...

Abu Dhabi real estate: Down, but not out

Abu Dhabi real estate: Down, but not out

While there has been evidence of rents in the richest emirate...

Forgotten fees: the challenge of investing in Dubai property

Forgotten fees: the challenge of investing in Dubai property

Investors attracted to low service charges at some Dubai residential...

Most Discussed