The UAE capital has witnessed a 50% increase in rents this year due in large part to a shortage of available housing. However, the city is set for a period of sustained growth in the real estate market with the Abu Dhabi Chamber of Commerce and Industry (ADCCI) predicting $62.6bn in developments in the emirate by 2009, which will expand housing capacity dramatically.
In an interview with Gulf Construction Worldwide, Ibrahim Eskiocak, vice president of First Gulf Bank's property management division, said, "The Abu Dhabi market will, in the years to come, do even better than others. It's still a virgin market, has a very strong economy and investor interest is on the rise."
The emirate has experienced a raft of major announcements in real estate development in the last 18 months. The most high profile are those involving Aldar properties and Sorouh Real Estate with their projects on Saadiyat Island, Al Raha Beach and Shams Abu Dhabi on Al Reem Island. These three projects alone will cost a reported $48.5bn.
Saadiyat Island, which will be completed by 2018, is projected to be home to 150,000 residents while Al Raha beach will be able to accommodate 120,000 people upon its completion in roughly 2009 and onwards.
Both projects will be divided into districts and will be home to residential, commercial and tourism complexes as well as providing elaborate and highly sophisticated infrastructure developments. For example, Saadiyat Island will be home to a cultural district containing four museums including the largest Guggenheim Museum in the world, as well as luxury town houses, apartments, an office park and a retail and commercial area. The island will be connected to the city centre of Abu Dhabi by two 10-lane causeways.
Meanwhile, the Shams Abu Dhabi project, being developed by Sorouh, will be home to the Gate area whose centrepiece will be the Sky tower. This building, set for completion in 2008, will be the tallest in Abu Dhabi standing at 379 metres. On current rankings, it will also be the 15th tallest in the world. Plans for such iconic structures abound in Abu Dhabi. The Sky tower will be almost equally divided between residential and commercial space with a mix of one, two, three and four bedroom apartments.
Other major developments such as the Al Gurm resort, the Central Market project, Dhanat Abu Dhabi and Mohammed Bin Zayed city will also substantially augment the number of housing units in the capital.
This investment and growth is timely. The Dubai-based real estate development advisers, RSP Group, have predicted that the population of Abu Dhabi will double in the next ten years leading to the demand for between 225,000 and 250,000 new housing units.
The majority of developments that have been announced thus far are high-end mixed-use projects.
There is some concern that middle and low-income housing capacity will remain constricted. However, the recent announcements regarding residential villages for workers in the Industrial Cities of Abu Dhabi suggest that the provision of housing for labourers is a concern of the government. Five such complexes are planned in Abu Dhabi and Al Ain and they will include accommodation as well as a number of retail and recreational facilities, healthcare centres and mosques.
Nevertheless, the focus of development is certainly on mega projects. Such developments have been encouraged by the change in property laws that allow for ownership and investment, laying the foundation for a dynamic and competitive real estate sector. In the first half of last year, the government passed legislation to allow UAE nationals to buy and sell property in the emirate. This has instigated a hunger amongst nationals for investment in residential and commercial property.
The government also followed this legislation with amendments to the property law regarding non-nationals. This decision, No. 23 of 2005, permitted chosen developers to offer property for sale to non-nationals in designated investment areas. The first of these developments is the Al Raha beach complex that is being constructed by Aldar Properties. Many analysts see these amendments as a critical precursor to sustainable growth in the sector creating a more attractive climate for investors.
The health of the sector is reflected by the performance of Aldar properties itself which recorded first half net profits of Dh526.7m ($143.4m), representing a 57% growth on 2005 figures.
International and local banking institutions, whose confidence in real estate developers is is increasing, are supporting these projects. Barclays bank recently offered Aldar a Dh300m ($81.68m) loan facility to fund one of its new developments illustrating the continued appetite for investment.
Indeed, the sector seems to be going from strength to strength and although demand is currently outstripping capacity in Abu Dhabi, the sheer number of high quality projects in the pipeline bodes well for the future of real estate in the emirate.