x Abu Dhabi, UAESunday 21 January 2018

Abu Dhabi rents shoot up as government workers relocate from Dubai

Rents in prime areas rise by as much as 25 per cent following a ruling that Abu Dhabi government workers will lose housing allowances if they live outside the emirate.

Data from Cluttons shows rents in Al Raha Beach area, such as the Khor Al Raha development, above, averaged increases of 22 per cent in the past six months. Duncan Chard / Bloomberg News
Data from Cluttons shows rents in Al Raha Beach area, such as the Khor Al Raha development, above, averaged increases of 22 per cent in the past six months. Duncan Chard / Bloomberg News

Rents in Abu Dhabi's prime areas have risen by as much as 25 per cent over the past six months as the city experiences an influx of Abu Dhabi government workers living in Dubai.

According to the property agent Cluttons, average rents in some of the city's most exclusive areas have increased by 10 to 25 per cent during the past six months, following a decree last year that could result in government departments cutting housing allowances for employees living outside the emirate and as renters flock to newer schemes.

Cluttons reports that areas such as Raha Beach, Raha Gardens, Al Reem Island, Saadiyat and Al Reef have all recorded rent increases over the past six months, even though average rents in the city have fallen significantly, driven by an oversupply of apartments.

The agent reported that an average annual rent for a two-bedroom apartment on Saadiyat Island showed the highest increases with a rise of 25 per cent over the past six months to Dh145,000 (US$39,477). Raha Beach showed the second- highest rise with annual rents for a similar apartment going up 22 per cent to Dh135,000.

Rents for townhouses at Raha Gardens increased by 18 per cent to Dh160,000 over the same period.

At Al Reef, annual rents for an average two-bedroom flat rose 17 per cent to Dh95,000 and on Reem Island they rose 10 per cent to Dh105,000.

Meanwhile, average rents for two- bedroom flats on the island of Abu Dhabi fell 10 per cent during the past year to about Dh95,000, Cluttons reported.

The agent added that 40 per cent of the inquiries it received about Raha Beach and Raha Gardens were directly linked to the decree, while 25 to 30 per cent of the inquiries it received related to Reem Island came from people relocating before the decree was enacted.

Although Cluttons said it had no log of the locations people had left to relocate in Abu Dhabi, anecdotal evidence suggested they were departing from the southern residential zones such as Dubai Marina, Jumeirah Lake Towers, the Palm Jumeirah, the Greens and the Springs as well as older buildings in Abu Dhabi. However, with rental rates in prime areas of Dubai increasing rapidly there was little evidence for the exodus to have affected rents there.

The agent added that rental reductions over the previous two years in Abu Dhabi have led to annual average rents in prime parts of both cities reaching similar levels. It said that the average rents of a two-bedroom apartment in Dubai Marina currently stands at Dh125,000 a year, while the average in Al Reem, Raha Beach and Saadiyat ranges from Dh105,000 to Dh145,000.

"There are definite signs that this trend will continue in 2013," said William Neill, the head of Cluttons' Abu Dhabi office. "There are a lot of people still in Dubai who have yet to move down to Abu Dhabi and they will only move when their leases have come to an end. At the same time, as vacancy levels increase on older buildings, landlords will be forced to further lower rents in order to secure a return on their investment."

Abu Dhabi's housing stock increased by a massive 9,000 apartments and 6,000 villas during last year, pushing rents for older stock in the city lower, the property company Asteco said yesterday.

The company reported average rents across the city fell by 12 per cent during last year as supply increased and were set to fall further this year with another 17,000 homes expected to hit the market.

Older buildings fared worst with annual rents for lower quality properties on the Corniche falling 19 per cent according to Asteco data, while older stock in central Abu Dhabi, Khalidiya and Bateen fell 16 per cent year-on-year. Rents in Musaffah fell 9 per cent during last year, while those in Khalifa City A and B fell 11 per cent.