Tuesday, May 27, 2008

Dubai-style Boom in Abu Dhabi Property Market

Article Source: www.ameinfo.com

As you drive into Abu Dhabi from Dubai these days the tower cranes first hit you at the Al Raha Beach, the 10km stretch of land reclamation and beach front.

Anybody who recalls Emaar Properties' excavation of the 1.8km Dubai Marina at the turn of the century will see an exact parallel with Al Raha today. And if you want to know what comes next at Al Raha, just look at the hundred or more towers now completed or nearing completion at the Dubai Marina.

Does that also mean that within a couple more years the UAE capital will be jammed with construction traffic? Well, there is certainly going to be a lot more of it but the legacy of roads from earlier expansions provides more capacity than in Dubai.

Developer heaven

On the other hand, it is by no means sure that as many developers will emerge in Abu Dhabi as Dubai, where there are now more than 500 firms registered with the Real Estate Regulatory Authority.

So far the big developers created by the government dominate the scene. But then in Dubai so did Nakheel, Emaar and Dubai Holdings in the early days, and they maintain a strong grip on the market.

Apart from the creation of construction noise and traffic the other downside to the Dubai real estate boom has been delays to project completions. Unfortunately it looks almost inevitable that Abu Dhabi will follow this example as well.

The pressures on building material supplies and construction labour are acute. In Dubai, the length of delays vary from three months to two years or more, but this is not so worrying for investors as long as prices are appreciating.

For example, AME Info talked to one property owner on The Palm, Jebel Ali last week who had just sold for a 92 per cent premium after three-and-a-half years, despite the fact that absolutely nothing had actually been built yet.

Project delays

Will Abu Dhabi property buyers also be put in this position? It has to be said it looks highly likely, given the supply constraints on developers, although some will undoubtedly cope better than others with these problems. The difficulty for buyers is trying to decide who that might be.

Surely a commonsense approach is to realise that the more advanced the architecture and ambitious the project, the more likely are completion delays. And from an investment point of view the return on a modest apartment in a block in a nice location might actually prove better.

Certainly that has been the experience in Dubai so far, which rather brings us back to where we started: Abu Dhabi is following the Dubai real estate pattern.
Article Source: www.ameinfo.com


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