Rent controls to stop unscrupulous landlords pricing tenants out of the market in Abu Dhabi with massive price increases are on the way.
Tenants have seen rents rise by up to 60% in recent months after the official 5% a year cap on increases was scrapped by the government.
Now, the government is working on price bandings for homes. The bands will have a cap on rents and annual increases according to the value of the property.
The aim is to give tenants more security in their homes and to put a lid on landlords hiking rents by huge amounts.
Abu Dhabi has seen an increase in tenants since the government slapped a ban on public workers living in neighbouring Dubai and commuting to jobs.
Rent cap problems
The two cities are linked by a major road, with the commute taking an average two hours each way.
Tenants of single bedroom apartments are reporting rents rising from £6,000 to £8,275.
The Abu Dhabi Rent Index will also offer landlords and tenants a guideline rent for apartments and villas in the surrounding neighbourhood.
Abu Dhabi’s government removed the rent cap in a bid to energise property prices in the emirate.
As a result prices surged by 25% in 2013 and 6% in the last three months of the year, according to property firm Jones Lang LaSalle.
Rents were up an average 17% over the year and 8% in the last quarter.
However, property prices are still running well below their pre-slump levels of 2007. Last year’s price rises only clawed back around 50% of losses that followed the credit crisis.
Trust and confidence
Masood Al Awar, CEO of property managers Tasweek, said the rent index, will resolve many of the problems tenants are experiencing over rent rises.
“The index will bring transparency and will let trust and confidence between the landlord and tenant return,” he said.
“Managers also see the index as a way of comparing prices and standards to make the market fairer for tenants.”
The government is thought to be setting a base rent for the index from 2004, the last year that failed to see spikes in rents.
No date has been set for the introduction of the rent index while the government consults with landlords, tenants and property managers over the best way to apply the new rules.
Although protecting tenants is one of the main aims of the index, the government is keen to see landlords receive a sufficient return on investment to make renting homes viable.