In a clear vote of confidence in Abu Dhabi's housing market, several high-profile British agencies have recently announced that they are opening offices in the emirate. Humberts and Cluttons are both setting up shop later this year, Knight Frank lately appointed an associate to cover the UAE for the first time, and property consultancy Jones Lang LaSalle opened an office last year. "The reason why all these agencies are now suddenly springing up is down to branding," says Oliver Hickey, of the Profile Group, a developer working in the region. "There are some high-profile maneouvres happening - such as the purchase of Manchester City Football Club - and it's put Abu Dhabi on the map quickly. Suddenly everyone's talking about the emirate. It can't be ignored any more - Abu Dhabi is now being taken seriously by the rest of the world."
The recent announcement that several media hard-hitters are joining the new media zone, twofour54 - including CNN, HarperCollins, the BBC and the Financial Times - seems to confirm this, and backs up the expectation that an already fevered demand for property in the emirate will only increase rather than cool down. According to AME info, Abu Dhabi will have a predicted housing shortage of about 20,000 units by the end of the year.
Humberts - one of the UK's oldest estate agencies, which went into administration earlier this year but was bought out by the Mercantile Group shortly after - officially launched its new office at Cityscape. "At the end of the day, there's massive wealth in Abu Dhabi and a great deal of belief in the market internationally," says Walter Hart, the managing director of Humberts UAE. "There continues to be an expansion of business as people realise it makes sense to settle here. There's a feeling that Abu Dhabi is really coming into its own."
If you examine market statistics, it's no surprise that so many international agencies are piling in. Jones Lang LaSalle picked Abu Dhabi as a "world winning city" in a recent report it published. The research, based on six years of fact-finding, assessed the best performing cities in emerging markets - looking for "cities which will be on the radar screen of the real estate industry over the coming decade," says the report.
"Abu Dhabi stands out as offering among the most favourable prospects of any of the emerging world cities" it continues. "The city offers shining possibilities for long-term growth through substantial wealth-creating opportunities, massive infrastructure investment, a clear vision, strong governance and the availability of capital We believe that it will sit alongside the likes of Shanghai, Mumbai and Dubai in terms of global reach and influence."
The last city to be recognised in this way in Jones Lang LaSalle's previous 2002 report was Dubai. There is no doubt that the market in Abu Dhabi has rocketed in the past 12 months. The consensus is that the past 12 months have seen 50 per cent capital growth, fuelled by an acute shortage of supply and relentless demand, making Abu Dhabi one of the fastest-growing cities, in terms of property prices, in the world. Reports by investment houses Morgan Stanley and EFG Hermes both come to the conclusion that property prices in Abu Dhabi are almost certain to keep rising, at double-digit growth, until 2012.
Rents have gone sky-high also, growing by an estimated 49 per cent in the past year. Such is the shortage of rental property that a growing trend exists of people working in Abu Dhabi buying in the Jebel Ali end of Dubai - an hour's drive away. "We're seeing some extremely high-calibre projects being launched in the city's islands," says Don Bradley, the chief executive of Knight Frank, Middle East, which is also planning to open offices in Bahrain, Dubai and possibly Oman.
"We are seeing a change in perception, as more and more people are considering the Middle East as a place to live and invest. People feel confident about Abu Dhabi in particular because there is a high local demand and a booming economy, an extremely well-resourced government and major infrastructure projects. There's also been a greater level of macro-planning in Abu Dhabi compared with Dubai, which bodes well for its future".
So far, those buying have tended to be investors. The Royal Institution of Chartered Surveyors in the UK suggested that this type of property purchase (as opposed to people buying their own homes) accounted for as much as 80 per cent of sales among its members. "The investors we've seen are generally local ones," adds Hart. "Foreign investors are still waiting to see what happens to a certain extent. In Dubai, we saw a lot of foreign investors flipping property, but in Abu Dhabi prices are higher than they were in Dubai, so there's less opportunity to flip." Cluttons' Michael Grant agrees: "We're also finding that the high prices in Abu Dhabi are starting to put a break on the investor market" he says.
According to Cluttons, apartments launched last year on Al Reem island cost Dh 1,500 per sq ft - and by May prices had already doubled - to Dh 3,000 per sq ft. To put this into context, Cluttons is also selling property in Dubai Marina at Dh 2,000 to Dh 2,500 per sq ft and the highly desirable Dubai Burj district is achieving Dh 3, 000. Such high growth inevitably raises concerns about a bubble being created that may ultimately burst. "Prices can only go so far," concedes Humbert's Hart. "At some point they have to level out. With what is happening in the rest of the world, there has to be some kind of impact on the UAE - we're not going to be completely isolated from what is happening around us.
"We should see a leveling of supply and demand as building finishes for some of the new developments from 2009 onwards. The market will naturally sort itself out. This market in Abu Dhabi has enormous potential - it's not going to fracture that easily I assure you."