5% rental cap reinstated

It was announced on Tuesday that the rental cap in the emirate of Abu Dhabi has been reinstated, landlords as well as property managers cannot increase rents by more than 5% per year.

Another statement had been also sent out by the Department of Municipal Affairs and Transport singles out that the rental cap outlined in LAW No 20 of 2006 (which was abolished in 2013) now applies once more. This means that any rent increase specified in tenancy contracts cannot exceed the annual 5%.

It has long been noticed that rents in Abu Dhabi have been a major drain on residents income and it was continued to increase from 3 years ago (since the removal of the rent cap). Some residents reported that their rents had doubled or even tripled following the withdrawal of government regulation on rent hikes.

However some real estate analysts, made it clear a decline in rents this summer has been linked to the worldwide decline in oil prices.

“People have lost their jobs and others have seen decreases in their housing allowances. So, although the supply of residential units in the capital city still trails demand, there was a fall in rents, even for prime units. Landlords are trying to maintain occupancy, so rent increases are unlikely to exceed five per cent this year, even in the absence of the cap. Although we do not track older units, we believe the decline in prime rents means that rents in Grade B apartments have fallen even more, especially as they must be struggling in the difficult market conditions” Mai Hassan (senior analyst at real estate service provider JLL Abu Dhabi) said in an interview.

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