The cost of living in Abu Dhabi is coming down, with apartment rents falling by between 14 and 24 per cent in the second quarter compared with a year ago.
Data released by two leading global property services companies highlighted the falls.
Research by CBRE showed a total of 12,000 new homes will be completed this year and this has pushed average rents down by 4 per cent during the three months to the end of June compared with the first quarter of this year. Overall, rents fell by 24 per cent annually, according to CBRE.
Jones Lang LaSalle confirmed prices in the capital were falling. The company's Abu Dhabi office said supply was outstripping demand, leading to a 4 per cent quarterly fall in average rents and a 14 per cent year-on-year drop.
"There is a lot of value to be had off [the] island in locations such as Raha Beach and Reem Island, which are becoming more affordable," said Matthew Green, the head of research and consultancy at CBRE in the UAE.
Last month, Jones Lang LaSalle published its second-quarter research, which found average annual rents in the capital stood at Dh120,000 (US$32,670) for a high-quality two-bedroom apartment.
The property agents predict rents will continue to drop over the next two years, with about 7,200 more apartments coming on to the market before the end of this year while demand remains relatively static.
Mr Green said rents in secondary locations were falling even faster, while prices in the luxury market remained steady. "We are seeing a flight to quality, which is protecting premium products from rental decline. In the most central locations, however, prices are holding fairly well.
"We predict this trend will continue for the next two years as new supply comes online across the city."
Office rents in Abu Dhabi are also under pressure, with 450,000 square metres expected to come on to the market this year, including 180,000 sq metres of offices still to be handed over at the city's new Sowwah Square development on Al Maryah Island. The trend is set to continue, with an additional 550,000 sq metres of new office space to be delivered next year.
CBRE said reports on the increase in supply had led to secondary office rents declining by about 8 per cent during the first six months of this year.
The company added that prime office rents remained flat during the second quarter, ranging from Dh1,600 to Dh1,900 per sq metre a year.
"For offices, too, there is still significant supply to be delivered," said Mr Green. "As with residential property, offices in the most well-located areas are seeing rents holding up pretty well while those in the more outlying areas are finding it harder to find tenants and more likely to reduce rents."
In Dubai, the residential market appears to be recovering after suffering an even bigger correction following the financial crisis.
CBRE reported last month that average apartment rents in the city rose 2 per cent and villa rents increased 5 per cent during the second quarter.
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