Will 2007 be the year for Abu Dhabi property?

The real estate boom in Dubai which began with the liberalization of ownership laws in spring 2003 is looking a bit long in the tooth with valuations now steadier after an October spike.

But down the road in Abu Dhabi the real estate revolution is only beginning to gear-up for the large-scale sale of apartments in 2007. Moreover, Abu Dhabi is promising to learn from the mistakes of Dubai and this may offer some reassurance to investors. What is Abu Dhabi going to do differently?

First, while the same type of ambitious mega projects have been announced as in Dubai, there is a commitment to phasing and a solid desire by developers not to take supply ahead of demand. This contrasts with the headlong rush to build in Dubai with oversupply now looming on the horizon.

Speculators sidelined

Secondly, Abu Dhabi developers are not interested in making speculators rich. Dubai initially offered premiums to initial depositors that encourage speculation in part-paid, off-plan apartments and villas.

Abu Dhabi developers see this as a folly because it effectively deprives the developer of a part of its profit, as well as creating a false market buoyed by speculation.

Thirdly, Abu Dhabi intends to install infrastructure before and not after development work starts. The UAE capital prides itself on a 20-minute cross-city journey for cars, and has no desire to succumb to massive traffic jams.

Fourthly, the developers are strongly backed by the Abu Dhabi Government with its immense oil reserves, and so buyers of real estate can be assured that projects will not run out of money during the construction phase.

There are doubts that remain to be tackled, however. Some investors are put off by the 99-year, automatically renewable leasehold tenure for foreigners and non-nationals. They will want to see exactly how this system is going to work in practice, and what the legal safeguards will be.

Red-tape warning

Regional investors are also concerned about the bureaucracy of Abu Dhabi, a city where paying bills can require time-consuming visits to local departments where officials are not always the most helpful. They would like to see more modern payment systems in place and a general streamlining of red-tape in Abu Dhabi.

However, it is not often that the chance to become a pioneer investor in the richest per capita city in the world happens. In this sense investment in Abu Dhabi has been characterized as a no-brainer.

Indeed, for 2007 as the big new real estate launches are rolled out it may well be that the focus of Middle East real estate investment shifts towards the UAE capital. It's time in the sun has come.