Abu Dhabi has witnessed a six per cent drop in its average residential rents in the third quarter compared to the previous one mainly due to a rapidly increasing housing inventory across the emirate, according to a report.
As residential rental rates continue to fall in the emirate, location and age-specific factors are becoming increasingly important for occupiers in determining fair rental value, said the CBRE in its Q3 market review for Abu Dhabi.
During the second quarter, a total of 1,516 buildings were completed in the emirate, with 68 per cent situated in and around Abu Dhabi itself, and the remaining completions split between Al Gharbia (23 per cent) and Al Ain (9 per cent), .
This is resulting in an ever-growing disparity between primary and secondary locations and between new and ageing properties, the report added.
A recent report from the Abu Dhabi Statistics Centre (ADSC) highlighted a growing number of development completions in the emirate with the majority incorporating residential products (75 per cent).
The ADSC report also indicated that 3,302 residential units were completed in the second quarter, up 17 per cent from 2,816 in the first quarter, reflecting a significant residential development pipeline.
The rapidly increasing housing inventory is creating greater affordability for residents as average rental rates remain fixed on a downward track. This is also having a knock-on effect on inflation, which has been maintained at low levels for much of the past year, the CBRE pointed out in the report.
Newly-delivered luxury properties such as Etihad Towers, Eastern Mangrove Residences and St. Regis Residences continue to achieve impressive rental rates, with solid occupancy and strong corporate demand helping to underpin rates, despite notable downside across the majority of housing projects.
“However, as the market awaits further delivery of high-end offers from World Trade Center Residences, Nation Towers and Landmark Tower, we may expect to some gradual softening of rents as competition increases.”
“This will provide a good indication of the sustainability of the luxury market, which has historically been an undersupplied segment of the housing inventory in Abu Dhabi,” said the report.
Overall, average residential rents have dropped 6 per cent from the previous quarter. It is apparent that a highly fragmented landscape exists with selected areas and developments outperforming the wider market.
“This is reflected strongly in our analysis of rental performance, with some properties seeing static rents, whilst others have experienced declines of between 3 – 9 per cent. At this point in the development cycle we see no immediate end to this trend with better quality inventory entering the market, adding pressure to ageing and/or inferior units,” said the expert.
Despite improving conditions in Dubai and the general reduction in rental rates in Abu Dhabi, the capital’s properties are still found to be slightly more expensive than in Dubai.
For instance, the average annual rent for a studio in Dubai is now slightly under Dh40,000($10,887) per unit as compared to Dh45,000 ($12,248) for a similar property on the main island of Abu Dhabi.