«Municipal Affairs» its capacity by 37%Truth Consultancy
Abu Dhabi – Mohamed Abdul Hai Abu Dhabi-statement
Date: March 282 016
The phenomenon of vacant apartments is still in Abu Dhabi revealed by the Department of Municipal Affairs last week, and its capacity by 37% over the past year, is highly controversial among senior real estate development, real estate brokerage and experts of real estate companies officials, about the causes of this phenomenon and its consequences on the real estate market in Abu Dhabi, especially in under indicators confirm that the market is on the verge of a real and significant decline in residential and office rents in the coming period.
Experts and brokers believe that the phenomenon of vacant apartments reveal «deprive» angel individuals and companies of the real estate market to prevent a decline in rents, while landlords and real estate companies believe that estimating the size of this phenomenon is exaggerated and that the demand for housing in Abu Dhabi is still considerable and that the occupancy rates of up to 98% with and there are waiting lists of tenants.
Despite the rationale expressed by each team for his opinion, however, there is an agreement between everyone on the importance of the rapid adoption of the Abu Dhabi real estate index guiding landlords and tenants, and determines the true fair value of residential and office rents, leading to the stability of the sector and reduce the phenomenon of vacant apartments and support Abu Dhabi as an investment destination Kjmabh foreign investors.
And the phenomenon of vacant apartments is not new and varied causes, but the current increase announced by the Department of Municipal Affairs concerned with the organization of the real estate sector and control it is the largest.
Supply and demand
Sees Reda Musallam economist partner in Truth Corporation for Economic Consultancy in Abu Dhabi that the free economic system in the United Arab Emirates and Abu Dhabi based on the supply and demand mechanism, stressing that this mechanism is disabled in the real estate market in Abu Dhabi because of the actors dominating the market and, in particular, the major real estate companies, privacy, these powers would prefer because of the very strong financial solvency stay residential rents at high levels do not reflect the reality of the real estate market in Abu Dhabi.
Notes that these forces practices appeared clear after the 2008 global financial crisis that hit the world’s economies has led to a decline in residential rents in many other countries and emirates in the UAE proportions large, however, this decline does not appear in Abu Dhabi but was gradually declining and relatively highly, then rents rose again today without sagging.
Believes that the real estate market in Abu Dhabi is witnessing for more than five years, an increase in supply by pumping tens of thousands of housing units, both within the city of Abu Dhabi, or especially in the Mussafah area and magnanimity and Khalifa A and B outside and others, but the tenants did not see the result of this big before and who did not witness greater demand as it was 2008 years ago and did not back down rents large proportions as predicted centers, local and international companies and property consultants in the state.
And confirms that recent years have seen the entry of large real estate companies and banks to market rents in Abu Dhabi and acquired or managed tens of thousands of housing units, and those companies and banks have contributed to increasing residential rents and survival at high levels due to the strength of these financial companies, banks, private financial conditions have improved significantly during the past two years after the diversified these specialized in real estate development in its portfolio companies and annexed the rents, commercial centers and other hotels, has this strong solvency have affected these companies on the real estate market dramatically, worked not to reduce the rents of residential units.
And indicates satisfaction Muslim negative impacts of continuing to raise residential and commercial rents in Abu Dhabi, pointing out that the most important effect of raising the rates of inflation and reduce the competitiveness of the emirate as a front to attract investments, for example if you rented a dealer shop rental worth up to 200 thousand dirhams, while the value of the real rental market does not exceed 120 thousand dirhams, this merchant will carry the increase in rental value on the prices of goods or services provided to consumers, leading to raise prices and increase inflation.
Reda Musallam and confirms that thousands of closed units in Abu Dhabi, the phenomenon is not new but what is new is the large percentage currently amounting to 37% indicating that the expert advisory and real estate companies and economic were expecting to drop rents during the first quarter after a decline in oil prices throughout the second half of last year and January and February However, this did not happen and still the majority of landlords not poets at all the effects of falling oil prices from around $ 100 to around $ 33 today and oil prices gradually go up.
Not to deprive
It rejects Amir Arar Virtual chairman towns Holding a former member of the Chamber of Commerce and Industry of Abu Dhabi accuse landlords that they thirst market to raise rents, stressing that there is no single owner refuses to residential rental units, but would like to get a higher rent in accordance with the supply and demand mechanism.
And refers chairman towns Holding that the phenomenon of closed apartments is not great, pointing out that there are many reasons to close them perform maintenance of the apartments or make modifications to the designs of apartments or the lack of appropriate static or that the high cost of the building, but that the owners deliberately closed to leasing overstated the value of where it is not common because there is no owner displays the same financial problems with the banks for a long time.
Virtual and for sure not to drop the residential rents this year, explaining that he does not expect the decline or increase in rents, but the stability of the current prices.
And excludes Mohammed Muhanna Al Qubaisi, Chairman of Manazel Real Estate, happen to fall in rents in Abu Dhabi at least the end of this year, pointing out that this decline has occurred if it will be in 2017, and there may not be a decline in rents from the ground up.
Shows that residential vacancies in any real estate market in the world exist for various reasons, including the lack of procedures for the entry of real estate units to the market, or they occur in areas that lack the integrated services, and in any case is complete, the market will go in and out of it tenants a day and this is a natural thing and the percentage of reasonable vacancies ranging from 15 % to 20%.
And it confirms that the phenomenon of rising rents will continue in Abu Dhabi over the coming years, adding that the reason for this is due to an imbalance in the real estate market was evident during the past ten years, where I grew up major real estate companies took later a large part of the responsibilities of commercial buildings circle Commission (Khalifa) and intensified this corporate real estate projects in the luxurious outstanding housing, which is located in a very scenic areas, and these companies are not the role of commercial buildings department, which was building a housing arrangements average and higher than the average to meet the new labor needs in the state, creating a distinct lack increasing with the passage of years, on average, housing and therefore residential rents have risen because the required supply dropped significantly.
It asserts Talal Theyabi Chief Development Officer at ALDAR in Abu Dhabi, the supply and demand mechanism located in Abu Dhabi, a ruling to him, pointing out that demand from tenants for real estate units leased a very large company, despite what some of the high Aejaratha, and ratios occupancy residential units of the company at the gate Towers and Sun and Sky Towers on Reem Island and Tower Mohammed bin Rashid and others are very high and more than 98% and sometimes up to 99% or 100%, as the percentage of occupancy in the offices of ALDAR about 95%, while the overall occupancy rate in the office towers in the market ranging between 75% and 80%.
He Talal Theyabi The prime locations for residential units and office towers of ALDAR very distinct in terms of construction, designs and locations. Wondering what the company pays an investment company because the lease rental values less as long as they have waiting lists for the value that you specify and possibly higher, add to that the cost of high buildings.
However, Abdul Rahman Al-Afifi Chief Executive Officer of the company enables real estate confirms that the owners both old and their image as people or new their image as companies and banks control the rental values, and since years and supply increases dramatically, both in Reem Island or rest or Saadiyat or inside and outside the city of Abu Dhabi Beach, However, the majority of tenants do not see a clear effect of this excess supply in the market.
He said: Tenants are still hoping to drop rents, and we expect to drop rents during the second half of this year because banks and landlords will not tolerate the effects of falling oil prices on the economy for more than six months following and will face real pressure, but I expect that the rate of decline is limited could rise with the beginning of next year.
CEO managed real estate and confirms that the last two years have seen a significant rise in rents, especially after the abolition of the rate of annual increase of 5% set by the Executive Council of the Emirate of Abu Dhabi, and raise some landlords rents 100% and others 70% and there was no indication can be referred to judge the increased rent built without the other, no doubt if this year, rents have fallen or next will be the percentage change are limited and may not exceed 10% and the remaining months of this year will be crucial.
Notes that some government departments in Abu Dhabi began in reducing the housing allowances for their employees, and there are companies that are restructuring the number of employees so as to retain the smaller number of employees to accomplish assigned projects and not to expand the number of employees without a doubt, these measures will lead to increase the supply of Accommodation private housing average new and old of both types in Abu Dhabi.
Aattabralameng Abdul Rahman Al-Afifi that the only solution to determine the percentage of rental increase, lies in leaving the supply and demand mechanism in addition to offering property index identifies the angel appropriate rental value of the units of residential buildings, and takes this indicator into account housing unit, location and characteristics space.
High commercial rents increases the cost of goods
The situation in the commercial and office similar units around the situation in residential rents, although the Abu Dhabi market is witnessing a significant increase in office space, which will increase with the end of the year to more than 3.6 million square meters having seen an increase of one million square meters over the past three years only rents offices and business centers are still high which is reflected on the operational cost of the shops and businesses and then the goods and products that are loaded on the consumer in the end part of the total cost and expenses of firm prices.
He says Ibrahim Abdullah sea CEO of Abu Dhabi Cooperative Society branches Assembly that rents in Abu Dhabi have not declined and remain as they are high, explaining that the increase is a real pressure leads to increased cost of goods and luxury food and the prices of products sold by the Assembly.
It also points out that rents account for a large proportion of the cost of any commodity, and a strong and influential reason for the increase in inflation rates in the emirate and higher prices. He says Ibrahim Abdullah sea that rental prices are currently more important than high oil prices for traders and consumers and rents have fallen if it is certain to be reflected positively on the prices of goods and products in general and reduction of inflation and cost of living.
And shows that the Assembly is looking for new branches to the headquarters of the Assembly, pointing out that this research does not mean abandoning the old branches, but for some reason proliferation and expansion of a strong competitive market, though rents have fallen this will clear on commodity prices appears, in any case, the Assembly increase its support for goods and implementing strong initiatives to reduce prices. Chief Executive Officer of Abu Dhabi Cooperative Society believes that residential rents in Al Reem Island in Abu Dhabi have started to enter the decline phase, pointing out that last week, be sure to drop residential units in Al Reem Island of AED 145 thousand to 125 thousand dirhams.
Agent: owners raise rents despite weak demand
Corporate officials and real estate brokerage offices in Abu Dhabi, said the owners one of the main reasons behind the continued rents on high levels.
Sees Tahir Raza Ovanda Company Real Estate Brokerage director and Islam reported administrative director at Skyline Real Estate Brokerage in Abu Dhabi, there are many residential units in Abu Dhabi, Al Reem Island is not worth more than the rental on a 85 thousand dirhams and refuses owners, whether citizens or residents rented for less than 95 thousand dirhams or 105 thousand dirhams, and in spite of the limited demand.
He says Tahir Raza landlords raise rents values do not find it hires, and prefer to keep their housing units empty for several months, and there are real estate companies and brokerage of real estate convince landlords need to lease postpone agrees angel on it because of the diversity of their investments and the lack of urgent need to rent these units.
Tahir is expected to landlords stand to the end of this year or the beginning of next year to be clarified clearly features the results of falling oil prices on the real estate market in Abu Dhabi.
Affirms Islam reported that the supply of housing units is increasing dramatically, pointing out that this increase will lead later to a decline in rents, but this decline will not be great and will be between 5% and 10%, will not be a big drop especially that now the demand for medium housing, the majority before or housing that is performed from luxury housing.