Abu Dhabi realty prices to rise 25% |
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Saturday, Mar 29, 2008
Gulf News
Abu Dhabi: Real estate prices in Abu Dhabi are likely to jump as much as 25 per cent this year as the euro's continued battering of the dollar increases material costs and demand outstrips supply in the market, say experts.
In its latest report, HSBC Global Research, however, said the fundamentals of Abu Dhabi's real estate sector "are still healthy", with residential prices up 30 per cent year-on-year on an average in January 2008.
Property consultancy Colliers says office rents have grown around 40 per cent over the last two years. Some estimates put the shortage of houses in the emirate as high as 50,000 in 2008.
Abu Dhabi recently lowered its rent cap from seven to five per cent.
According to HSBC's report, property prices in the emirate are still low compared to the per capita GDP of nearly $45,000 last year. Average residential real estate prices range between Dh1,300 ($354.50) and Dh1,700 a square foot, far lower than Paris, Zurich or London.
Europeans are lapping up the opportunity. According to estimates, Europeans buying residential property in Abu Dhabi account for almost 12 per cent of total sales, a figure on the rise.
The Abu Dhabi Chamber of Commerce and Industry estimates that the value of projects in the planning stages or under construction in Abu Dhabi is around $330 billion.
According to Falah Mohammad Al Ahbabi, director general of urban planning at Abu Dhabi's Executive Affairs Authority, around $200 billion will be pumped into various infrastructure projects in the emirate over the next five years, with the government bearing 40 per cent of the expenditure.
Eye on the future
The developments being undertaken conform to 'Plan Abu Dhabi 2030' that lays down the urban structure framework required to accommodate an estimated population of more than three million by 2030. Presently, about 1.6 million people live in the emirate.
Gurjit Singh, chief property development officer for Sorouh Real Estate, one of the biggest property developers in Abu Dhabi, believes there is scope for expansion. "The property market here has a wide gap that needs to be filled in terms of demand for different types of real estate products. Occupiers' demand is driving the Abu Dhabi real estate market," says Singh.
"Rental values of properties are going to rise significantly," he adds.
However, the sector isn't without its problems. Building materials are in short supply and getting more expensive by the day. Yet, such is the demand-supply balance that developers simply pass on costs to buyers.
Two major developers, Aldar and Al Qudra, recently said they are looking at forming joint ventures with, or becoming part owners of, suppliers to contain the cost of raw materials.
There is a labour shortage as well, given the massive scale of construction, which may cause project delays.
Nevertheless, realtors are betting big. "I see Abu Dhabi reaching the level of New York, London and Paris," says Sulaiman Al Fahim, CEO of Hydra Properties.
© Gulf News 2008. All rights reserved.
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