As the rental housing market continues to dip tenants are in a strong position to call the shots but they have to know what the current rates are for their home area.
The hot gossip over the garden wall in the capital these days seems to be how much rent the neighbours are paying.
Rents fell in almost every neighbourhood of Abu Dhabi last year, by as much as 25 per cent for a high-end, one-bedroom flat on the Corniche. The market shows no sign of picking up. Property company Core Savills said that this year’s drop in values would be close to 2016 levels, with prime and mid-prime villa values anticipated to fall by at least 15 per cent, and apartment prices by seven per cent.
Increasingly, tenants are finding the neighbours who just moved in next door are paying substantially less rent than they are. With the new Tawtheeq bill adding strain to their finances, when the time comes to renew the lease, tenants are prepared to push hard for a drop in rent.
But how to go about this process with delicate diplomacy?
Scottish resident David Crook has seen this question appear several times lately on the Facebook group that he runs, Tenants in Abu Dhabi (TOADS).
As a senior property manager with Abu Dhabi National Properties, he is an expert in this field, as one of his jobs is to negotiate between landlords and tenants.
“We see so many rent reduction requests coming in on a daily basis,” he says. “My advice to tenants is not to be too greedy, but also be aware that there are very few occasions now where landlords are justified in proposing to increase rents. Landlords will try, understandably, to get away with holding ground as much as they can, but there is a tipping point.”
Just before the two-month notice period is up, Mr Crook advises tenants to scour property websites such as propertyfinder.ae, or property managers’ lists of available units in their area, to arm themselves with evidence of current market rates.
“Its essential to do your homework,” he says. “Tenants can then say to their landlord ‘Here is some proof of what’s happening in the market, so I’m looking for a reduction’. We advise landlords that it’s always better to retain a tenant at a slightly reduced rent than to have an empty property.”
If your lease is with a property management company, then they will be the ones to negotiate with, says Mr Crook. “You’d have to write to that company and explain ‘I’m happy to renew, but I’m looking for X, Y, Z’. The company will then either take that decision themselves, or go back to the landlord to seek their approval.”
Australian resident Judith Summers had to do some hard bartering through a property management company to achieve an 8 per cent drop in rent for the three-bedroom flat she shares with her husband in Al Muneera. The couple, whose rent had increased year-on-year since they moved in 2012, went to the negotiating table with an annual rent of Dh195,000.
“At first, they announced the rent would be increased to Dh200,000,” says Ms Summers. “We offered Dh175,000, and in the end, we agreed on Dh185,000. I love living in Al Muneera and our lives are centred in this part of Abu Dhabi, so we really didn’t want to have to move. But we would have done so if they hadn’t agreed to a decrease – my husband was adamant about that.”
Moving to a new property costs “at least Dh10,000”, says Mr Crook, and there’s the burden of time and stress, too.
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Read more: Top tips on negotiating a drop in your rent
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Ben Crompton, the managing partner of Crompton Partners Estate Agents, points out that any potential rental saving might not be worth the hassle of moving, “and landlords know that”. But those who are prepared to announce they’re moving out are likely to see their landlord back down on price.
“You can play it like a game of poker,” says Mr Crompton, half-jokingly. “You need to be able to think that if you don’t get the rent decrease you want, you really are prepared to leave. Usually, as soon as you voice your intention to leave, your landlord will start to negotiate.”
But Mr Crompton points out that the landlord is well within his rights to call your bluff if you didn’t mean it and insist that you move out.
“A sensible landlord wouldn’t do that, but it’s a risky strategy.”
For those people who live in areas where the rent has only dropped by a relatively modest five per cent or less in the last year (such as Al Ghadeer Village and MBZ, where prices are holding up better), the ball is in the landlord’s court, because he knows the cost of cleaning and repainting the property, as well as brokers fees and moving fees, would cost tenants more than any potential rental saving.
“That knowledge may deter the landlord from offering a decrease,” says Mr Crompton.
But in those areas where the annual rent has dropped substantially more than the cost of moving, (such as Reem Island and high end apartments along the Corniche), it is the tenants who have the upper hand.
Mr Crompton says that some institutional landlords are still coming to the table proposing a five per cent increase in rent, “which is slightly ridiculous in the current market”.
“They’re then negotiating down to no increase, or perhaps a small decrease,” he says. “The rental cap, which was reintroduced in Abu Dhabi last December, means that landlords are no longer allowed to increase their rent by more than 5 per cent. This means that they don’t want to come down too low in price this year, because when the market does start to pick up, they won’t be able to climb back up in price very quickly. The rental cap therefore acts as a disincentive for them to be very flexible on dropping rents.”
Individual landlords are more flexible, says Mr Crompton, because they’re more likely to have the pressure of a mortgage.
“But Abu Dhabi is full of high net worth individual owners who don’t have outstanding mortgages to pay and don’t suffer the same financial pain from having empty properties. They’re not as flexible, because their hand isn’t forced as much by needing to make loan repayments or investment returns for investors.”
Ms Summers claims rental rates in Al Raha Beach are now set at “wildly different prices”, depending on the landlord’s tactics.
“I’ve seen two-bedroom flats here advertised for as little as Dh140,000 and as much as Dh170,000. Some landlords are still trying it on, because they know that the newbies arriving in town don’t know how the market works, so they’re willing to pay higher prices.”
Indian housewife Sheba Nair and her husband were paying Dh142,000 for a three-bedroom villa in Al Reef, but Ms Nair knew from checking the Al Reef Facebook page and speaking to neighbours that prices in her community had been dropping steadily.
“Dh130,000 to Dh135,000 was the going rate at that time,” she says.
The Nairs approached their landlord about two months before their lease was up, through their agent.
“We pointed out the market prices, and he replied offering us Dh140,000. We sent him an email asking if he would be willing to renegotiate and he replied immediately to say that Dh135,000 was good. I hadn’t really been expecting any decrease, and didn’t want the headache of moving, so I was really thrilled that we got to stay in our villa at a reduced rate.”
Yvonne Foley, who is an administrator on Facebook’s Middle East Lifestyle Page, negotiated face-to-face with her landlord over the five-bedroom house in MBZ where she and her family live.
“We told him we were considering moving, as all the rents had dropped city wide. He asked what it would take for us to stay as we were great tenants, and we asked to go back to our original rental price from three years ago [which was Dh10,000 cheaper], which he agreed to.”
But not everyone has been so lucky in their negotiations.
German resident Hanz Bergart failed to get a rent decrease on his Reem Island flat, after putting up with a year of noisy construction work nearby and a broken-down swimming pool.
“I told our administration company that we needed a lower rent, but they wouldn’t give us a penny,” he says. However, Mr Bergart was able to negotiate a shorter contract instead.
“We eventually made a contract at full price, but for only eight months, which suited me for personal reasons. But one thing is sure – I’ll never again move into a building where the administration simply don’t care. I’m close to preferring to live on a boat or in a tent in the desert.”
While just five years ago tenants were beholden to pay one cheque covering a 12-month period, now landlords are prepared to be more flexible in terms of the length of the contract and number of cheques required.
“The current market has seen some power return to tenants – they can start to dictate more favourable terms and the amount of checks is often one of those negotiation points,” says Lukman Hajje, the chief operating officer of Propertyfinder Group.
Mr Crook also finds that “the days of giving one cheque are long gone”.
“Because of the jobs uncertainty, we now accept three cheques as standard and four on exception.
“Flexibility on the number of cheques is about the only incentive the landlords have got to throw into the bargaining mix right now.”
newsdesk@thenational.ae
