28 July 2017

Becoming Abu Dhabi

A closer look into 2016 shows signs of the Abu Dhabi economy revitalizing itself, three years since the oil price crash, as markets begin to accept the ‘new normal. Housing Starts which in a leading indicator of the economy’s health, reveals that in 2016 new building permits have spiked by 50% year-on-year. This is an indicator used by economist to predict the direction of the economy over the next 12-18 months, indicating that there appears to be a gradual move higher in growth rates in the coming years.

Similarly, company formations reveal that in 2016 registered businesses within the emirate witnessed a 10% increase. This reaffirms the emirates initiative to diversify its economy into various sectors such as tourism and trade.

An analysis of the total returns of the real estate market (capital gains and rental income reveals) that since 2009, villas have yielded twice to that of apartments.

In the apartment space whilst prices have not rebounded to the levels seen in early 2009, from a total return perspective, investors have achieved 31% in 7.5 years. In the villa segment investors have fetched far better with a cumulative return of 63% during the same time frame.

We opine that on a relative basis, the performance gap between villas and apartments to narrow as economic diversification efforts lead to a push in mid-market housing (already underway).

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