Economic stimulus package to drive growth in Abu Dhabi’s real estate sector
Q2 saw a major announcement by Sheikh Mohammed Bin Zayed regarding a 3-year Dh50 billion economic stimulus package for Abu Dhabi that is expected to drive economic growth. The initiatives affecting real estate include reducing costs for developers, promoting partnerships between the public and private sectors and providing dual licenses for companies located in free zones to bid for and undertake government tenders outside the free zone.
As consolidations continue to take place and other companies choose to downsize, employment levels in Abu Dhabi continue to be affected, specifically in government agencies and financial service entities, placing downward pressure on rental rates. One major consolidation that took place in Q2 was Aldar’s acquisition of real estate assets (mostly on Saadiyat Island) worth Dh3.7 billion from TDIC.
The UAE’s decision to allow 10-year visas for expats and 100% foreign ownership in companies is expected to have a positive effect on the residential market, providing expats with more security over their rights to remain in the UAE. This is predicted to add a positive stimulus to the residential market over the medium term.
The introduction of VAT earlier this year has prompted retailers across the UAE to shift their focus on ways in which they can provide greater value to shoppers who have become more price conscious. Although VAT has had a short term negative impact on consumer spending, other factors are likely to have a larger long term impact on consumer spending (such as job instability, cuts in allowances and e-commerce).
The Abu Dhabi Department of Culture and Tourism announced a 30% tax to be applied on alcohol sold in off-license outlets to individuals, bringing Abu Dhabi in line with Dubai. This tax levy is expected to create additional demand in hotel F&B outlets, as their prices will become relatively cheaper, providing a boost for hotel performance.
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Author: Craig Plumb
Craig has over 20 years’ experience providing clients with quality advice on real estate market conditions in the UK, Asia Pacific and the Middle East. With a background in urban economics and spatial planning, he has particular expertise in the areas of property market research, development consultancy, transport related infrastructure projects and corporate real estate.
Since moving to the UAE in 2006, Craig has authored over 50 research reports on different aspects of the MENA real estate market. He has also provided market research and consulting services to major investor, developer and government clients and has appeared as an independent real estate expert before the Dubai International Arbitration Centre (DIAC).
Craig holds a Bachelor of Arts in Economics & Geography from Lancaster University and an M.Phil in Environmental Planning from Reading University (UK).