Residents are leveraging the slide in rents to relocate to a larger home in a better community

The Abu Dhabi housing market has seen a spike in relocations this year. This has been a result of both residents downsizing accommodation as well as leveraging the slide in rents to relocate to a larger home in a better community.

However, rents in the city centre have been largely immune to the drop in rents and residents are mostly shifting to the mainland. “For those seeking mid-market residential products in the capital, most rental options are to be found on the Abu Dhabi mainland, away from the city centre and the main places of commerce. This includes locations such as Mohammed Bin Zayed City and Khalifa City, which feature an array of more affordable residential units, typically in the form of standalone low to mid-rise residential apartment buildings, as well as some larger family homes and small residential compounds. On average, a two-bed apartment in MBZ and Khalifa City would start from around Dh50,000/unit/year as compared to Dh85,000/unit/year for a similar sized unit within the city centre,” says Arlene Jimenea, senior research analyst, CBRE Middle East.

Traditionally, some of the cheaper areas to rent in Abu Dhabi are Markaziya, Tourist Club, Mussafah, Muroor and Mamoura while Saadiyat Island, Khalidiya and Khalifa Park command higher rents.

There is a location premium attached with living in the city centre, with residents benefiting from ease of access to the main office areas, places of education, retail and other leisure facilities.

“For those seeking a more integrated community and lower rents, master-planned developments such as Al Reef and Hydra Village have emerged as affordable off-island locations for villas and townhouses, with Al Reef also boasting apartments. These developments are widely seen as conducive for small families seeking a community environment at rates not widely available in more central locations. Some units also benefit from private gardens and swimming pools, which has heightened the appeal, despite the longer commuting distance to the city centre,” observes CBRE’s Jimenea.

Meanwhile, locations such as Saadiyat Island, Al Raha Beach and Eastern Mangroves are popular among those seeking luxury apartment offerings. Upscale residential properties also abound along the Corniche. According to CBRE, annual rents for two-bed apartments here can go as high as Dh200,000/unit/year although average rentals are now closer to Dh150,000/unit/year.

Occupier demand levels have remained weak, and more and more tenants are considering downsizing and to move to more affordable locations.

“More people appear to be moving to cheaper communities such as Reem Island and Al Reef which are proving to be the most popular. The decline in rents seen in 2017 is driving the trend where tenants are happier to relocate to save money on rents. Reem is much more affordable now than ever before, as is Al Reef, with three-bedroom villa rents dropping from Dh145,000 to around Dh120,000,” says Sohail Raja, head of Abu Dhabi at Cavendish Maxwell.

“More people are moving to Reem Island as these units are newer and new supply is driving rents downwards. Therefore, people can get more for their money with parking, pools and gyms,” says Ben Crompton, managing partner, Crompton Partners.

Rent reductions have been prominent within Al Reef and Reem Island due to the huge number of vacant units because of redundancies across oil, gas and banking sectors, suggest market experts.

“With employers also tightening their salary packages, employee housing allowances have been the cause for occupancy pressure in many larger units,” informs Raja.

There has been widespread downsizing of accommodation to lower living costs. However, there are also residents taking advantage of falling rents to relocate and get preferential leasing terms.

“Apartment residents seeking larger family-orientated spaces at relatively affordable prices now have the option of moving to townhouses in communities such as Al Reef and Khalifa Park area at the same price. However, other factors are also important to consider, including the ease of access to public transportation, places of work and schools,” Jimenea points out.

The top end of the Abu Dhabi housing market has experienced the sharpest rent declines. CBRE estimates that upscale properties along the Corniche, Al Raha Beach and Saadiyat Island have witnessed average rental deflation of 10 to 15 per cent over the past year.

“The most resilient community is Saadiyat Island, mainly because it is viewed as a luxury location to reside in. It doesn’t cater to lower priced units and the type of tenants that reside on the island work for large organisations, where the rent is typically subsidised and generous housing allowances are offered,” explains Raja.