Investor interest in Abu Dhabi real estate begins to slow

In the last week of January Abu Dhabi hosted the International Real Estate and Investment Show (IREIS).

Tellingly none of the statements released following the show's closing entered into how many visitors had actually attended - despite an increase in the number of companies exhibiting.

On the last day of the show, the halls remained empty, in sharp contrast to the scenes seen at Cityscape Abu Dhabi last year, when would-be investors had to be physically separated as crowds surged to purchase any available newly announced units.

Exhibitors had mixed views on the low turnout. 'There aren't many people here but we've had some good quality conversations with some that will hopefully lead to sales later on,' said one marketing executive for a large Abu Dhabi developer, putting a brave spin on what seemed like lacklustre buyer interest.

Investors hold off

'There are people with money, but they are just waiting and biding their time,' a real estate agent told AME Info.

'You won't be seeing any major big announcements here. The problem is that no one is really sure that they have seen the bottom of the market yet, so people are just holding off until they are sure that prices won't fall any further.'

This uncertainty continues to pervade the market, although analysts remain confident that the undersupply will stop market prices from falling much further. Despite this, the city's major developers are already feeling the effects of the financial slowdown.

Sorouh's Q4 profits for 2008 stood at $12.5m, a healthy return by Western market standards given the economic conditions, but nevertheless a 94% drop on the previous year.

Similarly Aldar announced Q4 profits of $23m, an 89% fall. Aldar said that its Q4 income reflected the shift from ceasing its sales operations towards the end of 2008 due to the nature of the market. The company will be concentrating on increase its bank of rental properties in order to guarantee continued income levels.

The company's joint venture affiliate Aldar Laing O'Rourke announced on the same day that it would be laying off 320 members of staff in order to 'realign the company with the changing financial environment.'

A report by Re/Max property agency came to an interesting conclusion on the current state of the market. 'An average CEO in the capital who earns Dhs60,000 a month, can only afford a 700sqft studio on Reem Island at current prices [Dhs2,700sqft according to Re/Max pricing], provided he obtains a mortgage,' said CEO Mohamed Guidoum.

'Beyond a certain price level, capable buyers would be better off renting a home rather than owning one. Income from buy-to-let investors would not pay their mortgage.'


See also:
Video: Gloomy real estate market at the start of 2009
Aldar confirms affordable housing plans