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Sun 26 Mar 2017 10:13 AM

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Abu Dhabi expats look to downsize amid cost-of-living crunch: report

Municipality has moved to reinstate the 5 percent rent cap to regulate rental hikes

Abu Dhabi expats look to downsize amid cost-of-living crunch: report

Abu Dhabi’s residential market saw low levels of activity during the last quarter of 2016, with sustained, albeit relatively modest, declines in both rental and sales rates, according to a new report. 

Real estate consultancy CBRE said investment activity has been largely subdued, due to the on-going economic situation and prevailing market uncertainties, it said.

In overall terms, apartments experienced a 7 percent decline in rentals during 2016, although there was only a marginal drop recorded during the final quarter.

Following on from recent regulatory changes, the Abu Dhabi Municipality has moved to reinstate the 5 percent rent cap to regulate rental hikes. 

CBRE said that while this is unlikely to have significant impact in a falling market, it is a positive move for the future of the market, ensuring a better regulated environment for the capital’s residential tenants.

It added that expatriate residents are becoming increasingly cost sensitive, particularly in relation to housing requirements with evidence of downsizing boosting rents of smaller residential units in the city.

According to the report, Abu Dhabi's commercial property market continued to witness weak demand and limited interest in new office spaces.

CBRE said in its latest Abu Dhabi MarketView report that while the wider market is facing sustained challenges, good quality Grade A office accommodation continues to outperform, underlined by the presence of high occupancy rates across the majority of the city’s prime commercial assets.

However, CBRE said that with restructuring and cost optimisation strategies still in place, the market continues to be subdued and is likely to see further rental decreases throughout 2017.

It added that the negative impact of this trend has been most visible in the performance of the secondary office market, where rentals have fallen by 1 percent quarter-on-quarter and 8 percent year-on-year in the last quarter of 2016.

Prime rentals have remained broadly flat during this period, averaging around AED1,800/sq m/year but Landlords are offering more incentives to tenants, including longer rent free periods.

Mat Green, head of Research & Consulting UAE, CBRE Middle East, said: “Abu Dhabi is currently experiencing widespread deflation of rental rates for non-prime assets, driven by softening demand fundamentals and rising inventory levels and vacancy rates. 

"As a result, we can expect to see further declines in rentals during the course of 2017, with no imminent recovery in performance anticipated.”

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