A decree ordering government employees where to live has seen rents surge by 20% in Abu Dhabi during the past three months.
All public employees, including expats, must have moved within the emirate from the start of September 2013.
The move is aimed at stopping expats and wealthy workers making the two-hour commute from nearby Dubai, which many consider offers a better lifestyle.
Now, according to a report from property agents Asteco, commuters have moved to prestige homes in the Raha Beach, Al Reef and Reem Island neighbourhoods of Abu Dhabi.
The sudden influx of thousands of workers has seen demand for high-end properties leap – pulling rents and prices up at the same time.
Average rents up
The firm says average rents for luxury flats on Abu Dhabi Island and locales like Marina Square and Khalidya/Al Bateen soared an average 20 to 29%, while other flats in central Abu Dhabi and the Corniche are renting at around 40% below 2008 prices.
Al Reef villa rentals were up 14% year-on-year, while Golf Gardens, Al Raha Beach and Al Raha gardens saw increases of between 3% and 8%.
“Prime properties have not seen so much growth as demand is lower, “ said an Asteco spokesman. “However, our feeling is that if such properties are vacant, we can soon find tenants willing to pay a premium to move in.”
Average sales prices in Abu Dhabi also rose up to 26% year-on-year in the third quarter of 2013, boosted by increasing interest for luxury developments.
Values in Al Raha Beach have risen between 19% and 26% as the number of properties on the market shrinks, said the report. The firm also reports prices in Marina Square and Reem Island rose by up to 18%, but still lag up to 50% below their peak in 2008.
Supply and demand
A five-bedroom villa in Reef Villas now costs around 29% lower than in 2008.
“Rents and prices are rising, but they are still lagging the 2008 market peak by between 20% and 50%,” said a spokesman for the firm.
“While prices are moving upwards, investors and buyers should be aware that this is no bubble, but a trend mainly resulting from the government ordering workers to come back to Abu Dhabi to live if they want to work here.
“In the longer term, the market will level out as other developments come on line and help adjust the balance between supply and demand.”
