Nearly four in 10 Abu Dhabi tenants whose leases were renewed in the first three months of the year had no increase in rent.
Just over 60 per cent of rents increased by a small amount, 38 per cent stayed the same and 1 per cent were actually cut, according to a report by MPM Properties, Abu Dhabi Islamic Bank’s property consultancy.
The data comes from transactions in the bank’s portfolio of more than 23,500 homes managed by MPM.
Paul Maisfield, MPM’s chief executive, said rents would continue to fall slightly in the next few months, but the effect could be counterbalanced by a slowdown in the supply of new homes.
“We are seeing a shift in market dynamics as the first quarter of this year has seen a constrained new supply of homes coming into the market,” he said.
“The residential market is expected to see less than 2 per cent housing stock growth in 2016 versus an average of 4.5 per cent a year over the past seven years.
“The slowdown in new supply will counter some of the downward pressure on rents, although a marginal correction is expected in the months ahead.”
Only about 1,000 new homes came on the market in Abu Dhabi in the first three months of the year, in small to medium-sized developments in Al Nahyan, Muroor Road and Mohammed bin Zayed City.
A separate report from another property consultancy, Cluttons, suggests that there is a shortage of affordable homes, but there is also reduced demand for high-end apartments because some companies in the capital are cutting housing allowances for their staff.
Cluttons said some landlords had recognised the issue and were beginning to reduce rents or offer greater flexibility in payment terms, with some accepting quarterly cheques.
MPM said developers were also offering deals to home buyers as sales remained low in the first three months of the year. In an effort to increase demand, MPM said developers were offering attractive payment plans on off-plan residential sales.
In the office space, which is mostly led by the public sector, corporations have cut spending and put expansion on hold. MPM Properties predicts around 350,000 square metres of new office space to be added by the end of 2016.
The majority of offices will be at City of Lights on Reem Island, with the remaining floors at Addax Tower being handed over in this quarter, and in Omega Tower which is due to be completed later in the year.
Meanwhile, the hospitality sector added around 210 hotel rooms during the first quarter.
Prominent projects that are due this year include the Four Seasons, Marriott, Grand Millennium Bab Al Qasr Hotel, and the Emirates Pearl hotel.
selgazzar@thenational.ae
