1.1 Population

The population of Abu Dhabi experienced a 167% growth from 1975-1985 due to the booming oil industry, which brought foreign workers and expertise to the market.

The following graph provides the population of Abu Dhabi and its corresponding Compound Annual Growth Rate (CAGR) over the period 1975-2005.

 

The following should be noted:

• While the CAGR over the last 10 years has been 4.19%, Abu Dhabi's natural rate of increase (birth rate – death rate) is 1.46%, underlying that population growth in the emirate is due to an expatriate inflow of approximately 2.64% annually.
• Estimates suggest that approximately 74% of the population within the age segment 15-64 are expatriates. As more than 71% of the entire population is employed, it appears that a majority of expatriate households are dual income families.
• It will take Abu Dhabi 17.5 years to double its population as compared to only 11 years for Dubai.
• As there are approximately 1.55 males for every female in the emirate, the working population is largely concentrated in Abu Dhabi's major industries, that is, agriculture, construction, manufacturing and wholesale retail trade, which together represent 56% of the total working population of the country.

 

1.2 GDP Analysis

On the back of a strong oil market in recent years and a push by the government to diversify and expand the economy; Abu Dhabi's GDP has grown by a CAGR of 24% over the last three years.
The following graph details Abu Dhabi's GDP growth from 2002 to 2005.

 

The following should be noted:

• Of the UAE's total GDP, approximately 59% comes from Abu Dhabi due to its significant oil industry, which made up 56% of the emirate's economy in 2005.
• Abu Dhabi's per capita income is nearly 172% more than that of the entire UAE and 91% higher than that of Dubai. Recent studies have shown that Abu Dhabi is in the top three economies worldwide in terms of per capita GDP with approximately AED 203,632 per capita.
• The Ministry of Economy does not provide inflation adjusted GDP figures. Thus, assuming the UAE inflation rate applies to the Abu Dhabi emirate (averaging 8.5% in 2005), real GDP growth is assumed to be approximately 23.5% in 2005.

 

1.3 GDP by Sector

The following table presents a sectored break-up of the GDP of Abu Dhabi from 2002-2005.

 

The following should be noted:

• The Mining and Quarrying sectors have witnessed the greatest growth at 36% over the last four years and represented 56% of GDP in 2005, resulting from the strength of the global oil markets over the last few years.
• The manufacturing sector has also shown significant growth of 16% contributing a share of 11% to GDP in 2005. The sector is supported by over 350 factories and future growth is projected to be driven by an increase in the development of its downstream oil and gas industries such as plastic and polyolefin.
• The Real Estate & Business Services sector is among the largest growing sectors in Abu Dhabi's GDP, at 17% growth over the last four years and contributing 5% to the total GDP in 2005.
• Although a relatively small share of GDP (1%), the Hotels and Restaurants sector has seen a 12% growth rate over the last four years and is expected to boom in the next few years due to the activities of the Abu Dhabi Tourism Authority to promote the destination globally and the increasing level of development in the hotel sector. The entry of Etihad Airways is also expected to contribute to the tourism market of the emirate.
  

The Abu Dhabi Real Estate sector has seen a heightened activity over the past two years with numerous developments undertaken by the government. In 2005, the sector contributed 5.0% of Abu Dhabi's Gross Domestic Product and in terms of employment is second only to the general trade industry.

In spite of the development taking place in the real estate sector, it has not been enough to meet the growing demand; as a result the rents in Abu Dhabi have increased drastically in the last year. This increase has been attributed to the following factors:

• Strong demand
• Accommodation requirements for civil servants
• High population growth
• Rapid economic growth
• High cost of living
• Low operational life of buildings (30-50 years)
• Need for high return on investment
• Acute shortage of quality accommodation

UAE real estate yields have hardened to a typical range of 7% to 11% with the inflation and interest rates remaining low. In comparison, international real estate yields range from 5 to 8 per cent. With no taxation on revenues or capital gains or transactional tax, real estate represents an attractive investment option as a part of a balanced portfolio.

Favourable conditions for investors in real estate in the Abu Dhabi market include:

• Decision by the Abu Dhabi Government to allow freehold and leasehold ownership in some areas for GCC nationals and expatriates
• Strong economic growth and rising GDP
• Low interest and borrowing rates
• Consistent favourable returns as compared to other investments
• Low transaction costs
• Increasing population and a growing tourism market in Abu Dhabi
• A strong government committed to sustained economic growth

The Abu Dhabi residential market remained slow for a long time in terms of activity, due to the government enforced restrictions on sale of properties. Since 2003, Abu Dhabi's residential market has undergone change, triggering activity in the market. There was a reduction in the scope of the government sponsored Khalifa committee, in turn, leading to the allocation of a number of housing developments to the private developers aiming to improve efficiency.

This was also a part of the ongoing effort to improve the landscape, which was imperative to attract and retain tourist interest in the emirate. Removal of restrictions on the sale of property also resulted in the channelling of money that used to flow to Dubai, back into the local market.

Residential Performance

The property market in Abu Dhabi has shown a strong performance over the last four years. This has largely been a consequence of increased demand resulting from a growth in the number of expatriates attracted to support the economic growth.

The following Table 5, details the historical occupancy rates of residential units in Abu Dhabi.

The following should be noted:

• Currently the market faces a shortage of all types of apartments. New buildings are being occupied at a rapid rate with large corporations and tenants (from the public sector) reserving apartments in advance.

With the introduction of freehold in the emirate, the residential sales market is picking up. Even though majority of properties for sale are being offered to the market off-plan, a secondary market is slowly starting to develop.