Business | Property
Abu Dhabi housing woes will continue till 2010
Shortage of residential units in Abu Dhabi is expected to continue at least until 2010, two reports said on Thursday.
- By Himendra Mohan Kumar, Staff Reporter
- Published: 23:44 October 11, 2007
- Abu Dhabi's economy accounts for 60 per cent of the UAE's GDP.
- It holds 95 per cent of UAE oil reserves and 92 per cent of proven gas reserves.
- Economic growth at a Compound Annual Growth Rate (CAGR) of 16 per cent over the past ten years.
- GDP estimated to reach $159 billion by 2010, up from $98 billion in 2006.
- Emphasis on developing tourism, industrial and real estate sectors to diversify economy towards private sector orientated growth.
- Growth in value of construction sector activity forecast to slow to $6.5 billion in 2007, representing a modest 4.3 per cent increase over 2006, compared against 173 per cent growth between 2005 and 2006.
- Real estate price boom driven by a substantial historic undersupply across all of the key real estate sectors.
- Spending in excess of $200 billion over the next five years on infrastructure projects.
Abu Dhabi: Shortage of residential units in Abu Dhabi is expected to continue at least until 2010, two reports said on Thursday.
A large number of projects are scheduled for completion in 2010, which would help curb supply pressures, but a big chunk of the proposed units would come into the market only by 2015, bridging to a large extent the demand-supply mismatch, the reports said.
The National Investor (TNI), a privately owned regional investment banking group, said that beyond 2010, it expects a situation of oversupply in Abu Dhabi, which may threaten the value of the local property sector.
Cyclical
"This conclusion is also supported by our belief that the property market is cyclical in nature, and that the sky is not the limit," the report quoted Amer Halawi, TNI's director of investment research, as saying.
"We conclude that Abu Dhabi property exposure is a must for investors, but warn against cyclical fluctuations and extreme volatilities - which may significantly dent performance on the way, as we have seen in the recent past," said Halawi.
TNI said it believes that investors wishing to get exposure to Abu Dhabi property should stay away from single, direct equity investments, which bring significant volatility and risk.
"Instead, we recommend a diversified portfolio combining equity, fixed income and direct investments, which offer balanced risk across multiple sectors," said Hassan Awan, a TNI investment research associate.
Colliers International, a real estate consultant, in its latest real estate market overview, said that despite the announcement of numerous master-planned developments, the impact of a two-year construction moratorium imposed between 1999 and 2001 is still evident in Abu Dhabi.
It said the current demand for all types of residential property in Abu Dhabi has outstripped available supply, with occupancy levels of approximately 97 per cent to 98 per cent reported across the city.
"One and two-bedroom apartments currently enjoy the highest demand, while buildings with a reputation for effective property management and a good selection of amenities have waiting lists for potential tenants," said Colliers.
Rental increase
Colliers noted that rentals have steadily increased over the past six years, with a price appreciation particularly marked at the upper end of the pricing scale. The inflationary pressures resulting from rapid rental price increases have prompted the Abu Dhabi government to issue a law in late 2006, capping rent review increases at seven per cent per annum, it said.
The emirate in figures
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