It's no secret that countries the world over are reeling in the wake of the credit crisis, a situation that may leave the residents of the UAE's capital feeling a bit of survivor guilt with one of the world's largest sovereign wealth funds and long-term plans for continued real estate and infrastructure development, Abu Dhabi has both the means and the inclination to scoop up the potential customers of many other real estate markets.
Just how confident are the major players in the country's real estate market? The greatest indicator may be the annual real estate showcase, Cityscape Abu Dhabi 2009. This event will bring together international and regional investors, real estate developers and government authorities to discuss the pros and cons of the market and develop strategies this year, for the first time, in a roundtable style forum. The exhibition, to be held at the Abu Dhabi National Exhibition Centre April 19-22, will also provide potential investors with an opportunity to assess where the best prospects lie.
Perhaps the best way to describe the market mood leading up to Cityscape is "nervous". Why? In part, says Nicholas Maclean, managing director of real estate consultancy CB Richard Ellis, because of the type of investor that will be attending. "At Cityscape Abu Dhabi last year, the people who were principally buying were either from the GCC or GCC partners in combination with Indians, Iranians, or Pakistanis buying off island.
"These off-island properties were very popular with speculators because they allowed them to buy freehold in the emirate for the first time. These buyers had various levels of financing and the market is frustrated at the moment because some of those people are not keeping up with their payments, or they bought in the first place with the idea of flipping the property and making a very good profit.
"Now that the market demand has gone away, some of these buyers find themselves in a situation where they have to make their second or third payments and that's causing them some difficulty. The problem here is that there has been a bit of naïvety on the part of some investors which led to a buying frenzy," says Maclean. "Last year at Cityscape, for example, one of the stands physically collapsed under the weight of the people trying to get on just to express their interest. People thought they were going to
make money very quickly, and no one thought the global economy was going to collapse overnight, but it did."
Jeremy Mayhew-Sanders, head of investment and developments at Sherwoods Independent Property Consultants, says the number of new launches will be down compared to last year.
"We are not expecting to experience a fast trading environment. We do, however, expect the end-user or buy-to-let investor to be targeted," he says.
"Uncertainty remains as to where we are in the property cycle: are we bumping along the bottom, are we expecting further correction in prices? Cityscape will act as a magnet for property people, developers, agents, investors and so on, to meet and talk, sharing views and opinions. In times of uncertainty, people tend to come together, looking for comfort and guidance. We also expect locals to be present and looking to invest, seeking reasonable rental returns. They are earning little interest by leaving their funds in the banks so property is a sensible place to invest if the entry level is attractive."
CBRE director Richard Foulds feels international investors are the future of the capital's commercial freehold market.
"In the past, plenty of people made a lot of money buying these strata buildings, that is, buying one or two floors of a building and turning them over quickly, but those days are gone," he says. "The risk involved is such that most people would think twice before making such a purchase. Whether you're looking at buying just one flat or a whole office building, the principle is the same: buy a property, rent it out, and make a return on your investment. International investors aren't really interested in three or four individual residential units; the sort of trophy assesses they're looking for are the grade A office buildings leased to, say, British Petroleum on a 15-year lease."
"Many international investors will be looking to Abu Dhabi as it does not have the same issues as other emirates, especially Dubai; it may be considered a safer bet for some," says Mayhew-Sanders.
One topic speakers will address this year is what needs to be done to attract foreign investors. "Abu Dhabi has a lot of potential; you can see from the plans for the infrastructure alone that it's a modern, forward-thinking country," says Maclean. "Tourism is going to become a bigger part of the equation with the introduction of events like the Grand Prix. Those elements are useful in selling the region and convincing investors that this is the place to come, but what buyers really need is a way to protect their investments. It isn't the short-term view we should be looking at but how the market will change over the next five, 10 or 15 years."
Visitors to Cityscape Abu Dhabi 2009 will also get a firsthand sneak preview of the Abu Dhabi municipality's 2030 plan for public transport and sustainability in the capital which will include a high speed light rail link and urban transport system. "Abu Dhabi's ongoing commitment to infrastructure projects plays a crucial part in establishing the city as a sound place to invest," says Mayhew-Sanders.
"The city has to work if you are to encourage people to live and work there. The developer delivers the building but the government delivers the infrastructure. Both need each other and are equally important."
Many industry heavy hitters who will attend Cityscape such as Aldar, Sorouh, Al Qudra and The Land Real Estate Investment and Development Company, along with headline sponsor Mubadala, are reluctant to give away what they will present, but with so much riding on the exhibition, visitors should expect an impressive show. "Cityscape is a very important component of the marketplace because it's a way by which landlords judge sentiment in the marketplace," says Maclean.
"Cityscape Abu Dhabi last year was very important and there was a remarkable level of demand. Everyone is waiting with bated breath to see how Cityscape Abu Dhabi fares this year because people are going to make a judgment as to where the market is and if there are no transactions then people will be gloomy."
It's not time to lose hope though, says Maclean, who thinks the credit crisis will correct itself within the next few years.
"Here in Abu Dhabi we still have fundamentals in place. We're not producing enough accommodation commercially or residentially and we have demand we cannot fill and so the underlying components of the marketplace are still very strong."
No matter what the future holds, Mayhew-Sanders says the 2009 edition of Cityscape Abu Dhabi will be very different from last year. As for the mortgages, he predicts some new offers will be announced.
"I think Cityscape will be the launch pad for two or three new lending vehicles co-owned by the master developers, Sorouh, Aldar etc. Easier access to money can only help the property market and, as a result, transactions will increase. The lack of mortgage funds has had a crippling effect on the market."
Essentially, there's only way to find out - come and visit Cityscape this week.
Cityscape Abu Dhabi 2009 runs from April 19-22 at the Abu Dhabi National Exhibition Centre. For more information, go to www.cityscapeabudhabi.com. 2030 the year Abu Dhabi's population is expected to be over 3 million. Cityscape Abu Dhabi 2009 runs from April 19-22 at the Abu Dhabi National Exhibition Centre. For more information, go to www.cityscapeabudhabi.com
