There will be some exciting drivers for real estate in Abu Dhabi in 2023, pulling the market in very different directions.
First, interest rates are set to rise further in 2023, which will undoubtedly depress mortgage borrowing. When it becomes more expensive to borrow, buyers who might have purchased will think twice. This will remove buyers from the market, and fewer buyers mean lower prices.
A second factor will be the Abu Dhabi economy, which has historically been led by government spending. The oil price has meant more funds for the Emirate and UAE as a whole, coupled with other income drivers such as VAT and the impending corporation tax, should mean that the pullback in spending that we saw at the end of 2015 shouldn’t happen again, even if there is a deterioration in the world economy. As a result, we expect the Abu Dhabi economy to be one of the best places to weather any economic storms.
A third factor we see from our perspective is the influx of particularly Eastern European and East Asian buyers. They seem to be attracted by the stable economy and the new “Golden Visa” scheme introduced by the UAE government. In addition, the likes of Aldar have promoted foreign direct investment into the real estate sector and started putting Capital on the world map for investment. We expect to see that continue.
A fourth trend is the diversification of the developer class in Abu Dhabi. The improvement in the market has led previously subdued sub-developers to launch new projects and challenge the dominance of Aldar. We expect Bloom Holding, Reportage, Webridge, and Barakah to launch projects in 2023. Most importantly, the rise of Q Holdings, through the massive mergers of Tamouh, Reem Investments, and Al Qudra, will likely lead to more diversification of developments in Abu Dhabi.
A fifth trend, this consolidation, and improvement in the fortunes of the developers will lead to more off-plan launches. We can already see that the Grove Saadiyat has several more phases to launch, Reem Hills has another phase, Yas Golf Views has several buildings left, and Aldar’s Sustainable city should be fascinating if launched.
We are also seeing the first element of the sixth trend, the drive toward the sustainability of construction. In particular, Aldar uses sustainability credentials to sell their new projects. Things like “green build technology” and “sustainable materials.” As utilities become more expensive, there will be a superb drive for energy efficiency, even if not for moral reasons, then for financial. We hope things like solar panels will become standard in the future in UAE real estate, preserving the planet as we preserve our wallets.
Seventh, easing covid restrictions could show a renewed interest in apartments. The entire global real estate market was boosted in 2021 and 2022 by increased government support and lower spending, and we saw this in Abu Dhabi primarily by an increase in the values of villas. Apartments stayed relatively flat. After experiencing the lockdown, people wanted that outside space more and more. With all the restrictions eased, we might see apartment living come back into vogue.
Lastly, we’ll have to watch what inflation does. Inflation makes building more expensive, so we might see off-plan projects getting more expensive. It also erodes the ability of households to spend on rent or mortgage payments, which, coupled with rising interest rates, could put more people off buying. However, inflation also kills savings, so there will likely be a push to invest that money in tangible assets, and real estate could be one such investment.
In summary, many factors will compete for the attention of the Abu Dhabi real estate market in 2023. However, given all that, we expect to see modest single-digit growth in property valuations and rents across most sectors.