Need for an independent study of supply and demand in Abu Dhabi

In Dubai the 45-page independent report from EFG Hermes published in December 2006 has unleashed a wave of debate about the supply and demand position in the emirate.

Such a fundamental analysis of the market is surely a good thing. It allows developers and civil servants a second and expert opinion about likely future supply and demand patterns, and possible points of market weakness.

For it is all too easy to get carried away in an oil boom, particularly perhaps in the capital of a major world oil producer like the UAE. It is always much easier to spend money and make investments for the future than to assess business plans and commercial potential.

Reassessment period

Maybe now that the initial enthusiasm that surrounded the opening of the Abu Dhabi property market to foreign leaseholders and national freeholders is drawing to a close with the peaking of the oil price last summer, it is time to reassess the market.

How can this be done without a thorough study by expert analysts? What are the real population growth trends? What type and price of accommodation will be needed to accommodate these people? Do they need luxury palaces or labour camps?

An independent study could also look at growth projections in some key sectors and ask whether these are realistic, or even too low. Why does Abu Dhabi have a target of three million visitors a year for tourism while Dubai is pitching for 15 million?

Greater transparency is required if Abu Dhabi is to build the urban landscape that this wealthiest of global cities deserves. And this is something that is often forgotten in the excitement of promoting big new projects and rallying investment support.

Investor support

Yet investors will welcome third party research with open arms, and indeed this is actually the way to maximize investment value. For nobody in the international institutional real estate business is fooled for very long by an absence of independent research.

It is not as though Abu Dhabi has anything to hide, just a question of getting the research done and published. Quite the contrary, the capital of the UAE could well prove to be a hidden gem of global real estate in the coming decade.

For real estate prices in Abu Dhabi are well below comparable international levels for a city of such wealth, and Abu Dhabi has the highest per capita income in the world. But investors need the reassurance of a transparent market, why not give it to them?