Abu Dhabi to spend $23bn on new neighbourhoods

Wam

• Projects to total 76,000 homes, plus development plots and amenities
• Value of residential transactions rose by 8.5% in 2022
• Price growth “stable” due to limited construction pipeline

Up to 76,000 new homes are planned over the next five years in Abu Dhabi to meet rising demand for residential property. 

The emirate’s executive council has signed off a budget of AED85.4 billion ($23.2 billion) for a string of residential neighbourhoods with new homes and development sites. 

The projects will also feature services, amenities and leisure facilities such as mosques, schools, public parks and green spaces. The neighbourhoods will “ensure the highest living standards for citizens”, the government said. 

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The council gave no further information on which locations are to be developed, when construction will start and if it will partner with private sector property companies to deliver the projects.  

Demand for residential property in Abu Dhabi is rising, driven by ongoing population growth and an economic resurgence following the pandemic.

The value of residential transactions across the emirate rose by 8.5 percent year-on-year in 2022. The number of deals increased by more than 27 percent, according to a report published this week by real estate consultancy Knight Frank. 

The highest volume of transactions last year were in Yas Island, totalling AED4.2 billion. This was followed by Al Reem Island with AED3.4 billion and Saadiyat Island with AED3.1 billion, Knight Frank added, citing data from Abu Dhabi’s Department for Municipalities and Transport. 

House prices for freehold residential areas are also rising, by 1.2 percent year-on-year on average in the first quarter of this year to AED964 ($262.5) per square foot. 

This is a slower rate of growth than its neighbouring emirate Dubai, where villa prices increased 12.8 percent year-on-year in the fourth quarter of 2022. Apartment prices there are up 9 percent, according to CBRE’s UAE real estate market review published in January. 

This relative stability in prices across Abu Dhabi’s freehold areas is largely due to a limited number of new homes currently under construction, Knight Frank stated. An estimated 29,000 are set to be completed by the end of 2025, with villas making up 58 percent of this. 

It added that the pace of new project launches is “quickening”, with 15 new residential projects unveiled in the first quarter of 2023 alone. Around 5,600 homes had been announced for this year before the government’s announcement on Wednesday, but construction is yet to start on any of those.

“With Abu Dhabi’s strong economic growth driving job creation, we expect an upturn in demand for rental properties, particularly in the villa market,” said Stephen Flanagan, partner and head of valuation and advisory at Knight Frank Mena. 

“Like the sales market, tenants are seizing the opportunity to upgrade their accommodation wherever possible, which has increased villa lease rates.”