Property News · July 25, 2016

Average Abu Dhabi housing rents fall for first time in three years


Average housing rents in Abu Dhabi have fallen for the first time in three years driven by thousands of job cuts and an increase in the cost of living.The first signs of long expected falls in housing rents in Abu Dhabi started to appear in the three months to the end of June, according to a new report from the property broker JLL.It found that average prime rents for two-bedroom apartments in the capital fell 2 per cent in the three months to the end of June to Dh160,000 as a fall in the global price of oil impacted on the UAE capital.JLL said that as oil revenues, which comprise around half of Abu Dhabi’s GDP, dried up, government companies have slashed spending and cut thousands of jobs.It said that job cuts in government sectors, including news in May that state owned oil company Adnoc was planning to cut 5,000 jobs by the end of the year, is leading to slower than expected growth in the city’s population, therefore leaving apartments empty.And, with more expats and their families expected to leave as their tenancies expire at the end of the academic year and further rationalisation expected in the fallout of recent mergers between NBAD / FGB and Mubadala / Ipic, JLL forecast that rents are likely to fall further in the third quarter of the year._______________________________________• Where Abu Dhabi rents have risen and fallen, Q1 2016 – in pictures_______________________________________”During Q2 2016, we have started to see the first signs of a downward trend as the decline in the oil sector, reduced government spending and weak sentiment continues. While supply remains stable, the reduction in demand has now started to cause vacancy rates to nudge upwards, indicating we have now reached a tipping point with rents declining for the first time in three years,” said David Dudley, head of JLL’s Abu Dhabi office.”We expect the impact of these job cuts and reduced incomes to become more pronounced over the summer, as some people look to either leave or downsize. This will push vacancy rates up further and cause rents to decline at a time-lag.”Some brokers in Abu Dhabi have been reporting rent declines since the start of the year. According to property broker Asteco, rents for flats across Abu Dhabi fell by 2 per cent during the first three months of the year compared with the previous quarter, with the biggest drops concentrated on Reem Island.It reported that apartment rents in the island’s Shams Abu Dhabi area dropped by 6 per cent quarter-on-quarter, ranging from Dh95,000 to Dh120,000 for a one-bed unit, or Dh130,000 to Dh170,000 per year for a two-bed.But others say that these reports are heavily weighted towards new tenancies rather than renewals.JLL added that it was also seeing a number of tenants downsizing to smaller, cheaper apartments, pushing down average rents as disposable incomes fell due to a reduction in employment allowances and benefits, the removal of fuel and water subsidies and a new 3 per cent municipality fee on Abu Dhabi expat rentals.”Given the numbers we are talking about relative to the overall size of the market, this is expected to be a soft correction rather than a sharp decline,” Mr Dudley added.”While we commend the government’s prudent approach to re-prioritising spending in the current period of low oil prices, we hope that the tap is not turned off for too long or Abu Dhabi will lose the momentum it has built and we could enter a more damaging downward spiral. The extent to which a downturn can be mitigated depends on the return of domestic government spending in spite of a reduction in oil revenues.”lbarnard@thenational.aeFollow The National’s Business section on Twitter

Source : thenational.ae
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