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It’s official. The cap is off. In fact, it has been since late last year. The 5% rental cap restriction imposed by the capital’s government during the crunch days of the financial crisis that saw builders and contractors going bankrupt and the diaspora losing tens of jobs every day was removed after Abu Dhabi witnessed a period of relative stability and recovery last year.
And residents are feeling the pinch. A major contributing factor to the rental increases has been another one of the Abu Dhabi government’s new rules, that employees of the capital’s public sector must reside in the city or forfeit their housing allowance.
Yearly rental rate increases are expected to be 20% higher than the previous year every year, much to the dismay of long-term residents. Some tenants have complained of rental increases as much as 50%. On average, apartments have recorded an average increase of 4% while villa rents rose 2% on a quarterly basis. Overall, rents have risen 17% in the first half of this year alone.
But predictably, rental increases have not been uniform. Off island, the rental rate disparities are surprisingly large. The rule of thumb is that, the closer the property is to the city center, the higher its rent will be, while residential units farther away from the city have rents that are more stable.
Skeptics have questioned the risk the rising rental rates and the subsequent inflation the capital is witnessing poses to banks. But experts opine that the growth is not backed by leverage but rather by much more stable and stronger fundamentals this time around, thus allaying fears of another financial crisis.
Interest from foreign property developers has also increased in the capital, with the latest being that of a foreign company which launched the first of four luxury towers in the super premium residential sector on Al Maryah Island.
Abu Dhabi’s glitzy neighbor Dubai, meanwhile, is experiencing a significant slowdown and decline, both in terms of rental rates and sale of residential units.
* Abu Dhabi witnesses increased interest from foreign property developers
* Rental cap abolition one of the factors that contributed to rental increases
* The first half of this year saw a 17 per cent increase in rental rates in capital
Learn more about rents by clicking Rental rates.
Source: Bushra Hameduddin, Special to Properties
The writer is a freelancer