Cityscape Abu Dhabi to break records but can this boom last?

Every day another report predicting a bright future for oil-rich Abu Dhabi seems to emerge from one source or another.

This week came a study from the Department of Planning and Economy suggesting that the emirate's GDP would triple from around $105bn this year to $300bn by 2025.

Presumably that would be in real terms as inflation will surely be massive in that period, and it is well into double digits right now in the UAE. But this does signal something of a 'new era' for Abu Dhabi.

Its authors cite mega projects, economic reform plans and government restructuring, all driven by 'a strong, resourceful political leadership guided by a clear and far-sighted vision', with 'a brand new Abu Dhabi and a strong, lasting and stable economy.' And they mention the per capita GDP of $74,000 as the second highest in the world, after Doha.

Oil rich

However, hydrocarbon wealth is what fuels the Abu Dhabi economy, and oil and gas do not employ many people. So will this new era of prosperity necessarily entail demand for a vast amount of real estate?

Well, it has to be said that diversification remains a linchpin of the government's planning. But by 2015 Abu Dhabi is planning to host less than three million up market tourists to its museums and other attractions, compared with 15 million in neighbouring Dubai.

You also have to wonder how the capital's new industrial zones will work in practice, although the space is currently being snapped up. There is also talk of a financial centre - although that crown already belongs to Dubai surely, and any attempt at replication would be absurd.

Nonetheless, the fact that there is presently a massive shortfall of accommodation in the UAE capital city cannot be denied. There was after all a building moratorium in the late 1990s when nobody thought another oil boom was likely.

Supply chain

It is also true that the 'build and they will come' philosophy of Dubai may equally work in hugely rich Abu Dhabi: supply of property in the right places can stimulate demand.

On the other hand, Abu Dhabi is also arguably repeating some of the mistakes of its neighbour in launching too many mega projects at once and concentrating on up market projects when the main demand is for far more basic accommodation for the less well paid.

Does this not leave scope for an oversupply situation in the future? Yes, but that need not worry the frenzied crowds heading for Cityscape this week as there will be a very lively market in the meantime.

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