What is boosting home ownership rates in Abu Dhabi?

 

At a time of downward pressure on sale and rental prices for residential flats and villas, potential buyers and tenants have an opportunity to explore new housing options. According to Statistics Centre - Abu Dhabi, housing costs including utilities fell by 3.7% in 2019. This came as the real estate sector contracted by 1.1% in current prices in 2019, compared to a contraction of 17.4% in 2018. Despite lagging expansion, the year 2019 recorded 8663 mortgage transactions worth Dh37.4bn ($10.2bn) and 10,155 property transactions worth Dh20.6bn ($5.6bn), according to the Department of Municipalities and Transport.

There is strong demand for affordable housing, and supply is increasing at pace. “Mid-income housing is an exciting new prospect for Abu Dhabi’s real estate market,” Saeed Khalfan Al Kaabi, CEO of Abu Dhabi-based investment company ASCORP Holdings, told OBG. “ The main factor in determining affordability continues to be size. We have to be willing to move away from the traditional model that places a premium on larger homes and explore alternatives, such as smaller apartments.”

Between 2014 and 2018 the supply of affordable housing doubled, reaching 15% of the total. Developers are drawn to the subsector by strong demand and attractive rental yields. The authorities – led by Abu Dhabi Housing Authority (ADHA) – are also working to build social housing. At the same time, visa changes have opened the door to the market for expatriates.

Cheaper Options

In early 2020 the most affordable villas when measured in price per sq foot were in Al Ghadeer, at Dh685 ($186.46), and Al Raha Gardens, at Dh690 ($187.82). Such costs may be ideal for firsttime buyers; however, because many are purchased by investors, many would-be homeowners are effectively priced out of the market. “Real estate is an attractive investment option in Abu Dhabi because you can put your money into property where you will typically see a 5-6% net and 8-9% gross returns,” Christopher Taylor, CEO of mortgage lender Abu Dhabi Finance, told OBG. “Many investors will buy studios and one-bedroom apartments because they are a lower-ticket entry price to the market, and the property can then be rented.”

One of the main developers of affordable housing is Aldar Properties. In early 2020 the company was offering maisonettes starting at Dh290,000 ($78,900) and townhomes from Dh899,900 ($245,000) in the second phase of its Al Ghadeer site. The 682-home project is set for completion in 2021, adding to the 2130 residences completed in March 2014.

Social Housing

In line with a government mandate, ADHA develops housing projects, programmes and lending products, with citizens benefitting from housing grants and low- or zero-interest loans. Emiratis are also given land on which they can build homes, with those in lower income brackets given plots with houses that were already constructed in areas such as Al Falah and Al Riyadh City. Between its establishment in 2013 and mid-February 2020 ADHA offered 30,632 housing loans worth $16.6bn, and granted 25,847 houses and plots of land to UAE citizens.

In February 2020 ADHA launched Teyaseer, a housing support service that provides advice on the home-buying process and customisable designs for home construction. The programme follows the Dh50bn ($13.6bn) Ghadan 21 development plan that aims to enhance living standards. Launched in 2019, Ghadan 21 will provide 6000 housing loans and distribute Dh11.6bn ($3.2bn) worth of houses and land.

Sector players remain mindful that projects should seek to involve local companies to ensure that the local economy benefits from the initiative in the long term. “Ghadan 21 is very positive for the emirate, but there still has to be more of a focus on boosting local content,” Elias Sayah, president and CEO of Sayah Engineering, told OBG. “Further investment in local content will ensure the initiative has a long-lasting legacy.”

The supply of social housing is set to grow, with ADHA announcing in November 2019 that it would develop 899 new homes on the outskirts of Al Falah. The contract for the Dh2bn ($544.4m) integrated housing complex was awarded to Aldar. Furthermore, in March 2020 the housing agency awarded developer Modon Properties a contract for the emirate’s largest housing project. The contract, which covers the second and fifth phases of Al Riyadh City South, is worth Dh2.4bn ($653.3m). Once complete, Al Riyadh City will boast more than 6000 houses, parks, schools, shops, mosques, medical facilities and community centres.

New Schemes

Developers are looking to new services to attract home buyers to planned communities. Aldar is aiming to sell land plots that enable individual buyers to construct homes to their own specifications within a larger site where the utilities infrastructure and landscaping are provided. In April 2019 Aldar reported its development Lea on Yas Island had sold out, generating Dh400m ($108.9m) in sales for 238 residential plots starting at Dh900,000 ($245,000).

This followed a January 2019 announcement that Aldar had sold Dh1.6bn ($435.5m) worth of residential plots on its Alreeman development near Abu Dhabi International Airport. In July 2019 the Dh1.7bn ($462.7m) Alreeman II planned community generated sales of Dh420m ($114.3m) on the day of its launch, representing 75% of the plots available in the first phase. The company reported that 20% of customers bought their plot with a 50% down payment, and that 70% of buyers had never bought property from Aldar before.

Alternative Living

Developers are also looking to bring people into the market through community lifestyles. In March 2019 property developer IMKAN launched sales for its first phase of Pixel, a development of seven mixed-use towers that embraces the outdoors and creates a sense of community. Pixel includes a co-working space; 480 residential units; and food and retail outlets. The project is set to be delivered in the second quarter of 2021. Similarly, IMKAN’s waterside development Al Jurf sits between Abu Dhabi and Dubai on a wooded 300-ha area. The 293 villas and plots will be built on a site that will open up onto 1.6 km of seafront, with its own marina and private beach. “This development has tens of thousands of trees, as well as an array of wildlife,” Luann Parker, director of business development for IMKAN, told OBG. “Al Jurf also has coral, turtles and other forms of marine life, giving future residents a real sense of escape from the city.”

Changing Tastes

Property preferences are also changing among the local population. Today, many younger Emiratis choose to live in newer planned communities, especially those close to their work or school. “Some people still prefer villas, but the younger generations prefer living in apartments,” Christopher Taylor, CEO of mortgage provider Abu Dhabi Finance, told OBG. “Additionally, more Emirati women are working and have a degree of financial independence, which can also have an impact on housing choices.”

Foreign Buyers

Real estate agents are also predicting that growth in foreign ownership may be triggered by new freehold laws. An April 2019 amendment to the emirate’s real estate law now permits foreign nationals from countries outside the GCC to purchase freehold properties within investment zones. Previously, foreigners were allowed to own floors and apartments but not land (see analysis).

In a move expected to boost expatriate home ownership, in 2019 Abu Dhabi began giving visas to foreigners who made real estate investments in cash. Under the changes, five-year retirement visas can be issued to individuals over 55 years of age if they invest Dh2m ($544,400m) in property, as long as they have a monthly income of Dh20,000 ($5444) or over Dh1m ($272,200) in capital. Non-retirees can obtain a five-year visa if they invest at least Dh5m ($1.4m) in property. Meanwhile 10-year residency visas are available to those who invest at least Dh10m ($2.7m) in an investment fund or the establishment of a company, and those who are a partner in a business with a share of up to Dh10m ($2.7m).

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The Report: Abu Dhabi 2020

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