Vol:18 May/08

Property prices in Abu Dhabi to appreciate by 30% in 2008

Abu Dhabi, UAE's capital, is the wealthiest of the 7 emirates. Abu Dhabi in 2005 had registered the world's highest per capita income of US$ 46,147. The emirate is surging ahead with implementation of ‘Plan Abu Dhabi 2030: Urban Structure Framework Plan’, an endeavour to make Abu Dhabi a global capital city. This plan involves development of real estate projects in the city in line with real estate laws and urban and environmental planning.

 

Key drivers for real estate investment in Abu Dhabi

Residential Sector 

Studies show that Abu Dhabi's population growth has averaged 7.3% annually in the last 4 years. By 2013, the population of Abu Dhabi will touch 1.3 million and cross over 3 million people by 2030. Therefore, there will be demand for more residential units, commercial spaces, retail outlets and industries.    

The current demand for all types of residential property in Abu Dhabi has outstripped available supply. It is reported that the occupancy level all across the city is approximately 97-98% and the shortage of houses in the emirate is as high as 50,000 for 2008. The property prices are projected to increase by almost 30% in 2008.

There are approximately 14,000 villas and 18,000 apartments worth AED 200 billion under various stages of construction in Abu Dhabi. For the year 2008, the supply is projected at 24,000 with just 11,000 units scheduled for delivery. There will be only 150,000 new units by 2009 for supply to catch up the demand.

 
Commercial Sector

The continuous expansion of existing organizations and establishment of new ones have created a huge demand for commercial spaces in Abu Dhabi. The development of several free zones have fuelled the demand further as there is rise in licensed businesses at 5% annual rate. To fulfill this growing demand, 415,000 sq m of office space is under construction in Abu Dhabi.

Hospitality Sector

The increase in leisure and business tourism has led to the growth of hospitality industry in Abu Dhabi. This has also contributed to the realty boom in Abu Dhabi.

In an effort to be a world leader in outstanding meetings, incentives, conferences and exhibitions (MICE) venue, Abu Dhabi introduced an extensive investment programme to promote the emirate as a tourist destination.  

Abu Dhabi is targeting a tourist inflow of 3 million per annum over the next decade. In addition, occupancy rate in hotels in Abu Dhabi have touched 90%.

Abu Dhabi has raised its hotel guest projects over the next 5 years and predicts 2.7 million hotel guests by the end of 2012 according to latest 5-year plan.

The new hotels will add 25,000 rooms by end of 2012 from the existing 10,000 of which 45% will be 5-star category.

 

Abu Dhabi Growth Chart (2007-2030)

Growth 2007 2013 2020 2030 Population 930,000 1.3 million 2 million 5 million Residential Units 180,000 251,000 411,000 6086,000 Office Space (Sq M) 1.4 million 2.5 million 3.5 million 7.5 million Industrial Space (Sq M) 4 million 6.5 million 10 million 15 million Tourist (Visits) 1.8 million 3.3 million 4.9 million 7.9 million Hotels (Rooms) 10,000 27,000 49000 74000

The real estate and construction sectors are predicted to deliver compound annual growth rates of 24.4% and 29.6% respectively by 2010 in the UAE. These two sectors are also expected to contribute around 23% of the country's combined economic value by 2010 compared to 16% in 2006. The construction sector has contributed over AED 40 billion to Abu Dhabi's GDP in 2007 while the real estate sector is expected to attract AED 1 trillion investments in the long-term.

Thus, it can be concluded that Abu Dhabi offers the most favorable outlook for real estate investors. The rents are expected to further escalate, while capital values will be supported by high and rising demand. The enormous financial resources available in Abu Dhabi would ensure the continuity of construction activity in the emirate.