Tenants in Abu Dhabi face up to a 45 percent jump in rents by the end of next year as the recent wave of investment and developments increase the emirate’s appeal, EFG-Hermes said on Saturday.
The Egypt-based investment bank forecast residential rents would increase 20-25 percent by the end of this year, and by a further 15-20 percent in 2009.
“Given the current supply and demand dynamics, where supply is not expected to catch up with demand over the next 18-24 months at least, prices and rents will continue to rise in all the real estate segments over the short- to medium-term,” Sana Kapadia, research analyst at EFG-Hermes, said in a statement.
The bank said the market outlook for commercial, retail and leisure real estate segments were also set for “phenomenal growth” over the next couple of years.
Rents in the UAE capital soared 17 percent in the first quarter, compared to the year-earlier period, according to a report by the Abu Dhabi Department of Planning and Economy (DPE).
The DPE said surging rents were attributed to the shortage of residential units as a result of landlords’ preference for renting out space for commercial rather than residential use.
The soaring cost of accommodation has been highlighted as one of the main drivers of inflation in the emirate and across the wider UAE.
Rent and rent-related expenditures comprise 45 percent of total expenditures of a consumer in the emirate, with low- and middle-income people spending 50 percent of their salary on accommodation, according to the DPE.
UAE inflation was officially 9.3 percent in 2006 and may have surged to a record 14 percent last year, according to the Abu Dhabi Chamber of Commerce and Industry, citing government estimates. The government has yet to release the UAE’s official inflation figures for 2007.
Inflation in Abu Dhabi hit 10.9 percent at the end of 2007 and rose to 11.5 percent in the first quarter of this year, the DPE said in a report on Saturday.
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