Market forces are finally pushing rent prices back to earth, but tenants, especially in Abu Dhabi, will be hoping more change is on the way.
Lower rents are good for the market
In 2009, a report by property brokerage firm Landmark Properties concluded that landlords in the capital were exacerbating the housing shortage and keeping rents artificially high by clinging to unrealistic expectations of what people could afford. While some landlords reluctantly started to drop their rents in line with market forces, many others stubbornly refused.
Two years later, much has changed. While landlords of the past might have preferred vacant properties to giving renters a break, market forces are finally pushing owners to bring prices back down to earth.
As The National reported yesterday, apartment rents in Abu Dhabi fell by an average of 14 per cent last year, and higher end, harder-to-let homes dropped by around 35 per cent, according to a new report from the property consultancy Jones Lang Lasalle. At the same time, rents for Grade A office space - the highest quality available - dropped by an average of 28 per cent.
"While developers have scaled back many projects since the market correction at the end of 2008, the additional supply entering the market is generating an oversupply situation for most asset prices," the report says. "Consequently, average rentals and sale prices continued to decline in most sectors."
Many of the newly available vacancies are at the high end of the market in developments like Raha Beach and Reem Island, and the reduced rates will be welcomed by middle income residents. Furthermore, this is good news for many professionals who continue to commute from Dubai and Al Ain, as well as for employers hoping to attract overseas talent to the capital.
But tenants will be hoping more change is on the way. Many believe landlords hold too much power in setting the terms. In Dubai, there is an increasing trend towards paying rent in several instalments rather than one yearly payment. Such changes would benefit renters in Abu Dhabi as well. The one cheque payment, renters believe, gives landlords no incentive to improve services and maintenance, and makes it difficult to get out of bad buildings.
All vibrant cities are dependent on competitive rental markets and a mobile middle class. Abu Dhabi now stands to benefit from both.