First Al Raha Beach apartment sales in early 2007

Industry sources say that Abu Dhabi does not want to repeat the experience of Dubai where property was deliberately under priced in early projects to create a market where none existed before.

In Dubai projects such as The Palm Island attracted huge investor interest by discounting prices and creating a lively aftermarket in off-plan property. Indeed, most properties changed hands several times before ending up with an end-user who will now actually live in or rent out the unit.

The problem with this approach for a developer is that it leaves much of the profit from the project in the hands of speculators. All the developer gets is the original purchase price, although it has to be admitted that without the discount there might not have been a marketplace to start with.

Selling on quality

According to Aldar Properties CEO Ron Barrott, in an interview with this website, Abu Dhabi is likely to adopt a different line on pricing its new developments, and to sell on quality and commitment to delivering a fully serviced community rather than providing units for speculators to flip.

The new Abu Dhabi Property Law has also established a different system of tenure for foreigners in the emirate. Foreigners will be limited to 99-year extendable leases, while in Dubai they now have freehold property rights.

However, leasehold is a well established system worldwide and is unlikely to make much difference to the development of the market or valuations. Indeed, for high-rise property it is arguably a more secure and workable system of tenure.

But surely the real driver for property prices in Abu Dhabi is not going to be discounts or tenure. It will be a question of supply and demand in the world's richest per capita city, and location.

Rent hikes

The massive increase in rents in Abu Dhabi over the past two years have underlined the considerable shortage of accommodation in the UAE capital which was under a building moratorium for the previous decade and is consequently unable to meet the demand now evident during another oil boom.

Moreover, Abu Dhabi is one of the few oil producers to have a policy of continuous investment in new capacity, and so the prospect is for oil revenues to continue to rise independently of the oil price. Indeed, with around 10 per cent of the world's oil and some of the lowest extraction costs, Abu Dhabi is bound to prosper in an age of global energy shortages.

As investment analysts love to say Abu Dhabi is 'strong on fundamentals', and that is far more important for real estate investors than the prospect of short-term speculation.