With Abu Dhabi set to receive over 30,000 new housing units in 2014, the outlook for the capital’s real estate market is brighter than ever, says CEO & Founder, Michael Lahyani.
Infrastructure spending buoys Abu Dhabi realty
Michael Lahyani (Property focus) / 4 May 2014
Abu Dhabi’s real estate market is on a roll. The capital received one of its biggest investments — an enormous Dh37.7 billion for infrastructure and service projects, with the government allocating Dh12.7 billion for housing and community projects — hot on the heels of the recently concluded Cityscape. The number of residential units in Abu Dhabi increased by 1,700 units in the first quarter of 2014, bringing the total stock to around 238,000. With the capital set to receive over 30,000 new housing units in 2014, an uptick in real estate activity in Abu Dhabi is likely to continue to play out over the course of this year.
The rebound in residential activity in Abu Dhabi over the past 12 months has been driven, amongst other factors, by government intervention and positive economic growth. The Abu Dhabi property market is showing strong signs of maturity as the emirate looks towards achieving its 2030 vision. The recent decision by Abu Dhabi Municipality to issue title deeds to property owners who have purchased apartments from Aldar Properties has created an additional layer of certainty for buyers. Aside from revealing new housing projects in Abu Dhabi, Aldar is clamping down on speculators by introducing strict resale restrictions on its latest projects, preventing buyers from selling units until they have paid 50 per cent of the purchase price. This follows Emaar’s recent attempt to curb speculation by disallowing the transfer of names on purchase agreements until buyers pay up to 40 per cent of the property’s value.
The rise in demand for Abu Dhabi real estate amongst buyers and renters has been strong primarily due to the launch of new major infrastructure and construction projects such as the airport expansion and Etihad Rail, which is in turn fuelling job growth. The ‘live local’ policy directed at reducing the level of government employees commuting from Dubai and the narrowing of the rental gap between Abu Dhabi and Dubai as leasing prices in Dubai continue to increase, have also driven property demand in the capital. Year-on-year, sale prices for apartments and villas in the capital have risen sharply with apartment values increasing by 13 per cent and villas by 40 per cent. Whilst prices are yet to reach their 2008 peaks, they are expected to continue on an upward trajectory over the course of 2014.
Looking at the numbers in our recently released quarter one report, we see Al Reem Island enjoy a 30 per cent and Hydra Village a 60 per cent rise in property views on the site by potential buyers since the first quarter of 2013. Similarly, Saadiyat Island welcomed a 50 per cent increase in views since second quarter last year. When we look at the renting situation, the removal of the rent cap has had a huge impact on rents as residents are relocating to off-island communities such as Khalifa City and Mohammed Bin Zayed City. For instance, in comparison to Q1 2013, views of properties in Khalifa City on our site have risen by over 60 per cent whilst those in Al Reem Island have seen a 14 per cent increase.
The revival of the residential sector is also likely to encourage further, new development launches over the coming months, and see work restarting on stalled projects. Progress is also being made on the establishment of Abu Dhabi’s first financial free zone — the Abu Dhabi Global Market — on Al Maryah Island. Construction is gathering pace and is expected to encourage more international companies to base their operations in Abu Dhabi. The increase in retail spending by residents and tourists is furthering the demand for retail space in the capital. Abu Dhabi has seen a huge spike in tourist numbers, reporting record figures of 834,771 in the first quarter of this year — an impressive 32 per cent rise from 2013.
All in all, the outlook for the emirate’s real estate market is brighter than ever, aided by the market’s maturity and positivism. However, sustainable performance will be dependent upon the government managing the sharp upswing in property prices, taking steps to stimulate demand and engineering a market recovery that will continue to attract fresh foreign investment and benefit from expansion in sectors such as finance, hospitality, aviation, healthcare and tourism.