Abu Dhabi rental returns continue to climb despite financial slowdown

The latest quarterly Abu Dhabi property report released by Asteco, shows that, unlike in Dubai, prices across the city's property bands have shown no signs of being affected by the current financial slowdown.

The report states that rental rates in the UAE capital have gone up by an average of 79%, 100% and 82% for one, two and three bedroom properties over the course of the last year.

The Corniche and Khalidiyah continue to be the most sought after areas by tenants, especially given the construction underway for the new residential towers, although a lack of current demand has meant that Passport Road, Salam Street and Muroor have seen the most activity in the 12 month period to date.

At the other end of the market, Khalifa Street and Hamdan Street both suffered from the slowest growth rates, possibly due to the standard of available units and lack of facilities such as parking.

Price rises top 150%

The highest recorded average rate is for two bedroom apartments in Passport Road, with the rental costs up a staggering 157% on Q3 2007, and these units now renting for up to Dhs230,000.

Apartments in Khalidiyah and the Corniche now fetch returns of between Dhs160,000 and Dhs170,000 for one bedroom; Dhs235,000 to Dhs250,000 for two bedrooms; and Dhs332,500 and Dhs350,000 for three bedrooms.

This represents to top end of the market, with properties in Musaffah at the other end of the spectrum. One, two and three bedroom apartments here have asking prices of up to Dhs100,000, Dhs120,000 and Dhs140,000 respectively.

'These prices are definitely sustainable, as agents we know that people are really struggling to find accommodation,' Karen Lay, Marketing Manager for Abu Dhabi property company LLJ, told AME Info.

'Unlike Dubai, we have a real lack of available property. And the new properties coming online will command higher rents because they come with facilities such as swimming pools, gyms and parking that you just don't get in the older buildings here.'

Villa increases continue

Villas have also seen strong growth in rental returns over the past 12 months. Khalidiyah and the Corniche continue to command some of the highest prices, with three bedroom properties going for upwards of Dhs600,000 at the top end of the market.

Lack of supply is fuelling the growth, but further properties are expected to come online soon in the new developments springing up around the city, including Raha Gardens. Take up on these will still not cover the shortfall, however, and prices are expected to continue their upward trend.

Two bedroom villas outside of Al Falah, Airport Road, Passport Road and Khalifa 'A' can all command over Dhs500,000 at the top end.

And, despite the new expected new units, this looks set to be the average benchmark for growth. 'The Abu Dhabi Chamber of Commerce said recently in London that they were expecting around 40,000 new units to be delivered in 2008. Supply isn't expected to match demand until 2011 at the earliest,' said Lay.

Commercial rental growth

The boom extends beyond the residential market. With 8,800 companies setting up offices in the city in the first three quarters of 2008 demand for office space has grown in line with other sectors.

Occupancy rates of close to 100%, and rents of up to Dhs4,000 per square metre in town, have meant that newly arrived businesses are now using villas as offices. Further, new supplies of commercial space are not expected to hit the market until next year - when an additional 175,000 square metres is expected to come online.


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Dubai developers feel the effects of price uncertainty