Abu Dhabi’s new property law is set to boost growth and will lessen the impact of potential cyclical economic factors on the market, according to industry experts.
The effect of the recently implemented Regulation of Real Estate Sector in Abu Dhabi on financing and mortgage enforcement will be one of the core topics discussed at the upcoming Abu Dhabi Market Overview, which will be held on the first day of Cityscape Abu Dhabi Cityscape from April 12-14.
The forum will put a spotlight on Abu Dhabi’s economic drivers, its residential market capacity, and the impact a potential official freeze in oil output may have on the real estate sector.
Abu Dhabi Finance CEO Chris Taylor said that recent legal and economic developments in the capital will encourage best practice in the emirate’s real estate sector, with numerous factors contributing to buyers’ security, and subsequently enhancing growth.
“Increased clarity and transparency alongside centralisation of property and mortgage registration, the management of escrow accounts, and the creation of a mortgage law effectively reduces the risks involved in real estate transactions for all parties.
“Expat residents will be more likely to invest long-term in the market and non-resident customers will derive comfort from the new laws. The property law will lessen the impact of potential cyclical economic factors such as oil price movements on real estate prices creating a less volatile environment which should encourage continuous investment and growth of the sector.”
David Dudley, head of the Abu Dhabi office at JLL Mena, said that the property law would ensure higher financial security for investors.
“New regulations affecting escrow accounts, land and property registration, strata law, the licencing of real estate activity and new fees will help support a better regulated market as they will improve transparency and help protect consumers as well as investors.”
“Abu Dhabi’s new laws place greater responsibility and regulation on developers, which in turn will suppress supply growth. This will help reduce the risk of over-supply in the current period of weaker demand. However, the key will be to allow sufficient supply to come through to maintain a healthy balance between supply and demand to keep rents and prices at a competitive level.”
What is affordable?
In September 2015, JLL put “affordable” sales price in the UAE at around Dh790,000 and affordable annual rent at around Dh72,000, stating none of the freehold locations currently offer affordable property for sale and therefore the only option for middle-income families is to rent. This is limited to apartment units as no villas/townhouses fall within their affordable range.
Some affordable units for rent can be found scattered across the central business district (CBD), however these are generally older buildings with little surrounding amenities and poor parking facilities. The majority of affordable projects available for rent are located in the outskirts of Abu Dhabi, away from the CBD, in locations such as Mohammed Bin Zayed City, Mussafah, Khalifa B and Al Rahba.
Dudley, however, went on to say that though oil prices and production volumes have always been a key driver of Abu Dhabi's economy and real estate markets, the current slowdown has some positive aspects.
“The good news is that demand growth continues from major capital projects that started when oil revenues were strong. Projects such as the airport expansion, the growth of Etihad Airways and other major tourism attractions, including the Louvre Abu Dhabi have an economic multiplier effect, ensuring continued GDP growth,” Dudley informed.
Emirates 24|7 reported earlier this month that developers in Abu Dhabi will have to apply for a licence and register with the Department of Municipal Affairs by March 31 or could face fines of up to Dh2 million.
“Developers now need to act swiftly to meet short deadlines imposed by the law to avoid incurring considerable penalties,” according to David Bowman and Maha Dahoui of Al Tamini & Co law firm.
The Law No. 3 of 2015 regulating the Real Estate Sector in Abu Dhabi, in fact, came into effect on January 1, 2016.