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Although not completely immune to the global financial crisis Abu Dhabi and the GCC look set to emerge unscathed according to Fabio Scacciavillani, an economist at Dubai International Financial Centre.

UAE banks had not invested heavily in exotic derivatives and subprime mortgages, said Mr Scacciavillani, adding he did not expect major infrastructure projects to be adversely affected. “The exposure is minimal,” he said.

Walid el Hayeck, the director of asset management at the National Investor, said that while some potential initial public offerings by companies may be delayed because of adverse market conditions, he did not see investment banks in the region suffering a major loss of income as a result.

The government has an almost inconceivable stockpile of cash which it has used to help ease liquidity issues by injecting 50bn Dhs into the banking system.  Whilst such practices are likely to increase inflation further, the benefits of this ‘cushion’ far outweigh any negative aspects.

Despite there this immunity there may be some impact on the availability of credit which will affect Dubai more than Abu Dhabi at this stage.  The majority of projects in Abu Dhabi are still 18 to 24 months from completion and due to beneficient payment plans do not require buyers to take out mortgages until completion.  Furthermore, there is an incredible undersupply of property which is not the case in Dubai.

As an agency we are increasingly seeing investors looking to Abu Dhabi as one of the few markets in which healthy returns can be made. 

In most property markets around the world – both old and new – the concept of buying off-market properties directly from developers is an appealing one.  This too is the case in Abu Dhabi, but there are circumstances here that make this city unique among emerging markets.

Nowhere else has witnessed the rates of growth we are currently seeing.  It is because of the pace of this growth that new circumstances have arisen whereby buying a property from a previous owner is as appealing (sometimes more so) than if you bought it directly from the developer.

Typically, many properties there are sold literally within minutes of the launch of a new development.  Whilst on many occasions it is a tremendous achievement to secure these properties at this stage (due to the huge levels of demand at launch parties etc), there are other considerations to bear in mind.

Because the increase in property prices can be witnessed on almost a monthly level, you can often find properties that were purchased several months previously from a developer trading at prices much lower than current releases on different floors in the same tower from the same developer.  The owner will have applied a ‘premium’ to his property, and this is passed on transparently to the new buyer.

In some cases – if the property was bought, say, 6 months ago direct from a developer – the savings can be significant.  The original owner has seen a solid capital appreciation on his investment, and is prepared to sell prior to completion.  The property is still very much off-plan as it is 18 months plus from completion (in this example).  Furthermore, it will see yet more growth and greater capital appreciation as it nears completion.  This is good news for those who wish to hold onto their new property and rent it out or live in it.

As a rule, those looking for a “quick flip” need to source properties closer to original launches.  Those looking for a longer term hold will generally find better deals looking at properties that have been on the market for some time.  Prospective investors should not be put off if a property has changed hands a number of times even.  This demonstrates a healthy demand for properties of that nature by that developer.

The Abu Dhabi Stock Exchange’s (actually called the Abu Dhabi Securities Exchange) mission statement reads, “to lead the development of the capital market in the UAE and the region through a well-regulated marketplace in a lawful environment that ensures integrity, transparency and disclosure”. The Exchange was opened in November 2000 and has a number of functions including, “providing an opportunity to invest savings and funds in securities in order to benefit national economy.”

The Exchange and property are closely linked and the effects work both ways. The property markets are growing significantly in Abu Dhabi’s exchange and so they have more and more impact on the markets.

For example, this quote, taken from an article written in June 2008, shows how the two are interlinked, “shares of Abu Dhabi’s two main real estate developers surged for a second day on Monday, leading the UAE capital’s main index to a higher close. Aldar Properties soared 7.11 percent and Sorouh Real Estate 4.15 percent on a rental report by investment bank EFG-Hermes and the bank initiating coverage on the two firms. “It’s as a result of the prospects of hikes in rent prices and initiation of coverage of the two companies by EFG,” said Alami at Naeem Shares & Holding. “It had a quick impact on the stock and there is significant volume.””

The exchange is affected both positively and negatively by the property market in Abu Dhabi, as is the case in all stock exchanges but with the global economic climate being what it is at the moment the market isn’t good anyway so the development of the property market in Abu Dhabi can only help the economic situation in the exchange.

According to the chamber of commerce and industry in Abu Dhabi the gross domestic product (GDP) nearly touched $100 billion in 2006, which marked a 21.7% rise at current prices over the previous year. Given its small population of 1.5 million people, wealthy becomes an understatement in describing the emirate. A per-capita GDP exceeding $68,000 casts Abu Dhabi among the world’s wealthiest countries or city states such as Luxembourg, Ireland and United States. This figure is expected to further increase within the region of $91,000 in four year’s time if oil prices continue to perform in favour of oil-exporting countries like UAE, and if the population growth stays within the 4% to 5% growth range per annum.

The oil business contributed over $62 billion to the emirate’s GDP in 2006, dwarfing every other sector’s output including those of real-estate, finance and utilities. In the future however, non-oil sector’s stake in the overall economy of the emirate is expected to gradually increase from 38% of the GDP in 2006 to around 45.0% by 2010, if an annual growth of 17% to 18% is realised for the non-oil sector.  The government has embarked on major initiatives to re-invest its oil revenues – which have registered steep gains in recent years – on a broad spectrum of sectors particularly construction, tourism, electricity and water and industry.

The boom in the economy in the UAE and in Abu Dhabi in particular has been very sudden and so the development of the area’s property and infrastructure is still in its early stages but promises to be of a phenomenal standard when finished. Many foreign businesses are looking to invest in businesses in the region particularly because of the many benefits of lesser taxes. The finished development is estimated to cost $300 billion US dollars and involves massive investment in the energy sector, basic industries, infrastructure, tourism, real estate and knowledge-based industries. The Emirate’s leadership is also on target with its plan to integrate Abu Dhabi into the global economy through increased competitiveness, downsizing of government, and huge investment in education and human resources development.

Along with the rest of the city, tourism in Abu Dhabi is developing at an astonishing rate as the area becomes increasingly more popular with foreign visitors. There is an objective in place in Abu Dhabi to make it one of the world’s most sought after destinations with a unique combination of tourist attractions. As a promising start it has invested in hosting major sporting events to bring tourists into the UAE. As well as world class sports Abu Dhabi can offer tourists a unique blend of chic, urban living as well as tropical beaches, history and culture.

The globally renowned tourism expert, Dr Getz, commented that, “Abu Dhabi has massive potential to offer a unique experience for visitors and the overall vision must be to differentiate itself from all other destinations globally. The key elements of Abu Dhabi’s long-term vision must be uniqueness, differentiation and culture. This is already being driven very successfully by ADTA and the Tourism, Development & Investment Company (TDIC), and I believe there is still much, much more to come.”

Abu Dhabi hosts many prestigious sporting events throughout the year and through those increases the numbers of tourists visiting the city and the surrounding areas enormously. The most prominent of these events will be the F1 World Championship Grand Prix race in 2009. The event is expected to draw nearly 800 million audiences worldwide which will significantly raise the status of Abu Dhabi as a global city and attract many tourists to the area. Aside from the Grand Prix next year, Abu Dhabi hosts the PGA European Tour approved Abu Dhabi Golf Championship which will tee off for its 4th year, next January (2009) and Abu Dhabi also hosted its debut Abu Dhabi Cycling Race of Champions, the world’s most lucrative professional cycling event in November 2007.

Because of the expected boom in tourism, the city is set to increase hotel capacity to 25,000 rooms by the year 2015 from its existing 11,500 rooms. There are many ongoing projects to develop new areas of the city including a beach resort at the entrance of Abu Dhabi and developing a number of natural islands, comprising of Reem, Yas and particularly Saadiyat into tourist hot spots.

According to a research analyst at leading market research and information analysis company, RNCOS, “The last three years have witnessed outstanding growth rates in terms of visitors to the Emirates as well as revenue from the tourism sector. With a tourism industry in Abu Dhabi’s capital, the coming years would see new horizons opening up. What makes Abu Dhabi an emerging destination is its perfect blend of culture, heritage, sun, sea and sand.”

Abu Dhabi property development is at a very exciting point – the government are investing billions of US dollars into infrastructural development of the city including residential property, office buildings, hotels and improving transport networks. But what lessons can be learned from neighbouring Dubai which started selling real estate to foreigners three years before Abu Dhabi?

Initially buyers hesitated in investing in property in Abu Dhabi - despite or perhaps because of what had happened in Dubai. There were also questions raised about the seriousness of the government with these mega-projects and whether they would actually be successful.
However, this hesitation has been overcome in recent months, and the anticipated flood of buyers for apartments in all schemes has emerged. One of the main predicted reasons for the increase is that now certain parts of the development can be physically seen, encouraging people of the future development and the ‘realness’ of the situation as well as there being a huge amount of money being spent on advertising and marketing for the development. There are now official government documents outlining the future plans for Abu Dhabi’s development leaving no doubt of the direction that it intends to go.

The development in Abu Dhabi is such an impressive prospect that the question, “Is this now the time to be buying into this vision?” has to be asked and the answer has to be “yes!” The early buyers of property in Dubai did exceptionally well, and had to take far more on promise than is presently the case in Abu Dhabi. It is highly unlikely that anybody could be a loser through investing in Abu Dhabi real estate which, according to HSBC, has one of the lowest costs in the world compared to per capita GDP. Early buyers could well be just as amazed by where prices end up as in Dubai.

Lewis Charles Securities, the independent London based stockbroking company, will soon be launching their much anticipated Abu Dhabi Property Fund No.1, providing investors with the opportunity to profit from the UAE’s incredible property market.  Building on the phenominal success of their two previous Eastern European property funds the organisation is keen to captialise on one of the world’s most lucrative markets, especially against the backdrop of other poorly performing economies.

The aim of the fund is to provide investors with an efficient vehicle through which to invest into the area’s property market, and offers the obvious benefits of syndicated investment coupled with the expert investment advice of the Fund Manager and their professional advisors.

At Offshore Properties we have been involved with the Abu Dhabi property market since Non-GCC individuals were allowed to acquire property in 2007.  It is fair to say that it is an extremely difficult and competitive market and almost impossible to access without a physical presence, together with a lot of research.  From our perspective this fund will offer both seasoned and first time investors a clear, well structured route to market, without any of the usual stress and work associated with acquisition and disposal of assets (guiding your way through this market is not easy believe me!).

It is believed that the minimum investment level will be £50,000.  To find out register for the prospectus please contact Sahardid Hussein at sh@lewischarles.com

Offshore Properties have just released their new free Buyer’s Guide to Abu Dhabi’s explosive property market.  With doom and gloom pervading almost avery other market in the world, more and more investors are seeking opportunities in the Emirate’s capital city.  Please follow this link to view this Buyer’s Guide to Abu Dhabi

The graph below demonstrates how some locations fall out of vogue while others show much more steady performance.  Most interestingly from our point of view, searches for Abu Dhabi property is clearly on the up suggesting that investors are now starting to take notice of the incredible growth in the UAE’s capital.

We have for some time been shouting from the roof-tops about Abu Dhabi’s property market.  There are however many anomalies with the UAE’s capital and the headline recently quoted in The National outlines the highly unusual position of offplan resale stock being lower priced than units released direct from developers.  This situation has come about due to soaring demand and inflation; and with developers seeking constant price increases those buying early have an opportunity to make great returns from quickly reselling into a market primed to accept resale stock rather than that from the developer.  Educating the Western market about this incredible market can be a long process as but ultimately worth it, as the opportunity to genuinely ‘flip’ property and make huge returns is 100% real.