Supply fails to meet demand for residential real estate in Abu Dhabi
High rents driven by Abu Dhabi’s strong economy and near 100 per cent apartment occupancy levels are hurting residents, and further rent increases are likely this year.
First quarter research by real estate specialists Asteco shows an average jump in rents of AED5,000-10,000 for typical one, two and three-bedroom apartments in the UAE capital since the fourth quarter of last year. And opportunist landlords are even hiking rents of older, poorly maintained properties.
“We’re seeing colossal demand for well-maintained, affordable properties with amenities like gym, swimming pool, and underground parking,” said Asteco CEO Elaine Jones. “There is some new construction, but this is falling well short of demand. A better investment right now would be to put money into buying a home, but an Abu Dhabi freehold law needs to allow full ownership with the right to demolish, renovate, or expand the property.”
New Abu Dhabi rent laws allow landlords to implement 10-20 per cent rent increases every two years. With many landlords entering new rent cycles this year, Asteco analysts say rent reductions look unlikely in the remainder of the second quarter.
Rapid population growth is forcing prices up in Abu Dhabi. From a population of just 140,000 in 1980, the UAE capital is home to 600,000 today, and city planners expect its numbers to swell to 1.35 million by 2020.
The cost of Abu Dhabi office space is also soaring, with rents up by an average of 8-10 per cent since December 2004. Average rents for new buildings are now AED600 to 650 per square metre, and occupancy is approaching 100 per cent.
Several new office towers are expected to open between now and the end of 2006, but Asteco analysts say the high margin of demand makes further rent increases likely.
Jones added: “The shortage of parking is also a big headache for office workers in the capital, and new paid-parking developments are long overdue.”
Founded in Dubai in 1985, Asteco is the UAE’s largest property management company. Its services include retail, commercial and residential sales and leasing; strategic consultancy; property marketing; feasibility studies and evaluations; and research and investment.