The Sky Tower available with 97% mortgages from Amlak

The Sky Tower project is due for completion in mid-2009 and is just five minutes from downtown Abu Dhabi and features stylish luxury apartments starting from the 41st floor.

There is also an adjacent 18,000 square metre sports and leisure centre, and a community mall with shops and restaurants. There is a choice of one to four bedroom apartments and luxury penthouses.

However, Abu Dhabi has yet to see the rush of interest to buy property that has been seen in Dubai. Hence the increasingly attractive special deals on finance like this one for the iconic Sky Tower. Why?

Reasons for caution

Real estate agents have several different answers. First, Abu Dhabi is far behind Dubai in developing its real estate sector, and many of its residents have already bought in Dubai.

Secondly, the Abu Dhabi property market has benchmarked its prices against Dubai and therefore nobody has been allowed to make a big profit like the early buyers in Dubai. This might make commercial sense but it has not created the dynamic market witnessed in Dubai in recent years.

Thirdly, the 99-year permanent leasehold system for foreign ownership is contrasted with the freehold available in Dubai. For high-rise buildings this is typical around the world, and should not really be considered a disadvantage. On the contrary the rights and obligations of leaseholders are clearer in high-rise buildings.

Fourthly, there is an intangible concern at the back of some investors' minds that Abu Dhabi has announced very large projects in the recent past - such as the Sadiyaat Island financial centre - and then changed its mind later, scrapping the projects. Off-plan buyers might argue that they will wait and see this time, just in case.

Interest rates

Finally, the position of the global real estate cycle is also relevant. Dubai launched its real estate when interest rates had just fallen sharply. Today interest rates are higher and rising, not usually the best environment for real estate investment.

Perhaps then it is not surprising that most of the demand for Abu Dhabi property so far has come from local buyers. After all it is only very recently that even nationals of Abu Dhabi have been allowed to purchase freehold real estate, previously it was on a not-for-sale, gifted-land basis.

With this kind of dramatic real estate market reform in place it can only be a matter of time before the Abu Dhabi real estate market corrects to the higher price levels seen in the rest of the world. And those that drew up long lists of objections and bought nothing will be kicking themselves, just like in Dubai.