The landlords in Abu Dhabi are now revising their rents in the wake of the UAE Capital’s first official rental index. Especially where the agreed rates are definitely below current market levels, new tenants can witness an increase in the rates of up to 30 percent in some areas.
This has been so because there is a general shortage in the existing supply base and high demand from new tenants.
The index will also assist the tenants to negotiate favorable rental charges in areas where the rental charges exceed the index rate.
On Tuesday, real estate regulator Abu Dhabi Real Estate Centre (ADREC) unveiled it first official rental index comprising Dhafra, Abu Dhabi and Al Ain. The index allows property buyers and tenants to see the indicative rental for housing, based on location and number of bedrooms.
Abu Dhabi rental market remained buoyant in July especially in new apartment and villa markets in the upmarket locations.
It was further revealed from the real estate consultancy firm Asteco, that apartment rental remained relatively stable and the average price for a new apartment lease went up by 1 percent in Q4 2012 when compared to Q3 2012 and by 2 percent when compared to average of the same month of the 2011.
“But there are certain developments/areas where the phenomenon was more intensively observed; quarterly index grew rather near to five percent, and annually – up to ten percent,” it said.
Tenancy contract renewal
For the existing tenants, the impact may not be felt to the extreme since the law in Abu Dhabi limits annual rent increase to 5 per cent on renewed tenancy contracts.
In as much as it has been mentioned by different media this month, the UAE Capital’s real estate is fully occupied in areas; some properties have list of prospective tenants waiting for their turn to be tenanted especially in the luxury segment.
Some of the rental rates in the preferred areas, which include Saadiyat Island, have gone up in the past year thanks to many new tenants moving to the emirate.
The total population of the emirate was estimated to be have been 3.3 million in July 2018, and 3.8 million in a year later, more than any other emirate thus making it the most populous emirate in the UAE.
Prathyusha Gurrapu, head of research and consulting at Cushman and Wakefield Core, said that, as a rule, the new leases are based on the open market and rents may be negotiated between the landlord and the tenant.
Steadiness of rents
Svetlana Politova, the COO at Whitewill Abu Dhabi commented on the rental index saying that the index is expected to stabilize rents which cause more positive rental agreements.
“The index may change the rates whereby in areas where the rents that have been set have been above or below the appropriate level, adjustments may be made. However, the function of the index is as a source of information, to help the process of setting of fair rents rather than determining rents The impact of the index therefore while perhaps kick starting changes in rent will not be a drastic up or down.”
Many participants stressed that it would be useful index that would contribute to the overall growth of the health or rather to its increased openness according to Evgeny Ratskevich.
“This makes tenants to avoid falling prey to unscrupulous landlords and setting of rental prices and charges and other rental terms that are exploitative. That can only be described as making rental charges consistent with market comparables by using the index captures this concept and provides a benchmark against which the actual market prices are pegged to, thus helping tenants to bargain for better rental deals since they armed with market information.”
“The rental index is helpful to stabilize the real estate market and to prevent sharp and excessive changes in rental prices, because stability means less risk and, in turn, that creates a healthier environment for both tenants and landlords,” Ratskevich said.
In the process, the rental index would offer a better understanding of potential returns.
Abu Dhabi introduces its first official rental index, learn to check current rates in your locality
Fouad Bekkar, the vice-president for data and artificial intelligence at Property Finder, said the index would help in improving the level of trust in the property sector.