Friday, September 25, 2009

Dubai preferred over Abu Dhabi due to lowering rentals?

Although the demand for residential properties in Abu Dhabi is still strong, due to insufficient supply, the impact of lower rent rates in Dubai, could lead to a supply-driven market condition, with more residents opting for Dubai over Abu Dhabi, points out the latest report by EFG-Hermes about UAE property sector.

The difference in rent rates between Dubai and other emirates, particularly Abu Dhabi, has led to considerable cross-emirate migration. At present, several residents and businesses are taking advantage of the low-cost environment in Dubai and moving into the emirate from the Capital, mainly for convenience or lifestyle reasons. If this trend continues, it is likely to exert a downward pressure on prices and rents in Abu Dhabi, narrowing the differential and changing the overall outlook, the report points out.

However EFG-Hermes report emphasizes that the end-user demand is likely to pick-up in Abu Dhabi. This is owing to greater availability of mortgage financing, and a short-to-medium term supply-demand mismatch, coupled with structured pace of development and a shift towards better economic liberalization.

The Managing Director at Jones Lang LaSalle (JLL), Blair Hagkull, who spoke about the EFG Hermes report, said that the fundamentals in Abu Dhabi property market will remain positive in the long run. However, at present there is a marked difference in the cost of residential and office accommodation in Dubai and Abu Dhabi. While the prices in Dubai appear moderate, the value proposition for residential users in Abu Dhabi continues to remain challenging.

However, the rental rates to be charged in future, could be lower than what was anticipated, the report concludes.

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