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CBRE reports that the cost of rent in Abu Dhabi continues to fall, in part due to a large inventory that gives prospective renters more room to shop and negotiate. The 6% drop seen in the third quarter of 2012 still leaves rents higher than neighboring Dubai, however, and new developments coming online soon in the luxury sector are expected to boost competition at that end of the market. As before, units that come equipped with more amenities are performing better than basic units, and a new government directive requiring emirate employees to live locally may yet increase the supply for affordable housing within the city limits. For more on this continue reading the following article from Property Wire.

Average residential property rental rates in Abu Dhabi fell by 6% in the third quarter of this year compared to the previous quarter, according to the latest market report from consultants CBRE.

The report points out that the emirate’s ballooning housing inventory is creating greater affordability for residents but means that rents are falling although they are still higher than neighbouring Dubai.

The average rental rate for a studio on the main island of Abu Dhabi stood at AED45,000 per unit per annum, compared to AED40,000 per unit per annum in Dubai, the report says.

It also says that Abu Dhabi’s residential market has become characterised by a highly fragmented landscape in which some areas and developments are outperforming the market as a whole, with the largest declines in rents around the 9%.

The firm’s analysts do not expect the rental falls to stop in older properties but recently delivered luxury developments in Abu Dhabi such as Etihad Towers, Eastern Mangrove Residences and St Regis Residences are commanding premium rental rates, underpinned by high occupancy and corporate demand.

However, the delivery of high end residential projects from World Trade Centre Residences, Nation Towers and Landmark Towers in the near future could pressurise rents at the luxury end of the housing market as competition increases in this space, the report added.

Residential villas have been less affected with quarterly declines generally ranging from 2% to 5%. Developments in core locations with higher quality facilities and amenities continue to draw the most demand and attract higher rents, the report says.

It also says that a recent directive from the emirate’s government requiring state employees to live locally could raise the requirement for more affordable housing stock, which is currently in limited supply.

This article was republished with permission from Property Wire.