Rental surge underpins Abu Dhabi investment case

It is no surprise that the residents of Abu Dhabi are up in arms with the local newspaper Gulf News reporting the pain of renting a two-bedroom apartment that jumps from $14,500 to $20,700 per annum.

Indeed, the latest figures from property management giant Asteco make sobering reading for those renting property in the UAE capital. Between June 2005 and June 2006 rents are up by an average of almost 30 per cent, leading to calls for a rent cap of 15 per cent like that applied in Dubai this year.

In truth this sudden surge of rents in Abu Dhabi is a mirror image of what happened in Dubai a year or so earlier. It is an indication of the strength of the economic boom now happening in the UAE which is propelled by high energy prices and economic reform from an enlightened new regime at the top.

Legal reforms

Foreign observers have noted with interest the recent change in real estate legislation in Abu Dhabi which now facilitates 99-year leases for non-nationals. And they keenly await the fine-detail of the leases currently being drawn up by lawyers in this city.

For the start of a new property market is almost always something worth getting in on. Fundamental economic reforms like this create opportunities whether it is Russian real estate, Chinese property, or now real estate in oil-rich Abu Dhabi.

Of course, nothing guarantees success for any investor or entrepreneur. You need to do your homework and employ good lawyers at a minimum. But the chances of success in an emerging property market are generally very much stacked in favor of the initial participants because they will always be few in number.

Human nature

This is largely down to human nature and fear of the unknown. Just because Abu Dhabi does not currently have a property market of any identifiable kind - indeed, property gifted by the government can not be traded, so ipso facto there is no market - you need to have some imagination to foresee what one might be like.

People do not like what they can not see before them and are apt to think of many irrational reasons to doubt what is to come. What if the legal situation changed? What if oil dried up? Never mind the 200 years plus of proven resources with lowest cost of extraction!

And no doubt for the past 5,000 years people have been missing out on real estate opportunities in the Middle East, but there's a thought, real estate speculation first began in this region so let us not worry too much about 'new' markets here. There is nothing new under the sun, and no surer way to invest money than in property.