Average property rents in Abu Dhabi have been on the decline for years due to a combination of oversupply in the UAE capital and cheaper prices in Dubai, but that trend is likely to end soon.
One of the key reasons why this pattern is going to change is the decision by the Abu Dhabi government to force staff residing in other parts of the UAE to relocate to the capital by 1 September or face losing their housing allowance.
While the governments directive is widely viewed as a heavy-handed way to boost the emirates struggling property market, the end result will surely be a significant influx of new residents, as official figures reveal 23,000 employees and their families live outside the emirate.
But other factors are also helping to drive rental demand in Abu Dhabi, including the completion of a number of long-delayed projects such as Hydra Village. The delivery of high-quality properties in desirable locations is bolstering the emirates efforts to position itself as an attractive alternative to Dubai.
At the same time, Dubai is being viewed as a less desirable place to live for people who work in the capital, as it is no longer a cheaper option for renters. Rental rates in the emirate have increased by as much as 30 per cent over the past year, driven by a sharp rise in rents in secondary locations such as Dubai Sports City as tenants seek more affordable accommodation.
Taken together, these trends should lead to continued growth in Abu Dhabis real estate sector and create a more competitive dynamic between the UAEs two biggest cities.