Strong Govt support sustains Abu Dhabi real estate sector
Strong Govt support sustains Abu Dhabi real estate sector
Contrary to how other established markets are performing under the global economic meltdown, Abu Dhabi's current account surpluses and sovereign wealth reserves, provide enough strength to sustain the momentum its real estate sector has gained in recent years. The real estate market in the emirate continues to thrive on the supply and demand imbalance fed by the rise in population and housing needs. Recent studies indicate that Abu Dhabi's population growth has averaged 7.3% annually for the last 4 years and by 2013, the population of Abu Dhabi will reach 1.3 million and spread to over 3 million people by 2030.
Abu Dhabi, the richest city in the world per capita income wise, also saw its gross domestic product (GDP) soar from $40.6 billion in 2002 to $108.9 billion in 2007, i.e., more than 8% per annum. The UAE capital city’s economic growth as a whole can also be attributed to the government's efforts to diversify the economy away from its dependence on oil and gas. Non-oil and gas GDP has risen by 87% to $43.3 billion over the past 5 years. According to Abu Dhabi Department of Planning and Economy, owing to gains made in non-oil sectors, especially real estate, Abu Dhabi's economy is expected to jump to $179.1 billion by 2010, more than double its level in 2005.
Presently, the capital is in the process of executing ‘Plan Abu Dhabi 2030: Urban Structure Framework Plan' to strengthen the ongoing advancement of capital city to emerge as a top class destination. This plan also involves development of real estate projects in the city in line with real estate laws and urban and environmental planning. ‘Plan Abu Dhabi 2030' also provides various affordable housing alternatives for the residents apart from specifying the land uses, building heights and transport plans through 10 individual policy statements. According to Citigroup report, under the plan the UAE capital city is also being touted as a prime tourist destination, with an increasing mix of leisure tourists and business travelers. Tourism is expected to increase revenue of the emirate further by bringing more gains to its economy.
The steps undertaken by the government to bolster the non-oil sectors have resulted in a real estate boom. However, in a bid to bring in some transparency and effectively regulate property sector, Abu Dhabi's Department of Municipal Affairs recently finalized five draft laws which will be enforced next year. They are intended to clean up the property market by ending speculation. The new real estate law would introduce provisions and guidelines for developers, contractors and brokers and would regulate off-plan sales, licensing of high-rise buildings and property registration. With a comprehensive real estate regulatory framework in place, Abu Dhabi will have a separate dedicated body to look into emirate's real estate segment. The introduction of stringent realty laws in the UAE capital will surely enhance the emirate's global standing and help real estate brokerages to market products abroad more efficiently especially during the current credit crisis.
Although the ongoing global economic slump has impacted Abu Dhabi’s real estate market adversely, the effect is minimal. According to a recently published HSBC report the overall asking prices in the UAE capital declined by 1% in October. But upon closer inspection it is evident that even as the villa advertised prices fell by 15%, the rates for apartments, which account for 81% of the listings of property for sale, rose by 3%. This is because there is an ever increasing demand for residential apartments, especially among expatriates.
The 1% price decline, however, is temporary and is negligible when compared to western markets like the UK and US, where the slump has been catastrophic. In the UK, prices fell by 14.4% during the year-to-end Q3 2008 after rising 7.59% during the same period in 2007. The US market is the worst hit where house prices crashed 20.75% during the year to end-Q3 2008
Despite the credit crunch posing enough challenges to many economies including the UAE, the Abu Dhabi realty continues to expand on the back of an economy plush with high oil revenues and acute housing shortage. According to a Citigroup report, the population increase and household size shrinkage in Abu Dhabi should leave behind a shortage of at least 30,000 units by 2012. This coupled with International Monetary Fund (IMF) projecting a 6.3 per cent rise in the country's GDP for 2008 we can safely conclude that the property market in the UAE capital is on the right track.
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