Demand drops for Abu Dhabi high-end rentals as budgets fall

Abu Dhabi’s rental market is showing signs of fragmentation as softer demand for higher-priced areas contrasts with a shortage of more affordable homes.

According to Cluttons, cuts to housing allowances offered by companies in the emirate means there is a much smaller pool of potential tenants for high-end properties, leading to longer void periods.

The company said in its Abu Dhabi Spring 2016 property market outlook that housing budgets continue to hover at about the Dh100,000 to Dh150,000 mark – but average apartment rents start at Dh160,000 per year and average villa rents are Dh270,000.

CBRE’s latest Abu Dhabi Marketview offered similar findings, stating that although overall rents remained flat, cheaper units were subject to rental growth of 2 per cent during the first quarter of the year, offsetting a softening at the top end of the market.

“Lease rates in areas such as Corniche and Khalidiya remained high, with prime rentals for one-bedroom and two-bedroom units currently around Dh120,000 and Dh180,000 respectively," said Matthew Green, the UAE head of research and consulting for CBRE.

He said that there was a “continued shortage of affordable homes in the capital", meaning that rent levels at the lower end of the market would remain strong as more people seek out cheaper accommodation to mitigate the higher costs of living.

Cluttons said that some landlords had recognised the issue and were beginning either to lower rents or offer greater flexibility in payment terms, with some now accepting quarterly cheques.

It said that affordable submarkets such as Al Reef Villas and Hydra Village will remain resilient, with the former experiencing rent rises of 8.7 per cent and the latter rental increases by 26 per cent over the past 12 months.

Overall, though, it said rents to the end of the first quarter remained subdued, with apartment rental growth across the city slowing to 0.8 per cent year-on-year and villa rents declining by 1.4 per cent.

“The deflation in residential values reflects growing caution in the market, which is being compounded by low levels of demand," said Edward Carnegy, the head of Cluttons Abu Dhabi.

The listings website Dubizzle said there had been a steep rise in demand for emerging, inland communities in Abu Dhabi and Dubai, but said there had been a decline in demand for properties in older, established communities such as the Corniche and Tourist Club areas.

It said that rental prices in Al Reef increased by 9 per cent year-on-year, while sale prices were up by 4 per cent.

Despite this, Dubizzle’s product marketing manager, Ann Boothello, said Al Reef was “still one of the most affordable communities in which to buy, with a sale price per square foot at Dh860".

In Al Ghadeer, rents increased by 15 per cent year-on-year and sale prices by 3 per cent. Rents also increased by 10 per cent at Khalifa City A. Contrary to other reports, it said rents in the Corniche area dropped by 10 per cent and in the Tourist Club area by 13 per cent.

“As we see real estate becoming more affordable in central communities, the price increase in less central and established areas indicates that the capital is more family-orientated and people are seeking larger spaces for less," Ms Boothello said.