What 2023 holds for Abu Dhabi's property market
Many unique factors will influence Abu Dhabi's real estate market in 2023, each of which will push prices in a distinct direction. First, the further increase in interest rates expected in 2023 will undoubtedly dampen demand for home financing. The potential buyer pool will shrink as borrowing buyers rise, forcing them to reevaluate their purchasing decisions. Due to the lack of buyers, the market price will fall.
The Abu Dhabi economy, which has been driven by government spending for the majority of its history, is a second consideration. Since the increase in the oil price has resulted in more money for the emirate and the UAE as a whole, and since other income drivers like VAT and the upcoming corporation tax should prevent a repeat of the spending slowdown seen at the end of 2015, we shouldn't see it again, even if the global economy continues to deteriorate. We believe Abu Dhabi's economy will be among the most resilient in the world.
As a third contributing reason, we notice an increase in demand from what we consider to be mostly Eastern European and East Asian buyers. They are apparently drawn there by the country's relatively secure economy and the "Golden Visa" program recently instituted by the UAE government. Promoters of FDI into the real estate sector, such as Aldar, have begun to put the Capital on the global investment map. That's what we figure will keep happening.
The increasing variety of Abu Dhabi's builder community is an additional development. As a result of the market's growth, even sub-developers who had been dormant until recently have begun introducing new initiatives.
Fifthly, as a result of the industry's consolidation and developers' improved financial standing, we may expect to see an increase in off-plan debuts. Already, we can see that there are still many more buildings to be constructed in Yas Golf Views, Reem Hills, and the Grove Saadiyat. If implemented, Aldar's Sustainable City may be very interesting.
Also, sustainability in building is becoming a major focus. In particular, Aldar is promoting its new developments with the help of its green reputation. Sustainable materials and environmentally friendly construction methods. Utilities are becoming increasingly expensive, which means there will be a strong push toward energy efficiency if not for ethical then for financial reasons. For environmental and financial reasons, we can only hope that solar panels and other sustainable features will soon be the norm in UAE property.
Furthermore, if Covid regulations were loosened, maybe more people might be interested in renting apartments. In Abu Dhabi, the growth in villa values was the most noticeable indicator that the global real estate market had been bolstered in 2021 and 2022 by stronger government backing and lower spending. Prices for apartments hardly changed. People's desire for the outdoors increased after their experience in the lockdown. With the removal of so many regulations, apartment living could make a comeback.
Finally, we have inflation. As construction costs rise with inflation, off-plan properties may follow suit. Rent and mortgage payments become more of a burden on families, which, along with rising interest rates, may discourage potential buyers. However, inflation erodes the value of savings, so there may be pressure to put that money into tangible assets like real estate.
The real estate market in Abu Dhabi will be distracted by a number of competing variables in 2023. Despite this, most markets should experience increases in property values and rentals in the low single digits.
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