Abu Dhabi: the next Gulf property boom?

The belated change towards a proactive real estate development policy was marked by the new Property Law signed by His Highness President Sheikh Khalifa bin Zayed Al Nahyan on August 10th 2005. This allowed UAE nationals to own and trade land in Abu Dhabi for the first time. GCC nationals were permitted to do so within designated areas while other expatriates could invest on renewable 99-year leases within these zones.

This key legislative change was accompanied by the creation of half-a-dozen new property companies which were granted land in these designated areas. Two held highly successful initial public offerings - Sorouh and Aldar Properties - to raise development capital and public awareness.

Moreover, the new government of His Highness has embarked on an expansive economic investment programme promoting Abu Dhabi as a tourism destination with the formation of a new national airline Etihad and a tourism development body. Thirty industrial clusters are being developed within seven years in a 300 square kilometer zone and 40 international manufacturers have already signed up.

World's wealthiest city

It is not as though Abu Dhabi was a laggard in wealth, having achieved a per capita income of $46,185 last year - the highest in the world. But there was definitely a feeling among the UAE nationals living in the city that real estate development was falling behind economic success, and that after a virtual moratorium on building for a decade, Abu Dhabi looked a little neglected in comparison to booming Dubai.

The iconic property developments now in hand are the response. The main projects are the $14 billion Al Raha Beach suburb from Aldar, the $27 billion Saadiyat Island tourism project by the Abu Dhabi Tourism Authority, and the multi-billion Reem Island which features Sorouh's Shams Abu Dhabi flagship project with its 83-storey Sky Tower. But there are numerous much smaller projects like Sorouh's Golf Gardens and Aldar's Al Gurm Resort.

Off-plan sales

The big rush to market off-plan apartments has yet to get underway but 2007 will be an important year for new sales. However, investors are not expecting to get the bargains found in Dubai in the early days as if nothing else Dubai has set a benchmark for UAE property values and construction costs are up substantially.

On the other hand, the benchmark for Abu Dhabi property values will surely be international and not local. And the indications are that by this yardstick new property in Abu Dhabi will sell at a considerable discount to capital cities like Singapore or Mumbai.

Those with the patience to buy early and wait for the Abu Dhabi market to catch up with other major global cities will surely be well rewarded in time. And investors who missed out on the Dubai boom should be looking down the road for another opportunity.