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A report by the Abu Dhabi Chamber of Commerce and Industry (ADCCI) puts the current shortfall at a massive 20,000 units, up from a shortfall of 8,000 units in 2007. Rents during this period rose by 140%, and the new projects that are coming online this year will only account for 20% of this need.
Any available properties are therefore likely to be snapped up as soon as they come on the market.
The bad news for potential investors, however, is that the only real estate that can be bought is all off-plan. Buyers will therefore have to pay mortgage or payment plan instalments for anything between six months and three years before they can begin to reap returns from the rental market.
Percentage rental returns
A recent report by regional investment bank EFG Hermes concluded that rents in Abu Dhabi would grow by 25% in 2008. Landlords can expected a further increase of between 15% and 20% over the course of 2009.
The report points to the rising wealth in the emirate, attracting investment and a new workforce from outside the country, and the plethora of projects that the government is financing as part of its Plan 2030, to show that the housing market still has a long way to go before it hits saturation point.
The Abu Dhabi government plans on making the city the GCC's cultural capital; the Louvre and Guggenheim museums are the first permanent sites of their kind for the brands outside of their home country, and purchases such as the UK football Premier League's Manchester City serve to draw ever more international attention to the city.
Added to this, the shortage of available housing, increased demand and immigration and rigid government oversight on the amount of units that can be built in a year, means that there is no danger of the market being flooded and prices collapsing.
'Given the current supply and demand dynamics, where supply is not expected to catch up with demand over the next 18-24 months at least, prices and rents will continue to rise in all real estate segments over the short to medium term,' said EFG Hermes research analyst Sana Kapadia.
A report by Morgan Stanley concurs, stating that prices in Abu Dhabi are likely to increase until at least 2012, when supply will finally begin to catch up with demand. The report says that rental increases specifically are likely to continue their upward trend for the next two to three years.
Median asking prices
Because the majority of developments are still off plan, average rental returns can only be based on properties in existing districts, rather than possible future earning potential for the new communities.
According to Kershaw Leonard, one bedroom apartments on Airport Road fetch Dhs90,000 per year at the top end. Those on Muroor Road can bring in Dhs100,000 for new contracts. Two bedroom flats in the same locations can fetch Dhs140,000 and Dhs180,000 respectively.
Villas can fetch from Dhs260,000 for a two bedroom house, to Dhs350,000 for a four bedroom unit.
The average rent levels across the city put the returns at higher than for properties in Dubai. A two bedroom apartment fetches $2,264 per month, compared to $1,811 in Dubai. Both of these top the median asking price in New York, which stands at $1,729 for the Metro area.
Optimum apartment size
According to Fadi Antar of Better Homes, most speculators and people buying properties as financial investments tend to navigate toward one and two bedroom apartments: 'Speculators tend to think in the short term, so they usually won't exceed two bed places.
Staff
