Market analysis in Abu Dhabi - Research Paper Example

INTRODUCTION Abu Dhabi is the biggest of all seven emirates in UAE as well as the capital of the country. The population of the is about 3 million out of 3.8 million of UAE and also covers the 87% of the entire area. The city has a booming retail real estate market for residential buildings, offices other tourism places. The real estate market condition in the United Arab Emirates is, as a whole, facing a boom. It has the most secure and profitable market in whole Gulf region. Abu Dhabi is currently enjoying real estate investment from all over the world. The Abu Dhabi market possesses number of opportunities in the real state sector. It has been difficult for the authorities to meet the ever rising demand for real estate projects in the city. This paper presents an overview of economy, demographics and real estate of the retail market growth in the UAE region. It primarily illuminates the major retail real estate markets of Abu Dhabi, reflects on existing and future demand and supply, and provides recommendation for stabilization in the sector. ABU DHABI REAL ESTATE RETAIL- OVERVIEW OF REGION Demographics UAE came into being as a result of alliance of seven emirates and Abu Dhabi was made the capital of the state. Abu Dhabi has supremacy in almost all fields i.e. economically and geographically etc. Abu Dhabi covers approximately 87% of total UAE area. According to a census that took place in 2005 the official population of UAE was 3.8 million approximately while the Abu Dhabi population was around 1.3 million. 300,000 people were those non-nationals who did not become a part of the census (Emirates: Abu Dhabi-Country Profile). Economy UAE is one of largest oil and gas producing countries of the World. It has 9% of oil reserves and approximately 5% of gas reserves. Abu Dhabi has the predominant share in these reserves i.e. 95% and 92% of oil and gas reserves. Like almost every Middle East country natural resources are the back bone of economy of UAE. The IMF report says that the GDP group of UAE is around 12% in 2005 and expectedly more in near future (Emirates: Abu Dhabi-Country Profile). The government of UAE, however, does not want to rely completely on oil and gas due to the fluctuation in its prices. It has been focusing on minimizing the country's economic reliance on oil and gas exports. With the government efforts and local and foreign investment in real state retail, tourism and industry the 64% of GDP now consists of non oil and gas sector. The government put huge investment and established Abu Dhabi Tourism Authority (ADTA) and that has been handled by the Tourism and Development Investment Company (TDIC) to promote tourism and real estate sector. Hence, the economy is moving towards the right dimension in the whole UAE and especially Abu Dhabi, which is undergoing rapid economic growth due to huge foreign and local investment in the country from banks and financial institutions (Emirates: Abu Dhabi-Country Profile). . Real Estate The current boom in the real state market of the United Arab Emirates took place over the last few years and has made a significant difference to the economy. The ratio of real state was 2.5% of the economy which has reached to10.5% (Walters, Kadragic and Walters 78). The real estate is one of those sectors contributing heavily to the overall economy. This huge investment reflects the government interest in the development of real estate market. The whole Gulf region is showing its keen interest in developing its economy while supporting the real estate sector. Abu Dhabi attracts abounding investment from the region in its real estate market. Al-Futtaim is going to launch project of $9.5 billion. That would take approximately 10 years to be done. The project includes residential, commercial, hotel and several office towers (Woods) REAL ESTATE RETAIL MARKET IN ABU DHABI . Abu Dhabi is a different market than any other market in the region for instance Dubai, Sharjah etc. The city is ideal because of its property market and pricing that also helps to attract genuine buyers from around the world. There is highly growing demand for property in Abu Dhabi, especially the residential projects are sold like hot cakes. It is hopeful that the market will gain $2.5 billion in residential retail real state in 2007. This year is considered to be the more developing year for Abu Dhabi than past years. The reason for the demand of residential project and the increasing investment is due to the best quality rental accommodation available in the city. Same is the reason behind the increase in price of property and rentals (Woods). The investment in Abu Dhabi is increasing day by day especially in retail residential real estate. The private sector in Abu Dhabi has become greatly active making huge investment in the development of the city. Indeed, market has the capacity and potentiality to attract new investors. One of the most recent and giant investments made on the part of private sector is luxury real estate development near Sky Towers. It is completely a furnished residential project with every required facility like car parking etc (UAE Interact News) The Saadiyat Island project is going to be launched by the public-private sector in partnership. This Dh100 billion project is expected to be completed by the year 2018. This will be the residential project accommodating almost 150,000 people. This huge investment made by Saadiyat in Abu Dhabi reflects the international recognition of the city and rising economic prosperity. The project of island includes several hotels and resorts, museums, cultural centers and residential apartments etc (Gulf News.com). Demand- Trends and Forecasts Due to an ever rising population during the last several years, the demand for houses and construction has enormously increased in Abu Dhabi. The total current space of living is approximately 46 million square meters. This needs to be extended to 95 million square meters until 2020 due the excessive demand. Due to the gap between demand and supply the prices of real state and their rents have increased 20 to 30 percent during last two years. It seems that the prices would not come down in the recent future because of a lack of living projects in the town. It is greatly needed to develop more projects meet the actual demand. The government is now taking initiatives to extend its area of living by building up new projects in outlying area for low income people. The plan is to build up 265 residential buildings in the coming years Dahmash and Giannetti, Multi-Housing News). Market Conditions The UAE market is much safer and profitable market than other market in the region like Oman and Qatar etc. There are more opportunities available in the market like exemption from income tax etc. The infrastructure is becoming better and better with the passage of time. There may be some international markets that are more secure but the profitability in UAE market could hardly be seen in any other place in the world. The GDP of UAE with the international market has increased to 40%. The contribution of Abu Dhabi and Dubai is really admirable in all this (Ezz Al Deen, Gulf News.com) Risks The UAE real state market is currently having a short term risk of correction concerning property prices. This risk may affect the banking sector that has highly invested in real state market. But these are the short term risk that may over come by the economy as it has great potentials to observe the risk and shocks (Husain, Gulf News.com) . CONCLUSION The paper discusses the retail real estate retail markets in Abu Dhabi as well as in the UAE region. The city has all the potentials of being a global city. The oil and gas reserves brought about the boom in the economy. The fluctuation in the prices of oil and gas force it to minimize its reliance on oil and gas sector and promote industrialization. Consequently, the share of non oil and gas sector has increased in the GDP of the economy. The major boom was witnessed in Abu Dhabi's residential real estate. The price of property increases as the area of living in the city is not fulfilling the demand. The demand is constantly increasing but the supply is not. Hence, the difference in future seems to be increasing due to demand and supply gap. The market has charm but may see some short term down turn due to correction risks involved in such high prices. Recommendations: - The government needs to establish more housing schemes to meet the ever rising demand In Abu Dhabi. - The proper supply is extremely important in order to attract investors in the market and keep the prices high. - The political stability as well as the government sincerity and honesty are also very important. Works Cited "Emirates: Abu Dhabi - Country Profile." Oxford Business Group. 16 April 2007. Dahmash, Mohammed and Giannetti, Daniela. "The United Arab Emirates." Reports and Analysis. Multi-Housing News. 2 March 2007. 16 April 2007 Ezz Al Deen, Mohammad. "Abu Dhabi To See Dh500b In Real Estate Investment." Real Estate Property. Gulf News.com. 10 March 2007. 16 April 2007 Gulf News.com. "Real Estate Property." Business. 25 April 2006. 16 April 2007 Husain, Shakir. "Moody's sees real estate downturn risk." Real Estate Property. Gulf News.com. 4 April 2007. 16 April 2007 UAE Interact News. "Social Development - Real Estate." Today's News Stories. 2007. 16 April 2007 Walters, T.N. Kadragic, A. and Walters, L.M. "Miracle Or Mirage: Is Development Sustainable In The United Arab Emirates", Middle East Review of International Affairs. 10.3 (2006) 77-91. Woods, Jane. "How the Abu Dhabi property market is Hotting Up." Editorial Comments. Property World Middle East. 2007. 16 April 2007. Read More