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Wed 15 Aug 2012 12:14 PM

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Abu Dhabi residential rents fall 24% - CBRE

New visa regulations are likely to easy price decline going forward, report says

Abu Dhabi residential rents fall 24% - CBRE
Residential rental rates in Abu Dhabi have fallen by nearly a quarter in the last year (Bloomberg - for illustrative purposes)

Residential rental rates in Abu
Dhabi have fallen by nearly a quarter in the last year, but new visa
regulations announced earlier this year are likely to ease the decline going
forward, according to a report by real estate consultant CBRE.

Residential rates in the UAE
capital fell 4 percent in the second quarter of 2012 compared to the previous quarter. Rents declined 24
percent during the quarter compared to the year ago quarter,
the report said.

However, this decline is likely
to be impacted by new regulations requiring foreign residents to present a
valid tenancy contract in order to obtain a visa.

The recent amendment to Abu
Dhabi’s visa law has drawn mixed reactions from the market and concern
among lower-income expatriates who may be directly impacted.

“Affordability remains a key
concern for a large portion of the capital’s populace, but the proposed visa
rules may have the impact of increasing housing costs for the relatively high
proportion of the population that is currently residing in shared
accommodation,” the CBRE report said.

“Should the government choose to
implement and enforce the no-sharing policy, the demand for smaller residential
unit types could well escalate, inevitably to the detriment of larger properties.”

The requirement applies to those
in shared accommodation, who must provide proof of residence and a letter from
their employer confirming their address. However, it has not been confirmed
when the change will be introduced, nor whether there were plans to extend the
requirement beyond Abu Dhabi into the UAE’s six other emirates.

In the office sector, prime rents
in Q2 remained flat at around AED1,600 per sqm to AED1,900 per sqm, while low quality rents
continued to decline.

“Secondary and inferior office
products continue to suffer from widespread rental deflation which has averaged
eight percent since the start of 2012. A widening rental disparity has also
become evident between good quality high specification products and lower-grade
accommodations, with rents for poorer spaces now observed from as low as
AED750 per sqm,” the CBRE report said.

Despite 2,161 new commercial
licenses being issued in Abu Dhabi during the first quarter of the year,
landlords still had to offer incentive packages and flexible payment schemes in
order to attract tenants.

The most prevalent demand segment
remains companies seeking small accommodation sizes from 300 sqm to 500 sqm, the
report added.