Rents in Abu Dhabi jumped by 6 per cent in the second quarter of this year from the first on a lack of new supply, according to a report by Asteco.
The property consultant said new leases were being agreed on rates that were typically about 8 per cent higher than previous deals, but renewals on prime, high and mid-quality accommodation were typically being signed with increases of 4 to 6 per cent.
In prime areas such as Eastern Mangroves and St Regis Residences on Saadiyat Island, rents were renewed at increased rates of 12 per cent and 10 per cent, respectively, and there was a waiting list of prospective tenants for properties, it said.
Rents on the Corniche remained flat this quarter at between Dh1,300 and Dh1,700 per square foot for a typical two-bedroom unit.
Rents for villas have also hit a plateau after steep rises, but occupancy rates are likely to remain high. There are not many expected significant handovers of new units before 2017, meaning villa rents are likely to start climbing again soon, Asteco said.
“We’ve seen a spike in this quarter, mainly because of a lack of supply,” said Asteco’s general manager for Abu Dhabi, Jerry Oates.
“There’s been growth in some areas but not in others, and it’s this lack of supply in certain areas that is driving things. If you take a location such as Reem Island, the new stuff isn’t coming on line all that quickly.
“A few years ago, Reem was a place where people didn’t want to look. Now it’s a place where people are trying to get into but there’s no new buildings – or there won’t be for a little while,” Mr Oates added.
Reem Island has had its fair share of launches during the quarter, though, including Tamouh’s new Horizon Towers project at the City of Lights development, Aldar’s Meera at Shams Abu Dhabi and Aabar’s The Kite Residences.
There were also new apartments launched at Saadiyat Island at Bloom Properties’ Park Views project.
In terms of sales, prices of apartments were flat during the second quarter after some steep rises in previous quarters. They are still up 4 per cent year-on-year, but there is a big difference in demand based on areas.
Apartments in Saadiyat Beach Residences are 10 per cent more expensive than last year at between Dh1,500 and Dh1,700 per sq ft, but prices in Al Zeina have dropped by 6 per cent to Dh1,150 to Dh1,350 per sq ft.
Villa prices also remained stable, but Mr Oates said that demand at launches of villa projects such as Jawaher Al Saadiyat and Hidd Al Saadiyat and for projects at Khalifa City and Nareel Island aimed exclusively at Emirati buyers remained strong.
The launches will eventually add 3,600 new apartments to Abu Dhabi’s market from 2018, in addition to the 1,800 units that were brought to market last year. These will “bring much-needed new supply to Abu Dhabi’s market”, said Mr Oates.
Ben Crompton, the managing partner at Crompton Partners Estate Agents, said there had been more gradual increases in rents of about 2 per cent per quarter during the first half of this year.
He agreed with Mr Oates that the supply of new units was an issue, though, referring to a JLL report from earlier this year that anticipated a 2 per cent increase in Abu Dhabi’s built stock, compared with average population growth in recent years of more than 7 per cent.
“If that is the case then all you’ll get is rental growth,” he said.
Moreover, he said that a number of recent apartment buildings that have completed have been snapped up in bulk by corporate entities.
“Some of the healthcare providers and hotels have reserved these for their staff, which means that very little of this new accommodation is making it on to the market.”
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