Abu Dhabi property chiefs expect a delay of up to 18 months before the industry starts feeling the benefits of a Dh330 billion Government spending package.
Abu Dhabi's property market to shine by 2015
Abu Dhabi property chiefs expect it to be 18 months before the industry starts feeling the full benefits of a Dh330 billion (US$89.85bn) Government spending package.
Property experts say that plans announced by the Abu Dhabi Government this week to press ahead with a series of housing and infrastructure projects will help to improve confidence in the emirate's hard-hit property sector.
But a full recovery remains unlikely for at least 18 months to two years, they say.
On Sunday the Abu Dhabi Executive Council announced details of a plan to boost the emirate's economy through investing Dh3bn in housing loans that will be distributed to 1,500 citizens.
It also said it would develop 12,500 homes in nine new housing projects, including 786 homes and plots of land in Al Ain and the Western Region.
The Government assigned the building and general services agency Musanada to award contracts for the building work.
Shares in property companies such as the Abu Dhabi developers Aldar Properties and Sorouh Real Estate rallied on Monday while investors welcomed news of the projects, some of which are new and some of which were outlined by the Government last January. "This investment into infrastructure and development projects will fuel growth across a variety of sectors and support the long-term economic and social development of Abu Dhabi," said Talal Al Dhiyebi, the director of planning and infrastructure at Aldar. The developer could be one of the main beneficiaries of the spending.
It comes after a flurry of positive news for the sector, including last week's announcement that work on the Louvre art gallery would start immediately and that the emirate's two biggest property developers, Aldar and Sorouh, are finalising a merger deal.
Last year the Government announced that billions of dirhams were to be spent on construction projects including major transport developments such as Abu Dhabi International Airport as well as housing, healthcare and education facilities.
"The recovery of Abu Dhabi's real estate markets is to a large extent linked to the Government investing into infrastructure, economic development and social development projects that generate new GDP growth, job growth and income growth and in turn drive demand for real estate as well as further enhancing Abu Dhabi's urban offering," said David Dudley, the regional director and head of the Abu Dhabi office of Jones Lang LaSalle.
"The recently announced investments are positive and comprise some of these initiatives. They will be a boost to construction activity, social development and employment generation which will flow through to the wider economy."
Despite improving sentiment, property experts say the city's property market remains moribund. New figures due to be published by Jones Lang LaSalle this week will show that rents fell 11 per cent last year as demand failed to keep pace with the amount of new supply hitting the market.
The agent estimates that the annual rent for an average two-bedroom apartment in the city fell from Dh135,000 to Dh120,000.
Agents remain sceptical that the new initiatives alone will be enough to lead to a full recovery for Abu Dhabi property.
"Confidence is returning slowly to the Abu Dhabi property market and people are starting to feel a little bit happier, but we believe a recovery is still realistically 18 months to two years off," said William Neill, head of Cluttons Abu Dhabi, a property consulting company.
"Abu Dhabi is already starting to benefit from Dubai's property recovery," he added.
"We are already seeing people moving from Dubai to Abu Dhabi, partly as a result of the decree requiring government employees to live in the capital in order to receive housing allowance, but also because increasing rents in Dubai mean that rents in prime parts of the two cities are now fairly similar. However, people need to see stalled schemes starting before they will start to invest again.
"It will take time for this new money to filter through," said Rupert Bowen-Jones, senior surveyor at CBRE's Abu Dhabi office. "I'm not sure that these moves alone will have much of an impact on the wider property market but when the major planned infrastructure projects are completed we will see much more of an effect as companies will be keener to move to the city."
Abu Dhabi is not the only regional government attempting to kick- start its economy and improve living standards for its citizens by turning to large-scale national housing projects.
According to a report published yesterday by Ernst & Young, the supply of affordable housing across the Middle East is failing to keep up with quickly rising demand.
"The time for policy action in Mena is now, because the region's countries are entering an unprecedented period of new household formation," said Ahmed Reda, the office managing partner for Ernst & Young in Jeddah.
"The demographic window for a country in Mena will typically last for about 35 years; that is the moment of opportunity that Mena countries will have to move beyond emerging market status. To do this, they will require large numbers of quality, urban, affordable homes for people to own or rent."