Real estate wary of hot foreign money - Emirates24|7

Real estate wary of hot foreign money

Some experts at Cityscape say steps should be taken to deter speculators from dictating terms. (SUPPLIED)


An increasing number of foreigners have bought property in Abu Dhabi at the Cityscape event raising alarms of foreign "hot money" creating a real estate bubble that compounds the problems of an already inflation-plagued economy.

Most companies reported large bookings by foreigners, especially Americans and Europeans, comprising at least 35 per cent of all reported bookings. At some companies the figure went up to as much as 70 per cent. This comes on the back of unprecedented openness in Abu Dhabi's real estate sector where foreigners will soon be allowed 100 per cent ownership in strategic sectors, such as steel industry.

Officials, experts and investors expressed fears that speculative buying of real estate by foreigners could mean that they would dictate terms, as has been seen in the stock market, whose progress and retreat is controlled by foreign money.

However, some top officials of real estate companies told Emirates Business that the rise in the number of foreign buyers is not a source of concern since the market had clear laws.

They said it is important to encourage foreigners to invest and own property in the country to avert an expected eventual recession in the real estate market. Also, foreigners, especially Americans, have money that they want to invest abroad, away from the credit crunch of their domestic markets.

Mahmoud Al Shaibani, Chairman and General Manager of Al Odaid Real Estate, said about 75 per cent of his company's sales, exceeding Dh20 billion, were to Europeans and Americans.

Alan O'Donnell, General Manager of Pure Real Estate, said 50 per cent and 10 per cent of his total sales of Dh6bn were to Europeans and Americans respectively.

He said his company has set rules to make sure buyers were long-term investors rather than speculators, but did not elaborate on what those rules were.

O'Donnell added, however, that the majority of foreigners had proved to be investors who want to live in the secure environment of Abu Dhabi and benefit from the promising investment opportunities offered by the government with privileges they did not dream of in their countries.

Massoud Al Ghannam, Executive Director of Sorouh Real Estate, and Osama Ghanoum, Media Adviser of Aldar Properties, both agreed that foreign presence at this year's Cityscape was striking. Bookings by foreigners in both companies' projects were about 35 per cent, they said.

Some other top officials, on the other hand, took the alarmist view of the increased foreign investment.

Mohammed Ali Yasin, Managing Director of UAE Stocks and Bonds, felt at least 50 per cent of those, whether foreigners or locals, were speculators.

This was especially because last year investors in Abu Dhabi real estate made profits of up to 300 per cent.

Yasin believed foreign speculators would create an artificial bubble in the property market, which might precipitate a local version of the American sub-prime crisis and push Abu Dhabi banks into a big crisis. If speculation is not strictly controlled, Abu Dhabi will inevitably lose its attraction for investment, he said.

Ridha Muslim, Director General of Truth Economic Consultants, agreed, saying Abu Dhabi was in a phase where many foreign investors would be prompted to make quick profits, especially with the housing crisis.

According to Abu Dhabi market statistics, the demography of investors underwent a change in 2007, which continued in this year's Cityscape.

In 2006, Saudis represented 36 per cent of the foreign investors in Abu Dhabi, followed by Indians and Egyptians at 14 per cent each, Jordanians at 8.8 per cent, Kuwaitis at 6.2 per cent and other nationalities at 21.2 per cent. Last year, 77.2 per cent of investors in Abu Dhabi were British, followed by Germans at 16 per cent, Luxembourgers at three per cent and Kuwaitis two per cent.


The number

70% of bookings in some realty companies in the capital have been made by foreigners.