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Abu Dhabi Property Values to Keep Rising

UAE, the second largest Arab economy after Saudi Arabia has amassed huge current surpluses in recent years and can easily rely on sovereign wealth to cover the cost of financing current property projects — even with poor investment returns in 2008 and eroding oil prices, said Citigroup.

Unlike Dubai, demand in Abu Dhabi still outstrips supply for all segments of the property sector.

Current supply shortages for prime office space saw rents soaring 40 per cent in 2005-2006, 10 per cent in 2006-2007 and 14 per cent in 2008.

“Even with steep rent increases, the average prime rates are competitive on a global playing field. Abu Dhabi rent levels lag significantly behind London and Hong Kong, and are still some 40 per cent behind Singapore, Tokyo and Moscow,” said Citigroup.

It added that the supply coming to the market could actually generate further demand as many companies may have previously put at bay expanding in Abu Dhabi due to supply issues.

On the other hand, supply in the residential segment will only begin to exceed demand by 2012.

“No incremental demand is needed to soak up oncoming supply of residential units given unsatisfied pent-up demand. “

Citigroup said the current oversupply and growing population which resulted in recent years to extremely low vacancy rates, high rental growth and high price increases, will continue to boost rents and sales in the residential sector.

Even new retail space will also enjoy solid take-up as existing stock continues to age.

Citigroup noted that under the “Plan Abu Dhabi 2030” which outlines its development framework, Abu Dhabi is also being primed as tourist destination, with an increasing mix of leisure tourists and business travellers.

Besides, the retail market is fuelled by national spending power as opposed to tourist flows in Dubai.

“Abu Dhabi has the third-largest GDP/per capita in the world and with strong growth forecasts and oil surpluses, national spending levels look set to continue their growth,” said Citigroup.

· rocel@khaleejtimes.com