Apartment rents in Abu Dhabi increased by an average of 6 per cent in the second quarter of the year, compared to Q1, according to the latest market report by Asteco.
The majority of prime, high and mid-quality developments increased by 4 – 6 per cent upon contract renewal while new leases were, on average, 8 per cent higher than in Q1 2015. ?
Popular prime developments such as Eastern Mangroves and St Regis Residences by TDIC even recorded rent renewal rises of 12 per cent and 10 per cent respectively, with long prospective tenant waiting lists.
This indicates the continued lack of prime quality supply in the capital, the report stated.
On the other hand, prime apartment buildings located on the Corniche recorded little or no increase in Q2, with rental rates already at a premium.
Meanwhile rental demand for villas in high-end developments also remained high, with Asteco predicting an increase in rates over the next few months in the absence of any major handover of new villa stock before 2017.
“This turnaround of events is attributable to the gradual stabilisation of sales prices over the last six months, allowing for strengthened yields and positive long term prospects for landlords,” said Asteco Abu Dhabi general manager Jerry Oates.
Sales prices in the emirate remained steady in Q2, although apartment prices showed average growth of 4 per cent year-on-year.
A number of high profile apartment launches took place during Q2, including Aldar’s West Yas and Mayan on Yas Island; and New Horizon by Tamouh, Meera from Aldar and Aabar’s The Kite on Reem Island. Saadiyat Island also saw some new launches such as Bloom Properties’ Park Views, which saw sales rates between Dhs 1,750 – 1,850 per square foot.
“These launches will add in excess of 3,600 new apartment units to the market from 2018, in addition to the 1,800 units announced during 2014, bringing much needed new supply to Abu Dhabi’s market,” said Oates.
“This is also a strong indication that developers are optimistic about market prospects, and both buyers and tenants will ultimately benefit from more choice.”
Demand for upscale villas also remained high in Q2, with strong investor interest seen for TDIC’s Jawaher Al Saadiyat and Hidd Al Saadiyat developments, priced at Dhs 5.7m to Dhs 25m and Dhs 7.5m to Dhs 38m, respectively. ?
The first phase of Aldar’s master-planned Al Merief project in Khalifa City and Nareel Island – both targeting UAE nationals, also saw strong demand.
A recent decree issued by UAE President and Abu Dhabi ruler Sheikh Khalifa Bin Zayed Al Nahyan aimed at regulating and improving transparency in the real estate sector will further boost market confidence and act as a catalyst for increased investor demand, Asteco said.
“This as yet un-enacted legislation will effectively protect investor interests in uncompleted projects, as it requires that brokers and developers be fully licensed,” said Oates.
“When it comes into effect it will further cement the reputation of the emirate as a credible long term investment haven.”
In its Q1 report, consultant CBRE said it also expected a new rental matrix to be reintroduced in the capital, with many residents concerned with the growing cost of living. Abu Dhabi residential rents increased by 12 per cent in the last year, it stated.
“What the government is concerned about is it frankly scares people away and doesn’t encourage people to relocate from Dubai if there is a price differential,” MD of CBRE Middle East Nicholas Maclean said in the report.
“We know it’s [the rental cap] being looked at carefully. They don’t want to stifle any future rental growth, and then therefore do away with the whole reason it was removed in the first place, but on the other hand they don’t want Abu Dhabi to be an unaffordable city.
“So the government is contemplating both components, it’s calling for research from all sorts of people at the moment to help them make that decision.”
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