Abu Dhabi real estate a favourite investment class for 2008

Investment in an asset class is always partly a matter of eliminating the competition. If you can find a better home for your money why would you invest in Abu Dhabi real estate?

Surveying the alternatives, it is clear that many of them have fallen by the wayside. US property dipped into recession in 2007 and UK real estate followed in the autumn. US equities delivered a poor return over 2007, beaten by a fixed-rate deposit account. Hedge funds had a miserable year with performance patchy at best.

So if you are searching for pure investment return in 2008 you have a lot less options than at the start of 2007, before anybody had heard of the sub-prime crisis and credit crunch. You might, of course, be kicking yourself that you did not buy gold or UAE equities last August, but then again now might not be the time to plunge into these markets after a strong advance.

Positive aspects

Therefore by default any investor in the UAE is bound to be looking at Abu Dhabi real estate. This is still a fledgling market with very little by the way of hard data to analyse but there are a great many signs to warm investor interest.

How many times is a new property market created in one of the world's richest cities? What sort of future does a place like Abu Dhabi have with oil and gas prices look set to remain strong for the next decade as demand surges and supplies remain restricted?

The macro view is excellent. The devil is in the detail of deciding where and how to invest. However, since the middle of last year the major developers like Sorouh and Aldar have been releasing more and more property on to the market, and sales have turned up strongly.

Off-plan sales

It is therefore just a question of registering with the major firms and waiting for an attractive development in a good location to come up. These are substantial companies well supported by the Abu Dhabi government and your only risk is in the timescale of delivery, not the financial strength of the developer.

In fact, both Sorouh and Aldar have been making impressive progress down-on-the-ground arranging long term alliances with key contractors and suppliers to enhance the efficiency of the construction execution process. Thus surprises in construction timetables might even be to the upside.

Meanwhile, the troubled US economy continues to have a mirror image in the UAE where high oil prices and falling interest rates (courtesy of the dollar-pegged dirham) are fuelling an economic boom.

And even the expected revaluation of the UAE dirham will provide a one-off bonus for property investors if they make their investment in time. In short, Abu Dhabi real estate faces an almost ideal set of circumstances promoting the sector in 2008 and it is hard to see what might go wrong.

See also:
Revaluation prospects make dirham deposits attractive
Special report: Buying property in the UAE
Abu Dhabi a bigger construction site than Dubai within four years