Abu Dhabi rents may extend decline in next 12 months

Abu Dhabi\'s residential rents may drop by 10 per cent in the next 12 months, extending a three-year decline, as rising home completions increases the amount of unoccupied properties, according to the emirate\'s second-largest real estate developer. \"The supply is coming very fast because whatever was started three or four years ago is beginning to come into the market,\" Gurjit Singh, chief operating officer (COO) of Sorouh Real Estate PJSC, said in an interview in Abu Dhabi. That \"will bring down rents quite rapidly.\" Rents in Abu Dhabi have fallen 40 per cent since the market\'s peak, Jones Lang LaSalle estimates. Those in Dubai have dropped 55 per cent, according to Deutsche Bank AG. \"Two years ago, we were still seeing rents going up here because at that time there was a dearth of quality supply, while Dubai\'s rents were coming down,\" Singh said on July 6. Article continues below Building spree About 50,000 homes, 27 per cent of Abu Dhabi\'s current supply, will be completed by 2014 and about 16,000 will be ready this year, said Craig Plumb, Jones Lang\'s head of Middle East research. Developers may need to reduce rents by more than 10 per cent to attract tenants, Plumb said. Abu Dhabi opened its property market to foreign buyers in 2005, three years after Dubai. Home prices in Dubai have dropped 64 per cent from their 2008 peak after the global credit crisis caused banks to curtail mortgage lending and speculators left the market, Deutsche Bank said last month. In Abu Dhabi, prices slid 55 per cent, Rasmala Investment Holdings said. Sorouh expects to hand over the keys to 7,000 homes over the next four years, Chief Financial Officer Richard Amos said on April 17. That excludes homes the developer is building for a UAE government housing program. Income outlook Sorouh will probably collect Dh3.2 billion from property buyers and commercial and residential tenants this year and will spend Dh3 billion on project completions, he said. The company has Dh2.35 billion of debt due in 2014, data compiled by Bloomberg show. Apart from completing construction and collecting final payments that typically amounts to 50 per cent of the property\'s value, Sorouh has been working to increase income from rents of offices, homes and shops. It\'s aiming to triple its rental income over the next three to five years from Dh171 million in the first-quarter, Singh said.