Oil price fuels rent drop in Abu Dhabi

A slowdown in the property market because of the slump in oil prices has resulted in a decrease in rents in Abu Dhabi, according to a report.

The real estate sector in the capital is experiencing a fall in demand for residential units which has stabilised rents, according to Asteco property management.

“With the limited amount of supply anticipated for delivery in 2016 in addition to a slowdown in job creation, rental rates in the residential sector are overall expected to either remain at their current levels or experience a slight drop,” the report stated.

In the absence of a rental cap or index to regulate property prices, finding affordable housing has been an ongoing issue for most residents in Abu Dhabi.

Currently, the most affordable places in the city are in Muroor, Electra and the Airport road area, according to Muntazzar Ahmed, business development manager at Easy Deal, a property management firm.

“Rents vary depending on the building, old or new, with or without facilities and parking,” he said. “A one-bedroom in a new building with all necessary facilities will cost between Dhs80,000-85,000 in affordable areas, while a two-bedroom will range between Dhs110,000-115,000 and a three-bedroom from Dhs150,000-170,000.

Abu Dhabi projects box out“If you move on to a building without any facilities, parking and fairly old, a one-bedroom can be found between Dhs65,000-80,000 and two- bedroom for Dhs85,000-100,000.”

However, most expats prefer staying in Reem Island, Al Raha and Al Forsan. “On Reem Island, a one-bedroom starts from Dhs95,000 and although it has all facilities, the sizes of apartments are very small,” said Ahmed.

The oil price drop has already started to cause a decrease in rents in Abu Dhabi, said Ahmed. “It is too early for residents to feel the effect of the decrease since it is very low – Dhs2,000-3000 yearly – but we can expect this number to increase in the coming months,” he said.

According to John Stevens, Managing Director of Asset Services at property management company Asteco, an overall slowdown is expected in the Abu Dhabi market in 2016.

“The expat population, accounting for 75 per cent of the population, remains one of the main drivers for residential property, therefore any plans for job cuts due to the slump in oil prices may impact overall demand significantly.

“If demand levels decline, prices may come under pressure during the course of 2016.”