Abu Dhabi’s real estate market has been on the road to recovery over the past few quarters with property prices witnessing strong growth. While much of Dubai’s recovery could be attributed to its booming trade and tourism industries, which have led to an influx of foreign money, Abu Dhabi has benefited primarily from government initiatives geared towards boosting the property market.
The government’s proactive efforts as part of its 2030 vision are primarily aimed at diversifying the economy and making it less dependent on oil, which still accounts for almost 50 per cent of the emirate’s GDP.
“The economy is thriving and is being diversified. The government has enabled the economy to adapt to life after oil and expand in industries such as finance, manufacturing, aerospace and construction. There has been a large increase in population in recent years, so it is great to have a cross section of industries to support growth for years to come,” says Kevin Mitchell, UAE Country Director at Buro Happold, whose ongoing projects in Abu Dhabi include The Louvre Abu Dhabi, The National Bank of Abu Dhabi headquarters and the Four Seasons Hotel Abu Dhabi.
The government has embarked on a new stage of investment that exceeds $100 billion (Dh367.3 billion) to develop its social infrastructure, including health care, education, housing, transportation and aviation until 2020.
“Over the past year, there has been progress made on several large-scale projects, including Etihad Rail, the airport expansion and other major infrastructure and economic development projects,” says Mat Green, Head of Research and Consultancy — UAE at CBRE Middle East.
As part of these investments, the government has also allocated Dh7.6 billion for the Shaikh Zayed housing project and Dh11 billion for a subway system that will help ease the flow of traffic in Abu Dhabi.
“These developments are creating new employment opportunities and are impacting the residential space and other associated sectors such as offices, hotels and retail industries,” says Green. “As demand intensifies, we are seeing an increasing level of interest from developers and investors looking to exploit the improving market conditions.”
In recent years the Abu Dhabi government has approved other major projects that include the Shaikh Zayed National Museum and Louvre Abu Dhabi on Saadiyat island, and a nuclear power plant, which will be completed in 2017.
The Tourism Development and Investment Company (TDIC), which is developing the Saadiyat Cultural District, says the Louvre Abu Dhabi is on track for completion next year. A TDIC spokesperson says: “The Zayed National Museum and Guggenheim Abu Dhabi are slated for opening in 2016 and 2017 respectively. Once all three iconic cultural institutions come online, they will enhance Saadiyat as a destination of choice, which in turn will strengthen the demand for various developments, including residential projects, in surrounding plots.”
The company is currently developing the third phase of the Saadiyat Beach Villas (SBV), comprising 77 luxury residences. The project is slated for completion in June next year. TDIC has also released residential units for sale at a new building at Saadiyat Beach Residences, encompassing 70 apartments of between one- and four-bedroom configurations.
“We have seen an overall balance in demand for our high-end residential developments. However, the SBV has experienced slightly higher demand due to its unique location and views of Saadiyat’s glittering waters,” according to a TDIC statement.
It has taken a few landmark decisions to make the property market a lot more investor friendly, say analysts. For example, in January the Abu Dhabi Municipality announced that foreign investors will be allowed to own property on freehold basis in designated investment zones across Abu Dhabi. Earlier, foreign investors were only allowed 99-year property leases.
Attracting foreigners
Many view this move as an effort by the emirate to make its property market more welcoming to foreign investors. In another move aimed to propel housing demand in the emirate, the Abu Dhabi government has required public sector employees to relocate to the emirate to be able to avail of the housing allowance.
Also, Abu Dhabi scrapped the 5 per cent cap on annual rent increases in November — a move that has made property investment in the emirate more attractive. According to local agents, some landlords have hiked rents by as much as 50 per cent.
Other regulatory updates include new mortgage lending regulations issued by the Central Bank, which aim to reduce the level of leverage and increase equity in property investment.
Positive outlook
Last year was a positive one for Abu Dhabi as a large number of residences were delivered. Around 4,400 residential units were handed over to their owners during the fourth quarter, according to published figures. Moreover, about 22,000 units are expected to be delivered this year, the majority of which will be located in master-planned areas such as Reem Island, Saadiyat island, Danet and Rawdhat.
“We can expect an increase in the level of residential investment, particularly within established master-planned locations. This in turn may lead to an increase in the number of new construction starts, as we move through the year, after what had been a relatively quiet period for new development launches,” says Green.
The positive economic growth forecast this year also serves as a stimulus for Abu Dhabi’s property market. However, the government will need to continue to play an active role in promoting the growth of the property industry, say analysts.
In recent years, Abu Dhabi has invested heavily in developing its tourism infrastructure. “This type of investment will need to continue in tandem with the delivery of new hotel supply to sustain the recovery,” says Green. “While the market is now clearly moving in the right direction, new supply will still have to be managed correctly so as to not result in another oversupply situation, similar to what we saw in 2009 during the inaugural Formula One Etihad Airways Abu Dhabi Grand Prix.”
Some analysts observe that the health of Abu Dhabi’s property markets is linked to government spending of revenue surpluses to strengthen the economy and improve infrastructure.
Although Dubai will be the biggest beneficiary when it hosts the World Expo 2020, other emirates are also expected to benefit from this global event, specifically the capital, by registering strong growth in the property and hospitality sectors.
Strategic location
Mitchell explains Expo 2020 is a UAE-hosted event that is being held in Dubai. “What makes it interesting is the geographical location of the event. The site is very close to the border with Abu Dhabi, which means the visitors from outside the country will have a choice to fly in through Dubai or Abu Dhabi. This will help boost tourism on both sides of the border and will boost employment across the region,” he adds.
As the Expo’s date draws near, a wide range of projects, especially those that are related to hospitality, will come online to meet the demand from the surging number of visitors. Some developers in Abu Dhabi are already taking the Expo into account in the development of their projects.
“It is anticipated that visitors will explore other locations and attractions in the UAE, and in Abu Dhabi we expect to welcome Expo visitors, partners and participants to our rich offerings on Saadiyat, including the three museums located in its Cultural District — the Louvre Abu Dhabi, Zayed National Museum and Guggenheim Abu Dhabi,” says a TDIC spokesperson.
