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Abu Dhabi Housing Woes to Continue with More Units

DUBAI — Abu Dhabi‘s housing woes will continue for couple of more years, as only 33000 residential units are expected to come to ease the worsening situation, a report said.

“We have scaled our forthcoming supply estimates back considerably following the delayed completion of residential components within major master-planned developments such as Al Reem, Saadiyat, Al Raha Beach and Al Yas Islands, scheduled for completion beyond 2011”, says a report published by Colliers International, an international property management company.

Based on figures supplied by developers operating in Abu Dhabi for developments either under construction or planned, according to report, the supply of residential units will increase to over 213,000 by 2010.

As many as 140,000 additional units are expected between 2011 and 2013, driven by the completion of residential components within the Al Raha Beach and Al Reem Island mega projects.

As of the end of 2007, statistics by the Urban Planning Council estimated a total of 180,000 units within the city of Abu Dhabi.

According to a recent report by Abu Dhabi Chambers of Commerce and Industry (ADCCI) the emirate has a current housing shortfall of 28000 residential units.

The Abu Dhabi residential market continues to be characterised by chronic shortage of housing stock, the product of a two year construction moratorium imposed between 1999 and 2001, and strong economic growth.

The largest gap in the market continues to be in the middle income segment, a fact that the Urban Planning Council has recently announced it will seek to address.

It is planning to allocate free land in the forthcoming Capital District located between Mussafah and

Khalifa City, in order to encourage smaller developers to build affordable housing.

The UPC is also working with key master-plan developers to encourage the allocation of affordable housing components in all major forthcoming projects, including Al Reem Island, and Al Raha Beach.

Vacancy rates have dropped from an average of 2.5 per cent to less than one per cent, contributing to the highest year on year rental increases yet since 2001 – at a growth rate of 65 per cent between Q4 2007 and Q4 2008.

In these conditions of undersupply, the five per cent rent cap revised at the beginning of 2008, may have had the adverse effect of driving up asking rents, with landlords factoring in expected future rental increases in today’s market.

In spite of exponential rent increases, initial yields have actually hardened given even higher increases in sales prices over the past two quarters.

The limited availability of off-plan products available on the foreign ownership market at present, coupled with the decision of some developers to launch these at Cityscape Abu Dhabi in May 2008, attracted frenzied investment activity which has driven up prices in the high double digits.

Premium developments in Aldar’s Al Raha Beach have seen an average 130 per cent price increase since launch a year earlier, contributing to an average sale price growth rate of 89 per cent across market.

Whilst there are concerns that investment has been overwhelmingly speculative, the secondary sales and rental markets are expected to remain strong as excess demand is absorbed by the completion of new developments.

haseebhaider@khaleejtimes.com