Experts share top advice for Abu Dhabi real estate market in 2019
UAE capital's real estate developers must continue to differentiate their offerings in order to succeed, experts say
According to consultancy JLL’s Q1 2019 Abu Dhabi Real Estate Market Overview, the first three months of 2019 saw approximately 1,700 units delivered in Abu Dhabi – bringing the total residential stock to 259,000 units in the emirate. Data from the firm revealed a further 8,000 units are scheduled to enter the market by the end of 2019, mainly within major master developments.
Abu Dhabi has also borne witness to a host of high-profile development announcements over past 12 months. Just this month has seen the launch of both the $1.4bn (AED$5bn) Jubail Island megaproject that spans 400ha, and Lea, Abu Dhabi development giant Aldar’s latest waterfront residential project on Yas Island.
However, with residential supply steadily continuing during the first three months of the year, the time for speculative building seems to be waning, as experts point out.
“When we approach any development, we have to consider what the customer needs and wants in terms of product offering,” Maan Al Awlaqi, Aldar’s executive director of commercial, tells Construction Week.
The question is then how to sustain that [early demand] over time. We are now seeing businesses approach more sustainable models of profitability.
“Market data is key and we scrutinise leading and lagging indicators heavily at the planning stage. As a publicly listed company we have to deliver shareholder value, which means that we have to hit certain commercial thresholds as well.”
According to Manika Dhama, head of strategic consulting and research at UAE-based consultancy Cavendish Maxwell, the market cycle as it stands requires that developers effectively differentiate their products.
“None of the emirates operate in isolation,” she explains. “So, if it’s a large-scale project in Abu Dhabi, for example, you’re not serving that emirate alone; how does it link or compare to what else is happening in Dubai, or down towards the other markets?
“There could be an initial excitement if, say, there is a new brand or park that has opened. Demand could be driven just based on that. But, the question is then how to sustain that over time. We are now seeing businesses approach more sustainable models of profitability,” Dhama explains.
Indeed, property developers in the emirate are not only recognising this requirement, but fulfilling it as well.
“We acknowledge that there are still challenges in the market,” Richard Russell, chief operating officer at Lead Development – designated as the development management firm for Al Jubail Island – says.
“Nevertheless, the market also lacks certain products that have frustrated potential buyers. It is our plan to address this frustration by delivering a quality lifestyle offering [that will] include well-priced and sizeable plots in a low-density community, surrounded by pristine natural elements.”
When comparing the residential real estate markets of both Dubai and Abu Dhabi, Dhama says a trend she has witnessed over the last three to four years is the existence of a “big gap in selling the Abu Dhabi story”.
“Developers have to go and sell that story first,” she explains. “For example, an international investor may be more likely to invest in Dubai for obvious reasons. There doesn’t necessarily have to be an integrated marketing story. For some projects, we have conducted investor surveys, and we found that a lot of people don’t know about real estate regulations in Abu Dhabi, how they are different [from other markets], and what the key areas are.”
The market also lacks certain products that have frustrated potential buyers. It is our plan to address this frustration by delivering a quality lifestyle offering.
Slowing market conditions are also brewing a buyer’s market. Developers are vying for investors through competitive value offerings and marketing campaigns in order to maintain turnover momentum, as Sean McCauley, chief executive officer of recently-formed Devmark, explains.
“Payment plans have shifted from typically being lined to construction progress,” he says.
“Many developers [are] offering a payment plan where a significant percentage of the purchase price is only paid upon completion and in some cases post completion.”
Developers, he adds, have also increased their “breadth and depth” of their sales distribution networks” – either by “aligning themselves with an increased numbers of external third-party estate agencies to sell their products or alternatively by increasing the size of their internal sales teams or a combination of both”.