Abu Dhabi Real Estate Sector Outlook 2023

Real estate in Abu Dhabi in 2023 will see some very interesting drivers, pushing the market in very different directions. First, interest rates will rise further in 2023, which will certainly dampen mortgage lending. Buyers who may have already purchased will think twice when borrowing becomes more expensive. This removes buyers from the market, and fewer buyers means lower prices.

The second factor is Abu Dhabi’s economy, which has historically been dominated by government spending. Oil prices mean more money is needed in the emirate and across the UAE, which, combined with other revenue drivers such as VAT and the upcoming corporate tax, should mean that the pullback in spending we saw in late 2015 should not happen again, even if the world economy deterioration. We expect the Abu Dhabi economy to be one of the best places to weather any economic storm.

From our perspective, the third factor that we see is the influx of buyers from Eastern Europe and East Asia. They appear to be attracted by the stabilization of the economy and the new “golden visa” scheme introduced by the UAE government. Companies like Aldar boosted foreign direct investment in the real estate sector and started putting the capital on the world investment map. We would like to see this continue.

A fourth trend is the diversification of Abu Dhabi’s developer class. The good transfer of the market before the sluggish secondary developers have launched new projects to challenge Aldar’s dominance. We expect companies like Bloom Holding, Reportage, Webbridge and Barakah to launch projects in 2023. On top of that, the rise of Q Holdings through the massive merger of Tamouh, Reem Investments and Al Qudra could also lead to a greater diversification of development projects in Abu Dhabi.

Fifth trend, this consolidation and improvement of developer fortunes will lead to more unplanned launches. We can already see that Grove Saadiyat has a few more phases to roll out, Reem Hills has another phase, and Yas Golf Views has a few buildings left. Aldar’s sustainable city should be exciting if it rolls out.

We also see the first element of the sixth trend, sustainability in buildings. Aldar, in particular, is using its sustainability credentials to market its new projects. Things like “green building technologies” and “sustainable materials”. As utilities become more expensive, energy efficiency will get an incredible boost, if not for ethical reasons, then for financial ones. We want things like solar panels to become standard in UAE real estate in the future, protecting the planet while protecting our wallets.

Seventh, the easing of Covid restrictions may reveal renewed interest in apartments. The global real estate market as a whole gets a boost in 2021 and 2022 from increased government support and reduced spending, which we see in Abu Dhabi, mainly in rising villa values. Apartments remain relatively flat. After the lockdown, people are increasingly wanting space outside. As all restrictions are eased, we may see apartment living come back into fashion.

Finally, we must look at the role of inflation. Inflation makes construction more expensive, so we may see off-plan projects become more expensive. It also dents households’ ability to pay rent or mortgages, which, combined with rising interest rates, could deter more people from buying. However, inflation also kills savings, so there may be a push to invest that money in real assets, and real estate may be one such investment.

All in all, many factors will compete for the attention of the Abu Dhabi real estate market in 2023. However, given all of this, we expect modest single-digit increases in real estate valuations and rents across most sectors.

Ben Crompton is Managing Partner of Crompton Partners and recipient of the Abu Dhabi Corporate Quality Broker of the Year at the Property Finder Awards 2022