ABU DHABI // Abu Dhabi rents are likely to fall further in the coming months as another wave of new housing comes on to the market.
Average rents in the capital fell by 6 per cent in the three months to September and by 16 per cent compared with the same period a year ago, the estate agency CBRE says.
CBRE estimates rents are 63 per cent down on the market peak three years ago. And it predicts they will fall even further over the coming months as new projects, such as World Trade Centre Residences at Central Market, are completed.
The market is becoming increasingly fragmented, says CBRE, with some tenants negotiating rents down by between 3 and 9 per cent in the third quarter, while other rents have been static.
“At this point in the development cycle we see no immediate end to this trend with better quality inventory entering the market, adding pressure to ageing and/or inferior units,” said Matthew Green, the head of research and consultancy for CBRE in the Middle East.
“As the market awaits further delivery of high-end offers we may expect some gradual softening of rents as competition increases. This will provide a good indication of the sustainability of the luxury market, which has historically been an undersupplied segment of the housing inventory in Abu Dhabi.”
But the capital is still more expensive than Dubai, said CBRE.
It found the average annual rent for a studio in Dubai stood at slightly less than Dh40,000 (US$10,889), compared with Dh45,000 for a similar property on Abu Dhabi island.
Villas were slightly less affected by the drop in rents, with quarterly declines typically ranging from 2 to 5 per cent. The agent expects villa rents to continue to slide over the coming year as new projects such as Emirati Housing Community developments at Watani, Al Falah and Yas Island come to market.
Housing supply for poorly paid employees remained “limited”.
The requirement for government employees to live in the emirate is likely to lift demand for cheaper developments in Abu Dhabi, said CBRE.
Average offices rents in the emirate fell by 2 per cent compared with the previous quarter and are predicted to fall further in the next six months as more stock comes on stream.
But CBRE added things were looking up for the sector with the rate of rental decline slowing in the third quarter to its lowest level since the start of the property slump.
It reported more inquiries and a rise in activity during the quarter.
Prime office rents in Abu Dhabi were flat at Dh1,600 to Dh1,900 a square metre a year.
“Although the worst effects of the downturn appear to be over, there is still obvious pressures on landlords to maintain competitiveness,” said Mr Green.