Abu Dhabi property market gathers strength

30 January 2014

UAE capital’s property sector enjoys strong performance in 2013

Although Dubai has made headlines for the rapid recovery of its property market, Abu Dhabi is also enjoying a strong resurgence in prices for residential properties.

Similar to Dubai, Abu Dhabi’s real estate market plunged about 50 per cent from its peak in 2008 in the wake of the global financial crisis. But while Dubai’s rebound began earlier, in 2011, Abu Dhabi’s performance last year was nearly on par with its neighbour.

Sale prices for prime residential property in the UAE capital rose 25 per cent in 2014, with an increase of six per cent in the fourth quarter alone, according to a new report by US-based Jones Lang LaSalle (JLL).

Rents also increased by 17 per cent, with a rise of eight per cent in the fourth quarter, JLL added.

Both cities are benefiting from the UAE’s status as a safe haven, following political unrest that has arisen in parts of the wider region over the past few years. The announcement of Dubai’s successful bid to host World Expo 2020 is also helping each city, as it is raising expectations of further residential price growth in both markets.

The Abu Dhabi government has also been taking an active role in boosting the capital’s residential market. In September 2012, the Abu Dhabi Executive Council announced that all government staff currently residing in other parts of the UAE must move to Abu Dhabi within a year, or lose their housing allowances.

The official reason the council gave for making the decision was to ensure the safety of employees commuting long distances and boost employees’ performance by restricting the amount of time they spend travelling.

But the regulation also appeared to be targeting expatriate workers who have opted to live in neighbouring Dubai due to its cheaper rents, with the aim of propping up the capital’s rental market, which has suffered from oversupply in recent years.

Last November, Abu Dhabi also removed a 5 per cent cap on annual rent increases, which had been implemented in January 2008 in hopes of curbing demand as rental prices soared. The move to end the rent cap is likely to help push sale prices higher as investors will be able to command more rent for their properties.

While much of the news is positive for the market, Abu Dhabi’s recovery continues to be selective, with price rises limited to prime areas in the emirate, JLL said. With stock of prime property in short supply, prices in these select areas are likely to move even higher in 2014.

Looking ahead, the market’s long-term recovery will hinge on the government’s ongoing efforts to diversify the economy and create new jobs. Controlling supply will also be critical if prices are to continue to grow but this will be a challenge due to the increasing desire of developers to re-launch stalled projects in an effort to tap positive sentiment in the market.

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