Will bargains emerge in Abu Dhabi real estate in 2009?

One major test will come in the autumn when the first completed units are handed over to their new owners. Will these units immediately command a hefty premium to their original prices, as is usually the case for completed units that were sold off-plan?

It is easy to understand why this is usually true: A finished unit carries a premium because you are no longer buying on trust, and it can be immediately rented out for income or used to replace a rental property for individual occupation.

Off-plan premiums

In Dubai the first units handed over enjoyed 20%-25% price rises, and up to 40%-50% in some special cases such as The Palm Jumeirah. Will those Aldar apartments on the Al Raha Beach command similar premiums on delivery?

To begin with the number of units is going to be very small compared with the demand for residential property in Abu Dhabi - which many studies have established is well above the available supply.

But then again, Al Raha apartment prices were benchmarked against Dubai price levels, and these prices are now showing substantial weakness. However, equally the pattern in Dubai has been for the completed property sector to hold up better in price terms than off-plan, and Abu Dhabi will surely benefit from the same phenomenon.

Those seeking bargains in property in Abu Dhabi are far better counseled to look at the off-plan sector where some of the original buyers may now be facing financial difficulties due to stock market losses or losing their jobs.

Dubai buyers

Again it is the overlap from Dubai that is a factor here. For many home buyers in Abu Dhabi in fact hail from Dubai, often people who either did well in the Dubai boom and moved on, or missed it and hoped to do better in Abu Dhabi.

Sadly the same Dubai buyers are probably more likely to have got themselves into financial problems because the recent economic downturn has impacted more acutely on companies in Dubai than those based in the UAE capital. Hence, distressed sellers in Abu Dhabi may be from Dubai.

There has been a noted tendency for certain speculators to overdo it in Abu Dhabi, placing deposits on a number of units with no intention of taking final delivery but intending instead to sell-on or 'flip' the unit before completion.

These will be the distressed sellers of Abu Dhabi in 2009 and the target for bargain hunters next year. And granted that current oil price weakness may not last for long this could be an opportunity window that shuts almost as soon as it opens.

See also:
Sorouh to aid sub developers 'if necessary'
Abu Dhabi 'able to finance' all current real estate projects
Abu Dhabi developers change focus to suit financial constraints