Resilient Abu Dhabi finds stability

Whether or not the prices have bottomed out seems to be a never-ending debate with experts from various segments of the market coming up with mixed reactions. However, Abu Dhabi's real-estate sector is witnessing project completions and handovers, which augur well for the market. Developers in the capital say that things are beginning to pick up.

"Overall, the UAE real-estate market has witnessed considerable growth and success during the past two decades. While real-estate markets haven't been immune to the pressures caused by the global economic downturn, Abu Dhabi has taken a measured approach to its growth in the sector," says Ebrahim Eskiocak, CEO of Aabar Properties.

"The long-term real-estate outlook remains positive. The UAE maintains strong economic fundamentals and remains an attractive location for people from all over the world who are looking for a home in a safe, modern city [like] Abu Dhabi, with good infrastructure, year-round sun and top-quality cultural and leisure attractions."

He adds that the city is now gearing up for the next cycle of growth. "We are seeing a stabilisation of real-estate pricing and reduction in speculation. The Abu Dhabi 2030 Plan provides a framework for growth which sets Abu Dhabi apart from other cities in the region." 

Confidence factor

Ever since the global downturn, the most pertinent concern has been when investor confidence will return to the UAE market.

"The confidence is returning gradually. It will be boosted by the actual physical delivery and the efforts being made to introduce property legislation," says Gurjit Singh, COO of Sorouh Real Estate. This property cycle, Gurjit feels, is a longer one and it is seeing selective stability in some of the asset classes. "The market here continues to move in tandem with the property cycle that we have been experiencing for the last two years. There is selective stability within the submarkets of each sector. This is good because both capital and rental values are reaching a point which makes it attractive for serious end-user occupiers to return to the market. This, coupled with the actual completion and handovers taking place and the attractive pricing structures in the secondary market, will see some transactions taking place," he adds.

However, Wael Tawil, CEO of Baniyas Investment and Development Company [BID], goes one notch further, saying confidence never left the real-estate sector in Abu Dhabi. "Trust has always been there despite some turbulence and hiccups in the late 2008 and early 2009. Today trust is stronger than what it was two years back and the market is heading towards more maturity," he says, adding that there is limited stock in some areas and also in specific types of units - availability of more luxury units and fewer mid-range units. "Having said that, we have to ensure that units in the pipeline are residential units that meet the market requirements which translate to high standard quality with middle-range pricing," says Wael. 

2011

For the real-estate sector in the capital, this year so far has been good, with many agents claiming there has been a steady rise in the number of enquiries. They report they have also started hiring, which is a clear indicator of the current climate of the market.

"The first quarter has seen the completion and delivery of developments on Reem Island — namely the Sun and Sky Towers — and this is a good start as there will be more deliveries in the coming months from other developers. This will also give confidence to end-user occupiers as new products are being brought into the market," says Gurjit.

The rest of the year will be seeing more completion and deliveries. He also expects more investment to come into the market in the wake of the regional unrest that's currently prevailing. "As is the case generally in such situations, there will be the movement of capital into safe havens and there will always be a trickle-down effect into various forms of investments, and eventually real-estate will be a focus," he says.

For BID, the first quarter of this year turned out to be extremely successful with the company achieving record sales surpassing the set objective by approximately 2 per cent to5 per cent. "For us at BID, the plan for 2010 was successfully achieved, although it was very challenging. This year so far has been pretty good. However, we cannot deny the fact that there is a special political situation in the region imposing some reluctance over the decision-making for investment. We think this will stabilise soon and the region will get out of the dilemma of financial markets impacting the economies. People are now waiting and thinking twice before making moves on certain products." 

Prices and returns

Developers agree to the fact that prices have recorded a considerable decline since 2008, making investors conscious more than ever before. "As far as investing in the real-estate sector is concerned, investors always aim at having high returns on their investments [ROI] and on an average they would expect to get a return of9 to 10 per cent. Today the average ROI in Abu Dhabi is still attractive and it's relatively high in comparison to other countries," says Wael.

He adds that while earlier returns used to be in the range of 25 per cent, today the situation is entirely different, with excess availability of units in certain areas. In addition, a substantial number of people working in Abu Dhabi are living in other emirates. As a result, there is a dip in the ROI, yet Abu Dhabi market still offers comparatively better returns. "If people working in Abu Dhabi were living in the emirate as well, yields would go above 15 per cent," he adds. "Investors who were affected the most were those who bought units at record prices in 2008 and want to rent it out now; these investors would get a return of about 7 to 8 per cent. However, investors who invest today would be able to get returns in excess of 10 per cent."

Sorouh Real Estate, Baniyas Investment and Development Company and Aabar Properties will take part in this year's Cityscape Abu Dhabi to be held from April 17-20.

Homeowner view

• Before the crisis, investors in Abu Dhabi market used to get a return of 25 per cent, says Wael Tawil of Baniyas.
• Q1 2011 saw the delivery of Sun and Sky Towers commence.