The hot investment of 2008 is proving not to be GCC stock markets but real estate in Abu Dhabi. The benchmark Saudi Tadawul index is down 16% this year while UAE stocks are 5% lower. By contrast Abu Dhabi property prices are booming.
This bearish trend in GCC stock markets is expected to continue, with oil prices weakening into the summer season and global stock markets also very bearish. In the UAE the authorities have also indicated that margin lending is about to be cut to prevent ultra-low interest rates fuelling a stock market boom.
However, this only serves to highlight the attractiveness of local property as an alternative asset class, with Abu Dhabi off-plan the hottest sub-sector.
Local interest rates have tracked US Fed fund rates downwards to 2.25% and with the International Monetary Fund putting UAE inflation at 11%, that means real interest rates are strongly negative at minus 8.75%. That means property is rising faster in value than the cost of finance.
Off-plan flipping
In Abu Dhabi there is plenty of anecdotal evidence of property flipping with speculators doubling their money within a couple of weeks in the best deals. But for more stereotypical investors there is also a chance to buy property in a rapidly inflating housing market in the UAE capital.
The fundamentals are also excellent. This is not just a short-term interest rate phenomenon. A new study from the Abu Dhabi Chamber of Commerce and Industry (ADCCI) pointed to a shortage of 7,000-8,000 residential units last year and a likely shortage of at least 20,000 units in 2008.
The ADCCI concludes that new buildings will only meet 20% of this year's shortfall, leading to a 'crisis' next year.
This is very bad news for residents, especially for middle income earners whose rents have been spiraling upwards. But it is very good news for local investors seeking a solid asset class at a very difficult time for global and increasingly local stock markets.
As in any real estate market the trick is to compound this great demand-to-supply situation by buying in the right property in the right location. And that does not always mean the biggest home in a prestige location.
Higher returns
Many property market studies have shown that the best return on investment comes from smaller units which are easy to let and cheaper to buy in the first place. So investors should not worry if they cannot afford a penthouse; a one-bedroom flat could prove a better deal.
The ADCCI study also noted that the demand for affordable rental units was strongest, so this is surely a way of ensuring long-term investment success.
The main problem, of course, is securing the units and delivery times. Project releases are greeted by long queues of applicants and buyers need to do a lot of homework to ensure their name is on the right lists. But the best returns for speculators and investors are now in Abu Dhabi property. (AME Info)
This bearish trend in GCC stock markets is expected to continue, with oil prices weakening into the summer season and global stock markets also very bearish. In the UAE the authorities have also indicated that margin lending is about to be cut to prevent ultra-low interest rates fuelling a stock market boom.
However, this only serves to highlight the attractiveness of local property as an alternative asset class, with Abu Dhabi off-plan the hottest sub-sector.
Local interest rates have tracked US Fed fund rates downwards to 2.25% and with the International Monetary Fund putting UAE inflation at 11%, that means real interest rates are strongly negative at minus 8.75%. That means property is rising faster in value than the cost of finance.
Off-plan flipping
In Abu Dhabi there is plenty of anecdotal evidence of property flipping with speculators doubling their money within a couple of weeks in the best deals. But for more stereotypical investors there is also a chance to buy property in a rapidly inflating housing market in the UAE capital.
The fundamentals are also excellent. This is not just a short-term interest rate phenomenon. A new study from the Abu Dhabi Chamber of Commerce and Industry (ADCCI) pointed to a shortage of 7,000-8,000 residential units last year and a likely shortage of at least 20,000 units in 2008.
The ADCCI concludes that new buildings will only meet 20% of this year's shortfall, leading to a 'crisis' next year.
This is very bad news for residents, especially for middle income earners whose rents have been spiraling upwards. But it is very good news for local investors seeking a solid asset class at a very difficult time for global and increasingly local stock markets.
As in any real estate market the trick is to compound this great demand-to-supply situation by buying in the right property in the right location. And that does not always mean the biggest home in a prestige location.
Higher returns
Many property market studies have shown that the best return on investment comes from smaller units which are easy to let and cheaper to buy in the first place. So investors should not worry if they cannot afford a penthouse; a one-bedroom flat could prove a better deal.
The ADCCI study also noted that the demand for affordable rental units was strongest, so this is surely a way of ensuring long-term investment success.
The main problem, of course, is securing the units and delivery times. Project releases are greeted by long queues of applicants and buyers need to do a lot of homework to ensure their name is on the right lists. But the best returns for speculators and investors are now in Abu Dhabi property. (AME Info)
No comments:
Post a Comment