Abu Dhabi scraps rent rise cap, says executive council

Abu Dhabi has decided to scrap a 5 percent cap on annual rent increases, the emirate’s top decision making body said, opening up a property sector where many are paying below current market rents.

The Abu Dhabi Executive Council issued a decision to cancel the extension of the annual 5 percent rent increase rate as of November 10, the official news agency WAM reported late Thursday.

The United Arab Emirates capital slapped a 5 percent cap on annual rent hikes in January 2008 after surging demand drove rents higher and inflation with them.

“Many are paying rents under-the-market rates, so in some cases rents may go up. But with more supply now and competition it is laid more open to market forces," said Matthew Green, head of research at property services firm CB Richard Ellis.

Prime residential rents for new leases in Abu Dhabi were flat in the second quarter of this year after growing 8 percent in the first quarter, whereas secondary residential rents continued to fall, according to property consultants Jones Lang LaSalle.

Demand growth driven by government spending and regulations to reduce commuting from Dubai has been partially offset by continued additions to supply, Jones Lang said.

Last year, Abu Dhabi pressed public sector employees who reside outside the emirate to relocate within its borders, a policy which analysts said aimed to address heavy oversupply in its real estate market.