In April, the Abu Dhabi government changed its real estate laws allowing foreign nationals to own freehold property in designated investment zones, a privilege that was previously enjoyed only by the UAE and Gulf Cooperation Council (GCC) nationals. Foreign property investors in Abu Dhabi were previously only granted leasehold ownership with a maximum 99-year term.
“On a broad scale, we expect this to greatly impact overall market sentiment in the capital’s real estate sector,” said Nick Witty, managing director of Chestertons Middle East. “This new initiative will also help to close the gap between the Abu Dhabi and Dubai property markets, as expatriates in Dubai are already allowed to buy freehold real estate.”
Ian Albert, head of research, valuation and advisory at Colliers International Middle East and North Africa (Mena), believes “it would require two to three quarters to see its full effect”. However, projects launched in Abu Dhabi during the first quarter have already begun to see heightened interest. Azure Al Reem, a ready-to-move-in freehold waterfront apartment complex on Al Reem Island, claims to have received over 2,000 enquires over the first month of its launch.
“It is a very strong indicator that there is currently an appetite in the market for affordable home ownership options,” said Ziad Abou Nasr, director of Masaood Developments.
Furthermore, this comes on the back of the success of projects such as Aldar’s Alreeman in Al Shamka, an investment zone close to Abu Dhabi Airport. The project sold out within a few days of its launch, generating Dh1.6 billion in sales.
“With these figures in the public domain, we expect other developers to take advantage of this new law to generate interest among an expanded demographic of buyers,” said Witty.
The opening up of freehold ownership to foreigners will give homeowners greater security, hence, driving the number of property owners as opposed to renters. However, Nasr points out that introducing freehold alone will not be enough; developers will have to build the right product at the right price.
Aside from local and regional investors who comprise the majority of purchasers, Albert also expects to see interest from owner-occupiers living and working within Abu Dhabi. “Whereas the non-regional source markets are expected to be from Europe and non-GCC Arab states,” he said.
The new initiative will also help in bringing a more diverse set of investors to the table, while also strengthening the hold on existing ones. “We already know that some of the major foreign real estate investors in the UAE include Indians, Pakistanis, British, Chinese, Canadian and Russians, and we would expect interest to continue to be generated by these categories,” said Witty.
The Urban Planning Council’s recently released list of designated investment zones where non-GCC nationals can purchase freehold property includes Raha Beach, Reem Island, Al Reef, Lulu Island, Saadiyat Island, Yas Island, Saih As Sidirah, Masdar City, Al Maryah Island, Al Falah, Fahed Island, Hiid Al Saadiyat, Al Jurf, Ghantoot, Nurai Island, Jubail Island and Al Shamkha. While this spans a range of areas and covers high-end to affordable housing, Witty said lower ticket prices and flexible payment plans will continue to be a key strategy for developers.
According to Savills’ Katie Burnell, who also heads sales for Azure Al Reem project, the strongest areas of investment into Abu Dhabi are currently within the affordable or super-luxury sector. “We have noted interest and major growth in areas with new innovative developments in the market where the recently amended freehold law is applied, such as on Al Reem and Al Saadiyat Islands in Abu Dhabi,” she said.
However, Albert points out only three affordable projects had been launched over the past year: two in Reem Island and one announced but not yet launched in Masdar City.
Moving forward, Nasr says developers will look to introduce a greater variety of freehold properties positioned at the mid-market. “They will be accompanying that with a wide range of ownership models that allow buyers a greater choice to turn their accommodation costs into equity,” said Nasr.