Abu Dhabi is the capital city of the United Arab Emirates (UAE) and is an intriguing mix of old and new, blending skyscraper office blocks with ancient markets and forts. Visitors and residents can choose between attractions as diverse as the Louvre Abu Dhabi and the Yas Mall with its 350 stores and 60 restaurants.
Abu Dhabi is the largest of the emirates and is also its wealthiest in terms of total GDP and income per capita. It holds most of the country’s oil and gas reserves, with the hydrocarbon sector making up around 36% of total GDP in 2017. This contribution has declined in recent years (from an average of more than 50% between 2010 and 2015) and is in line with the government’s initiative to diversify its economy.
Following the implementation of the 5% VAT in January 2018, other measures have been approved, including a three-year economic stimulus package of USD 13.6 billion. This aims to create around 10,000 additional jobs in both the public and private sectors, thereby stimulating growth across business sectors in Abu Dhabi.
These measures will directly impact the commercial real estate market as capital flows supporting the business environment will help increase investment in Abu Dhabi from both a local and international perspective. Recent corporate consolidations, redundancies and job insecurity, in addition to regional economic challenges, have continued to place downward pressure on residential sale prices. The rental market also remains weak, with average rents declining by 10% over the past twelve months.
While the residential market in Abu Dhabi is expected to continue witnessing increases in supply over the next few years, occupancies are forecast to stabilise at 91% on average. Demand for residential units across the Emirate is expected to be positively impacted by the UAE’s decision to issue selected categories of expats with long term visas of 10 years, thereby restoring confidence with regards to their ownership rights.