Cityscape Abu Dhabi: 12% rent hike brings inflation concerns

Cost of living in Abu Dhabi rose by 4.3% in the first quarter, and is set to grow further due to higher rents, says CBRE

PHOTO: There has been a 12% increase in Abu Dhabi residential rentals in the past year, CBRE says. Credit: Shutterstock

A sharp increase in Abu Dhabi residential rents has prompted concerns over the cost of living, real estate consultancy CBRE said ahead of this week’s Cityscape exhibition in the UAE capital.

Abu Dhabi’s inflation rate was 4.3% in the first quarter of 2015, above the national average, said Matthew Green, head of research and consultancy at CBRE in the UAE.

“Following a 12% increase in residential rentals during the past year, many residents in the capital are becoming increasingly concerned over the escalating cost of living,” Green said.

Utility bills have also been getting higher due to changes in the pricing structure, he added.

“By all counts, expats and locals have been seeing quite a big jump in their water and electricity bills during the first part of the year.”

That means the inflation rate in Abu Dhabi could be set for a period of quite significant growth, Green noted. “It’s probably going to outpace the rest of the UAE.”

It is expected however that a new ‘rental matrix’ will be introduced in Abu Dhabi to replace the old rent-cap system – which could help to cool prices – although the timing of this is yet to be confirmed, CBRE said in a report.

As rents rise across the city, residents have been forced to seek more affordable locations, Green told

“The flight to affordability is one of the key trends that we’re seeing in Abu Dhabi over the past couple of years, particularly at the start of last year when the rent cap was removed,” he said. “There’s very strong demand for middle-income housing. At the moment, you have Al Reef which pretty much caters to that market.”

Green added that many other residents in the mid-market segment have flocked to locations like Mohammed Bin Zayed City or Khalifa City A and B.

But there are challenges in developing residential units specifically in the affordable bracket, as increased market interest and speculation are bound to drive prices up, he added.

“It’s open to market fluctuations. If there’s not enough supply in the market then obviously rents can be pushed up quickly, and something which is supposed to be affordable will not be affordable for particularly long.”

Developing properties with a leasehold strategy can be a means of addressing the affordability issue, he noted.

“If you follow a leasehold strategy where you’re building to lease, then you can obviously have far more control. That’s something that we can expect to see more of in Abu Dhabi potentially as well.”

Cityscape Abu Dhabi, held at the Abu Dhabi National Exhibition Centre, runs from 21-23 April.

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