Abu Dhabi: Abu Dhabi's property market is likely to remain sluggish through the initial months of the new year due to suppressed demand coinciding with increasing supply.
"Demand has been reduced due to the government cutting back spending on infrastructure investment and economic development initiatives, combined with slowing global economic activity," David Dudley, regional director for Jones Lang LaSalle, the real estate services firm, said.
"At the same time, projects that had started construction during the boom years are reaching completion, resulting in an increase in vacancy rates and, consequently, a reduction in rents.
"The current situation will continue into 2012 but, fortunately, this will be a short-term issue with market dynamics picking up again thereafter. Abu Dhabi's real estate market continues to have a very bright future as government spending ramps up again and the newly delivered supply gets absorbed by tenants upgrading and expanding. There has already been major progress in the delivery of Vision 2030."
In recent months, Abu Dhabi witnessed a slowdown at some of its projects which are under development. Aldar Properties, the emirate's largest developer with projects valued at more than $75 billion, in October said changing market conditions had prompted the layoff of 24 per cent of its workforce.
The Abu Dhabi Government earlier this year came to the rescue with a multi-billion dirham support package that enabled it to continue with various projects. Also in October, the Tourism Development and Investment Company announced its three flagship museum projects on Saadiyat Island would be delayed, just weeks after the developer cancelled a major construction contract for the Frank Gehry-designed Guggenheim Abu Dhabi.
The key to the real estate market's recovery in Abu Dhabi will be government's reinvigoration of its major investments and growing new sectors of the economy and investing in physical and social infrastructure to stimulate job growth, while remaining committed to the 2030 Vision to build a world-class capital, said Dudley.
"Despite the challenging market backdrop, positive steps are being taken by the Abu Dhabi government to consolidate projects and re-prioritise them," Abu Baker Seddiqi Al Khoury, managing director at Sorouh Real Estate and the emirate's second biggest developer, said. "This is helping to support the sector and manage supply coming into the market in the next few years."
However, market sources say banks must be more active in lending to realty projects and facilitating property purchases.
"The Abu Dhabi property market can be boosted by setting and implementing clear parameters of ownership of property," said Elaine Jones, CEO of Asteco Property Management.