When did the credit crunch start to hit Abu Dhabi? What were the main indicators?
The credit crunch in Abu Dhabi was first experienced during October 2008 – when our sales inquiries and transactions just ground to a halt. Properties that would normally have sold overnight remained on our books, and we started to hear stories that banks were not lending. We had already started to see distress sales in Dubai, and this caused investor anxiety in the market – people still had money, but were being more cautious about what they were going to do with it.
How has the economic climate affected you professionally on a day-to-day basis?
Credit is still not available to anybody in the property profession, whether a property consultant, construction worker, or a broker – because so many companies were closing down and many companies had overstretched in terms of investments in the market; banks took the view that all real estate related professions were high risk. This, of course, adversely affected our business operations and we have had to change much of our business plan for 2009.
Are people still buying?
Yes, people are still buying, but they are doing more research into the security of the developer, what specifically they want to buy, where it is located and the price they want to pay for it. Previously it was a case of, ‘Get me anything, anywhere at any price – as long as I am on the property ladder.’
Are rents coming down?
There are no rental decreases being experienced in Abu Dhabi as yet. This is because there is still a strong supply and demand issue. Perhaps the only indication that things may change is the willingness of some landlords to negotiate the terms of the contract and in some cases a small percentage decrease; but, overall, the rental prices are, and will remain, strong for the next few months.
Which area is the best to rent? And best to buy?
That’s difficult to answer as it’s a very personal choice. Townies like to live in the centre of the city – so in that instance I would say the corniche or Khalidia are the best downtown locations, but these are also the most expensive areas to live in Abu Dhabi. For those with families and who are wanting easy access to a wide range of schooling and leisure facilities, then Raha Gardens and The Mangroves are the most desirable expat locations.To buy? This is very different, as choices within the grasp of expatriates are restricted in Abu Dhabi to three different areas: Al Reem Island, Al Raha Beach and Al Reef. Currently the most sought after for buying are those properties which will be handed over this year; these include the villas in Al Reef and apartments in Marina Square on Al Reem Island. Predominantly, it is investors who have purchased in Marina Square and they will soon see a good rental return, while end users have purchased in Al Reef as the properties are well-priced, and because owners see the area as a means to avoid the high rental costs of Abu Dhabi.
How long do you think this downturn will last?
If you find anyone who can answer that question, I would like to meet them! Personally, I do not think we have gone through the worst yet. It is slow in coming to Abu Dhabi and not as apparent as it is in Dubai. This is due to the fact that there are still people pouring into Abu Dhabi – all the schools are full, quality accommodation’s not available, and hotels and restaurants remain full. This is because Abu Dhabi is only now developing into a first world city, and leisure facilities are still in short supply. I don’t think we’ll see any evidence of an upturn for about 18 months.
Is Abu Dhabi robust enough to cope with the downturn and bounce back?
Absolutely. With an oil-backed economy and the Abu Dhabi government investing billions in infrastructure and in non-construction-related activities, for example Emal [Emirates Aluminum], the emirate is set to thrive in the future. No bounce back required; just a steady fall and rise.
What is needed to refuel investor confidence?
More market liquidity, more clear and transparent processes, and the completion of the many projects currently under construction.
How are property companies repositioning to be able to weather the storm?
I can’t speak on behalf of every real estate company, but at Al Jar Properties we have moved our focus from sales to leasing, where the greatest need is at the moment. It is an opportunity to build relationships with our many landlords and our growing client base. We have also spent some time improving our level of customer satisfaction by listening to our clients and learning what they want from a real estate company. This has enabled us to add a number of new and exciting services aimed at satisfying all our customers’ needs in one place. For example, mortgage advice, furniture leasing options and a will writing service.
Are there many positives to report?
Yes. The downturn started very early on in the Abu Dhabi property cycle. Prices had climbed too high and too fast to reach a point where property had become unaffordable. A sense of reality has now returned to the market, a number of rogue operators have left, and people are beginning to feel a more sane and balanced platform from which to start their investment process. In summary, confidence in Abu Dhabi is still very high.
www.aljarproperties.com; 800 25527
