Friday, March 26, 2010

New rental law unlikely to affect rent levels in Abu Dhabi

The new rental regulation is unlikely to leave a significant impact on rent levels in Abu Dhabi in the short-term, but in due time, it will help in bringing down rents, a report said.

One of the leading real estate consultancy companies in the Middle East, Landmark Advisory, has issued its March lease guide for the Abu Dhabi market. The report was compiled together with LLJ Property, a leading real estate agency in Abu Dhabi.

The guide shows further decline in the capital, but the Director of Research and Advisory Services at Landmark Advisory, Jesse Downs said that even before the amendment in the rent law, it was predicted that lease rates in Abu Dhabi would gradually decline in 2010.

However an adjustment phase is expected when the rents are likely to remain static, but the actual rents will continue to decline, she said.

The report revealed that after a fall of 10 to 15 percent on an average during the last quarter of 2009, apartment rents in the Capital have continued to show its negative trajectory with another 5 to 10 percent decline.

According to Andrea Menown, Leasing Manager, LLJ Property, low quality apartments showed an average decline of 5 percent in January and February 2010. But similar units in certain areas such as Muroor and Tourist Club Area showed a decline of up to 20 percent.

However, rentals in off-island communities such as the Mussafah and Khalifa City areas are more buoyant than the on-island communities such as City Center and Muroor. This difference could be largely because the off-island communities had already experienced major decline in rents during the previous quarters and the rents are now very affordable.

As for the villas, rents are continuing to adjust. After an average rent decline of 10 to 15 percent in Q4 to Q9, average rents fell another 5 percent during the first two months of 2010, the report said.

In the case of villas, on-island villa rentals seem more resilient than off-island villas, where there has been a 5 to 10 percent decline in rentals, particularly in communities such as Khalifa City A, Golf Gardens and Al Reef.

In the case of commercial rentals, a decline of 10percent on an average was recorded during January and February, while areas such as City Center, Al Nahyan Camp and the Corniche, recorded a 20 percent decline.

The demand for offices is more for smaller units, as people are not willing to commit to large office spaces. Majority of demand for large office space is linked to government bodies or government-related companies.

With more supply entering the market, an adjustment phase is expected when the landlords will bring their expectations on par with market fundamentals, between Q4 of 2010 and Q1 of 2011, when the new law takes effect, the report said.

1 comment:

Dubai Blog said...

I agree that amendment in the rental law is affecting Abu Dhabi rental and mortgage sectors. There is a similar declining situation in rent of apartments in all areas of Abu Dhabi. Some analyzers think that rental law needs new legislation to increase real estate activities in 2011.