The Abu Dhabi real estate market is set to experience immense growth over the next two years, spurred on by the recent wave of investments and developments set to redefine Abu Dhabi’s image and appeal, an EFG-Hermes report announced today. According to the research from the leading regional investment bank, this growth will be accompanied by a 20-25% increase in residential rents by the end of 2008 and by a further 15-20% increase in 2009.
The market outlook for residential, commercial, retail and leisure segments uniformly indicates phenomenal growth. The retail segment is largely underserved and the three factors that will contribute to robust growth are – rising wealth in the Emirate, growing demand and strong macro-economic fundamentals. Iconic projects such as Saadiyat, Yas Island’s Formula 1 Grand Prix track, Raha Beach and Reem Island are poised to attract a new ware of tourism and will help generate greater interest in real estate across Abu Dhabi.
This growth can be attributed to increased economic liberalisation and the creation of investment hubs, strong government presence and backing and the establishment of Plan 2030 which has seen Abu Dhabi adopt a well-structured urban planning approach. These factors - combined with the structural shortage of good quality space across the various types of real estate, pent-up demand, strong immigration growth prospects in the emirate and caps on the amount of real estate that can be built in a year - help to mitigate the risk of an oversupply of property and curtail speculative building activity.
“Given the current supply and demand dynamics, where supply is not expected to catch up with demand over the next 18-24 months at least, prices and rents will continue to rise in all the real estate segments over the short to medium term”, said Sana Kapadia, Research Analyst at EFG-Hermes. “Abu Dhabi’s unique positioning is a crucial success factor. Its vision for change, sustainable quality and economic growth, together with the emirate’s substantial finance reserves, help ensure that the market will be responsive, fluid and controlled to a large degree”.
However, there are certain downside risks such as finite contractor capacity, labour shortages and rising building material prices, which could challenge the sustainability of this buoyant market. A currency revaluation in an environment where the AED is pegged to the USD could increase property prices and reduce foreign buying. Also, housing could become less affordable, given a recent upward price spiral that is expected to continue until 2009 at least.
About EFG-Hermes
Established in 1984, EFG-Hermes is the leading investment bank in the Arab world. The firm specializes in Investment Banking, Asset Management, Private Equity, Securities Brokerage and Research. With listings on both the London and Cairo stock exchanges, EFG-Hermes currently boasts a market capitalization in excess of US$ 4.5 billion.
Through its offices in Egypt, UAE, KSA and Qatar and with around 700 people from 18 nationalities, EFG-Hermes serves a considerable and diversified client base from the Middle East and North Africa to Europe and the United States. Our clients include governments, corporations, financial institutions, high net worth individuals and retail customers.
