Will Abu Dhabi property beat the global financial crisis?

However, the completion of off-plan sales on Dubai projects was not allowed at the show, under new regulations from the Real Estate Regulatory Authority, so it is impossible to make a fair comparison.

Dubai may have follow-ups from the show that convert later into actual sales.

All the same, the head on rush to invest in new Dubai real estate projects does seem to be over, or at least resting while investors digest the global financial crisis and what it might mean for them.

Also there has to come a point when everyone who wants an off-plan apartment has either bought one or decided against it.

Abu Dhabi by contrast is still a relatively new option for real estate buyers and continues to pull in off-plan sales even in a market as acutely difficult as recently, under the shadow of the worst global financial crisis since the 1930s.

Indeed, at the event Sorouh Real Estate reported the sale of all 230 apartments it was offering within its Gate District project at Cityscape Dubai.

Market cycles

Why then are off-plan buyers choosing to buy in Abu Dhabi over Dubai? Partly this is down to the maturity, some would say saturation, of the Dubai market with development projects.

Certainly the property cycle is more advanced in Dubai than Abu Dhabi simply because it started earlier. Thus the first actually completed property will only be delivered in Abu Dhabi late next year while Dubai had its first completed units in late 2002.

In Abu Dhabi the demand for space is huge and the supply currently absent.

Abu Dhabi has also been delivering the better price appreciation over the past 12 months, and investors are generally attracted by high recent returns, although this does not necessarily guarantee that they will continue into the future.

Economic slowdown

On the other hand, the UAE economy is likely to slowdown next year as the global financial crisis brings oil prices down to earth. Standard Chartered Bank says that the real GDP growth of 4.8% this year will moderate to 2.7%.

A red-hot off-plan property market like Abu Dhabi could therefore cool down before a single unit is delivered. And if too many speculators dash for the door at the same time then a correction will follow.

However, the $33bn pumped into the UAE banking system over the past two weeks, and the guaranteeing of all deposits, is a reminder that the government is highly proactive in defending its economy, and this could well attract Arab investment which is now being pulled out of the recession hit Western economies. Local property investment could be a winner.

Hence a property shakeout in Abu Dhabi cannot really be judged very likely, although as ever those taking big risks with off-plan investments would be the most exposed in any correction, and the best locations are the least risky.

See also:
Special Report: Buying property in Abu Dhabi
Will the global financial crisis affect Abu Dhabi off plan sales