ABU DHABI — The real estate sector in Abu Dhabi is set to witness a boom in the future, especially by 2010 when a large number of ongoing projects will be completed, The National Investor (TNI) forecast yesterday.
“By 2010, we expect a situation of oversupply of residential units which may cause a fall in the property prices. This conclusion is also supported by our belief that the property market is cyclical in nature,” said Amer Halawi, TNI Director of Investment Research.
TNI’s supply-demand analysis suggests that the Abu Dhabi property sector would have three distinct periods: shortage in the short term (which is being felt now), oversupply by 2010 and reasonable growth in the long term in view of the economic growth expected.
“We conclude that Abu Dhabi property exposure is a must for investors. But we also warn them about the cyclical fluctuations and extreme volatility, which may significantly dent performance on the way, as we have seen in the recent past,” said Halawi.
The TNI believes that those who want to invest in the Abu Dhabi property sector should stay away from single, direct equity investments which may have volatility and risk. “Instead, we recommend a diversified portfolio combining equity, fixed income and direct investments, which pose a more balanced risk across multiple sectors,” said Hassan Awan, Associate, TNI Investment Research.
One of the catalysts of the real estate boom in Abu Dhabi is Law Number 19, which allows nationals to buy land and foreigners to take plots on 99-year lease in select investment zones.
The major developers in Abu Dhabi were previously offering residential units to UAE nationals only (for instance, projects like Raha Gardens). The neighbouring project of Raha Gardens is open for sale to both nationals and expatriates now.
For both Abu Dhabi and Dubai, the future of real estate seems to be dynamic and diverse.
In the tourism sector, the ongoing development in the Capital may change the way a potential tourist plans his vacation. “We believe that tourists will visit both Abu Dhabi and Dubai in the future for a combination of cultural and leisure attractions,” TNI said in the report.
The setting up of the Abu Dhabi Tourism Authority and conversion of Reem Island, Saadiyat Island and Yas Island into luxury resorts with mixed-use facilities are all part of the plan to increase tourist traffic to Abu Dhabi.
Tourist traffic to the emirate has been rising steadily in the recent past. The report released by Abu Dhabi Tourism Authority shows a 12 per cent rise in tourist arrivals to the emirate in 2006 — 1.34 million compared to 1.21million in 2005. The growth rate would be higher in the next four or five years when the ongoing projects are completed. The Abu Dhabi Tourism Authority expects tourist arrivals to reach three million by 2015.