CBRE: Abu Dhabi Market View Q4 2010
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The road to home finance has been a long one for the Kingdom, but with its highly anticipated mortgage law edging ever closer to ratification, would-be homeowners and financial institutions are gearing up for a new era of opportunity.
With the announcement this year of a US$66.7 billion initiative to address the demand-supply imbalance in the Kingdom’s housing market, social infrastructure spend is topping the Government agenda as it focuses on building affordable homes for the future.
The South-East Asian island has seen a number of distinctive developments come to fruition over the past few years as the country further establishes itself.
2010 proved to be another challenging year as many of the world's major economies remained firmly in the grip of recession.
The knock-on effect for emerging markets was also highly evident with an anaemic economic perfromance in the UAE.
Abu Dhabi's real estate sector has suffered acutely as a result of the economic downturn. The swift departure of international investors ans subsequent withdrawal of liquidity changed the face of the investment market almost overnight. A notable retraction in local demand also occurred as growth in the economy and populance stuttered.
Rapidly increasing property inventory, declining rental rates, limp property demand and weak investor appetite represent the major threats to any revival in fortunes. However, the external economic environment is now showing promise of a recovery with positive growth expectations for the coming year.
Abu Dhabi is now faced with the challenge of creating a more attractive investment environment with improvements in the regulatory system essential in order to provide greater protection to investors and to encourage further FDI into the Emirate. Whilst a number of draft laws and regulations are understood to be under consideration, implementation continues to lag.
'Strata' and 'Escrow' are two of the most important issues still to be adressed and with the negative impact of fractional ownership becoming all too apparent in Dubai, now would seem a prudent time to provide clarity in the capital. Any further regulatory changes that can be addressed to improve transparency will be welcomed by the market.
To keep pace with the Emirate's changing characteristics, the Department of Municipal Affairs has taken steps to introduce construction regulations anticipated for implementation in 2011. The regulations are intended to complement the Urban Planning Council's development programme.
In Q4 2010, the Abu Dhabi Executive Council (ADEC) issued Resolution No. 64, 2010 which regulates to property registration rights in the Emirate. Under this regulatory framework all transactions related to Abu Dhabi real estate or any rights related to property ownership, land development lease and mortgage contracts must be registered.
It is hoped that the decree will help to renew confidence while facilitating access to finance for real estate developments. The biggest single benefit for investors is likely to be improved transparency.
The registration system will effectively create a tracking system for property transactions and a live snapshot of the health of the sales market. How the information is used will be the acid test, although we would hope to see information made publicly available, similar to the Land Department in Dubai.
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