Cashing in on Abu Dhabi's rental boom (page 2 of 2)

One bed is very popular. These are the easiest to then rent on or resell.'

The asking price for villas also tends to be much higher than for apartments so investors may find that the ratio of returns from their outlay are not as high. Villas on the rental market will also mostly attract families, whereas young professionals are more attracted to apartments, meaning that the bar for asking rent can be set higher, thus giving healthier returns.

Apartments are also more likely to attract corporate contracts as they can be used for visiting or relocating executives. Corporate contracts tend to be set at a much higher bar than private leases and offer a higher certainty of renewals.

Rent caps

Potential buyers should be aware, however, that there are legislative checks in place to try to dampen accommodation-driven inflation. A 5% annual rent cap is in place (lowered from the limit of 7% that was originally put in place in 2007), meaning that rents can only be raised up to this level when the tenancy contract is renewed.

For the second renewal the landlord is not allowed to add any further hikes. This could effectively mean that if tenants are in situ for an extended period of time, neighbouring properties that are taking on new tenants could be fetching a much higher asking price.

Nor can landlords summarily refuse to renew existing rental contracts in order to accept tenants who are willing to pay more. Unless stipulated in the primary contract, the landlord has to show that the property will be reserved for their own use.

The service charges and property fees are also the responsibility of the landlord, unless specifically stipulated. They cannot be left up to the tenants to settle, but usually also cover the building insurance.

Agent's and management fees for those leaving the letting to onsite agencies will also be a percentage of the annual rental rate. Most fees average between 5% and 8% for overseeing all aspects of the letting.

Landlords may have to pay for repairs or damage to the property. The good news is that all gains from property appreciation and rental returns are tax free.