Friday, July 18, 2008

Abu Dhabi housing rates higher than in Dubai for first time ever

The housing and rental rates in Abu Dhabi has surpassed Dubai for the first time, says recent industry reports.

According to latest figures released by HSBC, the average rent per square meter in Abu Dhabi was $272 per square meter during the end of 2007, and is $430 per square meter during second quarter of 2008, marking a growth of 58 percent.

During this period, the average rent in Dubai was $343 per square meter during the last quarter of 2007, and $420 per square meter during the second quarter of 2008, marking a 22 percent growth.

Even for purchasing a house, Abu Dhabi witnessed 61 percent growth in house prices, between the last quarters of 2007 and second quarter of 2008, while Dubai saw an increase of 37 percent during the same period.

According to an analyst at HSBC, the main reason behind such a scenario is that the market in Dubai is much tighter, and delivery delays are more apparent. Abu Dhabi is at a premium, as affordability is higher.

The report states that although delays are happening in both Abu Dhabi and Dubai markets, Dubai is experiencing rapid growth, and basic infrastructure such as electricity, water and sewerage systems are unable to match the pace of development.

About 160,000 units were expected to hit the Abu Dhabi housing market by the year 2010. However, at present, Colliers International estimates that only 31,000 units will be available, due to problem with delays.

In another recent Fitch report, Dubai has been warned of a possible oversupply situation with a major influx of housing units into the market towards the year 2009.

However, the report by HSBC predicts that most units would be delivered by the year 2011. The scarcity of housing in Abu Dhabi has prompted people to shift to Dubai, and commute to Abu Dhabi. This may prevent a possible oversupply situation in Dubai.

Analaysts feel that the housing shortage in Dubai too, will remain so, until 2010, when the bulk of supplies hit the market. However, even an oversupply in 2010 cannot be confirmed, due to the continuous ongoing delays in the market.

The report also states that prices in UAE, although on the rise, are still affordable as per international standards. At present the plot prices are an average of Dh.7000 per square meter, and towards end of the year, a residential property sales price of Dh.28000 is expected, which suggests that price growth rate will slow down since the beginning of the year.

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