Abu Dhabi has extended a 5 per cent cap on annual rent increases after a study found that there was a housing shortage despite an increase in supply, the state news agency WAM said.

'The Executive Council decided that no annual increase above 5 per cent of the original rental value specified in the tenancy contract will be valid,' it said.

The decision was based on a study by a committee of officials from the emirate's government and the real estate sector which showed that an increase in the supply of housing units did not meet demand, and that there was a shortage of low-income housing.

Real estate service company Jones Lang LaSalle said this week decreased rentals for lower- to middle-market housing will have a positive impact on demand for Abu Dhabi's residential sector, as the market continues to adjust from the unsustainable levels in 2008 and 2009.-Reuters