16 March 2017

Abu Dhabi / Dubai: The Two Horsemen

An examination of the Abu Dhabi and Dubai real estate market reveals that since 2012, Dubai apartments have experienced superior growth rates (2x) to those of Abu Dhabi. Remarkably in the villa segment, capital gains in both cities have mirrored each other indicating that in the horizontal space there is an equal value being perceived by investors. In the rental space both cities have followed the same trajectory as prices. Dubai apartment rental rates have appreciated more than 35% since that time, while apartment rates in Abu Dhabi have slipped back to the 2012 levels. In the villa space, rental rates of both cities have moved in tandem over the past 5 years.

In 2016, Abu Dhabi had a completion rate of 75% whereas Dubai stood at 48%. The realization rates of supply in both cities have been systematically lower, indicating not only the flaws in the estimates made by analyst, but also a greater sensitivity on the part of developers to adjust to the market conditions.

Investors have already started to perceive similar economic value in the villa space between the two cities. As the capital state ramps up supply in the mid income space, it is likely that the price cycles of Abu Dhabi and Dubai will start to converge, reflecting the symbiotic economic performances of the two Emirates.

Although relative locational and regulatory advantages may be something that investors focus on during price cycles, the overall market dynamics indicate that prices should start moving in tandem between the two cities in the coming years.

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