Abu Dhabi Real Estate Sector Sustained by Government Backing
Despite the global meltdown and financial crisis the markets of the UAE have remained fairly stable and buoyant. Of course there have been minor slumps like the property Dubai and tourism sectors which are witnessing a slowdown. But overall the mood is pretty uplifting. Abu Dhabi real estate sector is one of the markets that have hardly been impacted by the meltdown. Abu Dhabi’s current account surplus and independent wealth reserves provide the necessary cushion to the real estate sector and help it in maintaining the kind of growth that it has been witnessing till now. The government completely backs the real estate sector and is hopeful that it will continue to flourish under the imbalance of supply and demand due to the rise in population and accommodation needs
Statistics show that the population of Abu Dhabi has been growing at an annual rate of nearly 7.3% for the last four years and is slated to touch the 1.3 million mark by 2013 and even grow to 3 million by 2030. The capital city is presently laying down the foundations of the ‘Plan Abu Dhabi 2030: Urban Structure Framework Plan” which is going to make the city a world class city in the lines of its neighbouring city of Dubai. The plan is meant to set up state of the art real estate projects which will be following the real estate and urban planning laws.
A recent report published by HSBC shows that the overall asking prices in Abu Dhabi has decreased by 1% in the month of October. But a closer look shows that the advertised prices of villas fell by almost 15% but the prices of apartments increased by 3% and this accounts for nearly 81% of the sales. Thus it shows that the demand for residential apartments and complexes is still growing and this is mainly due to the steady in flow of foreign residents into the country. The 1% decline in prices is a transitory phase and when evaluated against the markets in the US and the UK it is quite negligible. The real estate market of the UK saw prices falling by nearly 14.4% in the third quarter of 2008 and the US saw a disastrous fall of 20.75%. Both markets had witnessed a positive growth rate in the similar periods in 2007.
In spite of the credit crunch in the global financial markets which are creating new problems for the developing economies including the Emirates, the Abu Dhabi real estate sector is still growing steadily. The economy has been able to maintain this due to the huge profits it made on the sky rocketing global crude prices and a rising demand for housing. The population has been increasing at quite a pace and Citigroup predicts that this will leave a shortage of nearly 30000 units by 2012.
The government has been quite positive about the real estate sector and are firmly backing the market. Any speculation and fear about the crashing of the real estate sector has been negated. The Abu Dhabi real estate sector especially is showing no signs of slowing down. The government is taking all the necessary steps to keep the market steady. Enough cash has already been pumped into the banking system to maintain liquidity. Also steps are being taken to introduce user friendly payment plans and postponing mortgage payments. A Financial Stability unit has been set up especially to keep a close watch on the markets and manage the real estate services. All these steps will surely ease up the pressure and the property market will be able to endure any major setbacks if inflicted upon it.
The UAE government is taking the right steps to tackle any problems that may arise. Officials say that they are expecting a positive growth economic growth rate in 2009. Obaid Humaid Al Tayer the Minister of State for Financial Affairs said that the government has pumped in Dh 120 billion into the banking system which will come up to 14 percent of the GDP. He said “Compared with other countries, it shows we are taking the right steps. The UK has injected 20 per cent of GDP; the US 15 per cent of GDP, Russia 8 per cent, and Germany injected 7 per cent of its GDP.”
The construction sector has not faced any major problems except for rising prices of raw materials. There will definitely be a demographic explosion in the next 20 years. Over $200 billion of government money will be invested in infrastructure and real estate projects in the next five years and by the time the city is ready to take on the world the global recession will most likely get over. There is the possibility of the UAE becoming a key business hub of the world and there might as well be a shift of power from the West to the Middle East and the East. Property Dubai and its retail sector contribute significantly in this, not to mention Abu Dhabi is following the same path.
In recent times Abu Dhabi has attracted quite a lot of attention of the investors. The F1 grand prix that is slated to be held in the capital city will surely attract quite a lot of foreign tourists as well as residents. Abu Dhabi is all slated to become a global sports hub and many sports like golf and cricket are already getting quite a lot of sponsors in the city. Venues are not a problem here and the infrastructure is also superb. Huge retail spaces in the line of Dubai and massive residential complexes are the top of the draw as far as property is considered. The market demand is quite high and is going to remain like that in spite of the global slowdown.
