It's contagious! Abu Dhabi residential rents record substantial increase
Abu Dhabi residential rents increased by an average of 16 per cent year-on-year last year, with rates rising by as much as nine per cent in the final quarter, said a report.
The latest Abu Dhabi Market View by CBRE, a leading international real estate consultancy, stated that rental increases were highest for one-bedroom units which jumped 11 per cent during the quarter.
Mat Green, head of research and consultancy UAE, CBRE Middle East, said: “The recent move comes at a time when housing demand was already on the rise, following the earlier government intervention to change the conditions under which state run companies paid housing benefits to their employees.”
“Despite Abu Dhabi’s impressive return to growth, the market remains polarised in its performance, with significant variation found between the emirates key residential locations and by the age of the specific property. With a large portion of the capitals housing stock now quite dated in appearance, there has been widespread tenant migration towards new developments upon completion, which in turn has resulted in sustained rental deflation for many older units,” he said.
The rental gap between properties location ‘off-island’ and those in ‘on-island’ locations remained firmly intact, with apartments in off-island locations 44 per cent cheaper than those on the main island.
“While rental growth appears to be a new reality for the majority of residential tenants, the high volume of expected new supply may at least help to curb some of these inflationary pressures, although again this is likely to be location specific and dependent on the local market fundamentals,” said Green.
“Over the next three years, roughly 40,000 new residential units are forecast for delivery across the capital with close to 45 per cent to be completed on Reem Island alone,” he added.
An increase in the level of residential investment activity may be expected, particularly within established master plan locations, which in turn may lead to an increase in the number of new construction starts this year, said the report.
The Abu Dhabi office market, however, witnessed a relatively quiet quarter, with only the sustained activity from the public sector helping to maintain the markets forward momentum, noted the CBRE report.
The average prime rentals for Grade A commercial office spaces and secondary office rental rates remained stable, although further rental deflation is expected during 2014 as new good quality developments are completed, it said.
“It is hoped that the positive economic growth forecast for 2014 will also provide much needed stimulus for an improvement in the commercial office sector. However, any recovery is likely to be constrained by the large volume of new office supply that will be delivered during the course of the year,” Green concluded.
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