New Infrastructure Projects could Stabilise Abu Dhabi’s Property Market

The planned infrastructure projects in Abu Dhabi will further enhance the emirate’s desirability and create a demand for jobs and services. The improvements which are set to complete over the next two years are seen as an important step on the path to the property market’s recovery which in turn accelerates population growth.

Traditionally, Abu Dhabi real estate has always had a lack of apartments for its residents. This meant that because the demand was traditionally high, so too were the rents. However in 2009, this trend changed due to the global economical crisis. Rental prices declined due to lack of demand in comparison to an increase in the supply of units. However when looking forward to 2010, rental pricing seems to be stabilising. This is suggested by the minimal decreases in the values of apartments for rent over the first quarter of the year. However Abu Dhabi still remains more expensive than neighbouring Dubai; a typical two bedroom apartment in Abu Dhabi is in the range of AED 150,000 (£26,565 at the time of writing) whereas a similar apartment in Dubai costs around AED 120,000 (£21,252) to rent per annum.

Together with infrastructure projects which include improvements to road networks, public transport and power station capacities (water and electricity), a further 2000 residential units are expected to enter into the market place in the first six months of 2010. This will in turn renew market confidence and increase the number of visitors and therefore potential residents to the city. Consumer faith in the property market is without doubt one of the most important factors for an economy’s restoration.

Another possible influence in confidence of the property market is the recent announcement by Abu Dhabi Finance. They have reduced their mortgage interest rate to a minimum of 5.5%. This action will go someway in reducing mortgaging costs for both businesses and landlords alike, hence this is a welcome move and could be a determinant for Abu Dhabi’s economic progress. This is a measure that has not yet been mirrored by Dubai banks and financial institutions (where the lowest rate available is 7.5%) despite a call for it by some property companies.

After careful data analysis of the rental pricing trends together with the focus on key infrastructure projects and the potential uplift in population figures, Abu Dhabi’s property market could continue on a steady footing over the course in 2010.