Abu Dhabi tenants may continue to enjoy lower rents as supply rises

Abu Dhabi - 15 per cent drop in property prices recorded last year

Rental prices have significantly dropped in the UAE capital within the last year. However, property experts predict that prices will slide further, suggesting that supply is increasing while demand is decreasing. 
Jalal Mamdouh, leasing coordinator at Prime Capital, said rental prices in Abu Dhabi are expected to decrease throughout 2017, due to companies cutting costs. "Many expats have left, which means the rental prices also decline."
"Companies have cut a lot of expenditure and reduced staff. Families are also expected to leave after their kids finish schools," he added.
Although an average of 15-20 per cent has been dropped in property prices, new projects and buildings waiting to be handed over could see a further dip. 
He said that landlords are thus finding it difficult to compete with one another, adding: "They are desperate to lease their apartments," particularly those who have bank loans.
"Most landlords have mortgage loans, and they don't want to leave their apartments empty for too long." Mamdouh gave the lowdown on the rent drops in different areas in Abu Dhabi, highlighting that this year, Reem Island in particular, has witnessed a tremendous decrease. He said that in 2016, tenants were leaving Reem Island and heading for more affordable properties in Abu Dhabi City, however this year has seen the opposite. A one bedroom in Reem Island now starts at an average of DhDh70,000, whereas in 2014-2015 a one bedroom had an average of Dh85,000.
Today, a one bedroom apartment in the Gate Towers has an average of Dh75,000, decreased by approximately Dh15,000.
"You can find brand new apartments for Dh70,000 now, which has not happened in the previous years," he said. "There are landmarks, like Sun and Sky Towers, which used to go for Dh105,000 - now below Dh90,000. Landlords listing their one bedroom apartments for Dh90,000 and above will never have them rented out."
New projects are also increasing inside the Abu Dhabi City, which is also helping prices decrease. "The new projects are also starting at a relatively low rate - lower than what they would have been," Mamdouh said.  In Khalidya, which is an older but high-end area, there are apartments near landmarks which have also decreased in prices.   "A one bedroom is now estimated for Dh85,000 in the higher-end of Corniche, whereas before they used to be around Dh100,000," he revealed. "Half of my clients are looking for something more affordable because prices decreased, while the other half are looking for something newer, which they couldn't afford before."
Mamdouh also said that prices have decreased in the Tourist Club area, as well as Khalifa City. "I believe there could be another dip coming up." Ben Crompton, managing partner of Crompton Partners Estate Agents, said the drop in prices began since 2015, due to cost-cutting in businesses.
He estimated an average of 15 per cent decrease in the last year alone, adding: "There is a large supply coming in, but not much population taking it. Prices might keep going down until Q2 2018."
Ali El Aina, CEO of Home Hunters Properties, said the drop in rental prices is taking its normal shape. "There is still a booming market in Abu Dhabi and Dubai, and although many expats have left, many are equally moving in to the UAE, so the rental prices are just taking their normal shape. There is a decrease in prices, but on the other hand there are new buildings being built."
However, he said many landlords are desperate to lease their properties, as they have obligation to banks, which could be another indicator as to why prices are decreasing.
"There are new buildings in Reem Island, Corniche and Tourist Club targeting the medium-average market now, because it is the highest portion of the market." - jasmine@khaleejtimes.com