A Canadian couple is wondering if they will ever find a suitable place to live in Abu Dhabi. They have had to lower their expectations, even with a budget of Dh200,000.
Floored by capital housing costs
When Keith and Kim Jeffery moved from Vancouver, Canada, to Abu Dhabi a year and a half ago for work, finding a home was the least of their worries. Reassuring their two young children that Father Christmas would still be able to find the family despite the 12,000km move might have been a headache. But locating a place to live, they thought, would be fine. With a budget of Dh200,000, they were confident they would find a spacious three-bedroom villa with a pool, and perhaps even a complementary gym membership.
Now, after 18 months of shuffling between two hotels, a flat and a less than perfect house in Khalifa B, where the family resides, they admit their ride on the Abu Dhabi housing roller coaster has been a bumpy one. "The housing situation here is brutal," sighed Ms Jeffery. "We are not being especially picky. It's just there is nothing like the kind of thing we want for the price we are looking to pay.
"We are not talking small amounts of money, either. We want to spend around Dh200,000, but it doesn't seem to be enough. It's quite disheartening." Unfortunately, this family's experience is not unique. Despite evidence that the Abu Dhabi housing market may be levelling off, expatriates continue to struggle to find affordable and quality accommodation. Last month, according to a report published by Asteco, a local property services firm, the capital has seen price reductions of up to 35 per cent between March and June. The report also suggested the reduction was partially fuelled by redundancies and tenants relocating out of the city centre.
Landlords are increasingly willing to accept payment in two cheques instead of one, estate agents also reported. But despite this supposed reprieve, capital rents continue to strike financial fear in expatriates. Michelle Nicholls, 38, from Wellington, New Zealand, has been in the UAE for only two weeks, having moved here to take a job as a financial consultant. She is currently living in Dubai, but must relocate to the capital as a condition of her job.
"My experience of the housing market in Abu Dhabi is that it is expensive, scarce and unpredictable," she says. "I had a look at the pricing in comparison to London, Sydney and Wellington, and it is right at the top. I am going to have to pay double what I was paying in Wellington. I don't mind paying double, but the standard is not what I would have expected. I was budgeting to spend Dh10,000 a month, and I haven't seen anything I like for close to that.
"Basically, I'm feeling a bit despondent. I suppose I will just have to adjust my expectations." The UAE witnessed astonishing price inflation during the past three years, with rents more than doubling in parts of Dubai and the capital in 2007 and 2008 as the global economy boomed. High demand and an undersupply of homes translated into vast rental revenues for landlords. But what goes up must come down, and Dubai's rental rates have slipped dramatically on the back of the global slowdown.
As supply has increased, prices have softened, but the continuing overall shortage in Abu Dhabi is helping to buoy prices in the capital. According to recent figures from Asteco, villa rental rates in Dubai slumped by 24 per cent in the 12 weeks between April and June. Rents in the capital fell by equally staggering proportions, but the problem for renters is that they generally remain much higher than rents in Dubai.
In Abu Dhabi's most sought-after district, the Corniche, Asteco reported that one-bedroom flats were leasing for Dh130,000 per annum, while average rents for a similar apartment in Dubai's top-of-the-range area, Palm Jumeirah, were Dh100,000. Rents in the capital are being further inflated by landlords who are resisting market pressures to cut rents, preferring to cling to unrealistic profit levels.
"Prices have been falling in Abu Dhabi in recent months, but not like at the rate we have seen in Dubai," said Susan Cronin, the general manager of Abu Dhabi-based estate agents Al Jar Properties. "The situation is a bit frantic at the moment. We are seeing a lot of people move here from Dubai to go into jobs, and they are finding that landlords are actually increasing the rents to the levels they would have been paying before for apartments with fewer facilities," she said. "We get newcomers arriving looking to find a one-bedroom apartment for Dh50,000 or Dh60,000. It's just unrealistic."
Ms Cronin believes it's the landlords who are mostly at fault. "They are holding out for high rents, and landlords who own entire apartment blocks just want to deal with companies who are going to take all the apartments, rather than individuals who just want to take one," she explains. "They don't want the hassle. If a company takes the lease for the whole building, it is just one lease agreement, and if anyone moves out it is the company that will shoulder the burden. We are slowly starting to make them see sense."
Indeed, the price disparity between rents in the UAE's largest cities has already led many renters to attach a price tag to their free time. "I have heard of a lot of people who have jobs in Abu Dhabi and live in Dubai and drive in each day, but we would like to stay here," Ms Jeffrey says. "It's a three-hour round trip each day and that is a lot of driving. Jesse Downs, the head of research at Landmark Advisory, a division of the property brokerage firm Landmark Properties, says there is more supply coming on, and that is having an effect on pricing. "And there is also the Dubai Effect - that is the fact that many people are moving to Dubai because of the attractive prices and high quality of apartments," Ms Downs says. "In Abu Dhabi, the majority of [the housing] stock is quite old and it doesn't necessarily have all the facilities and amenities that many of the developments in Dubai have."
People who were previously pushed out of Dubai by the sky-high rents and forced to live in outlying districts such as Sharjah are also flocking back, while others who were forced to share accommodation are taking advantage of the prices and moving into flats of their own. In any event, the situation in Abu Dhabi looks as if it will remain fraught for the foreseeable future. "For the time being the majority of landlords in Abu Dhabi are remaining very stubborn on pricing," Ms Downs said. "It is worsening the housing shortage in the capital, assuming that the population remains stable."
According to Ms Downs, Abu Dhabi's landlords are a "homogeneous group". As a result, prices move in an apparently co-ordinated way, making them less responsive to market forces than owners in Dubai. Indeed, estate agents have reported large numbers of apartments and villas in the capital lying empty because landlords refuse to cut rents. Landlords may also be reluctant to lower rents because it could take several years for them to return to current levels. In addition, rents that are agreed at a low rate now, and are subsequently prevented from rapid increase by the capital's five per cent cap on increases, would likely fall far behind market values when housing recovers.
Meanwhile, the Jefferys are left to scour the internet and classified ads looking for the holy grail of a three-bedroom villa owned by a landlord prepared to pay attention to market forces. "It's just so frustrating," Ms Jeffery says. "All our friends who came here four or five years ago have beautiful places for a great price. We do seem to see prices dropping. Villas that were being offered for Dh300,000 a year and a half ago are now down to Dh225,000 or 250,000. All we can do is keep looking. Maybe we'll get lucky."
Fingers crossed, they will find a place by December. That way, the children can give Father Christmas plenty of notice of their new address. email@example.com
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