Abu Dhabi limits building to avoid glut, Aldar says

The Emirate has a shortage of 15,000 to 20,000 units and the government will let the “rope out on development in a measured way,” Bullough, whose company is the United Arab Emirates' second-biggest developer, said in an interview. “There will be, in our view, a lag between supply and demand.” Abu Dhabi, the UAE's capital and holder of 8 percent of the world's oil reserves, controls development from homes to offices and transportation links under “Plan 2030,” devised in 2007. The plan foresees the population growing to as much as 5 million by 2030 from an estimated 1.6 million in 2008.

“There is a short-term question mark, but then there is a medium- to long-term suitability,” Aldar Chief Financial Officer Shafqat Malik said in an interview last week at the company's Abu Dhabi headquarters. “What we saw over here is the doubling of rents and prices. Is this a sustainable way for any economy to grow? The answer is probably no.”

Aldar said it plans to deliver 3,500 homes and 140,000 square meters (1.5 million square feet) of commercial space over the next 18 to 24 months. Abu Dhabi's government owns 18.9 percent of Aldar through Mubadala Development Co. and 7.2 percent through state fund manager Abu Dhabi Investment Co., according to the emirate's exchange.

Aldar rose as much as 2 percent in Abu Dhabi trading and was priced at 5.51 dirhams (US$1.50) as of 2:29 p.m. local time, a gain of 1.5 percent. The stock, which reached a price of 13.30 dirhams in June 2008, has gained 39 percent this year. Limiting supply “brings up the cost of housing and can be seen as an additional tax on companies,” Jesse Downs, director of research and advisory services at Dubai-based Landmark Advisory, said in a telephone interview.

Abu Dhabi home prices have dropped by an average of 33 percent from their peak in the third quarter of 2008, according to Matthew Green, head of UAE research at CB Richard Ellis Group Inc. Dubai's residential property values have fallen by more than 50 percent and UBS AG said last week that they may decline by as much as 30 percent more.

“We are not in the business of releasing and withholding units or regulating prices,” Fouad Kassem, public affairs officer for Abu Dhabi's Urban planning council said in a phone interview.

Slowing down construction was easier in Abu Dhabi than Dubai because more projects were at the planning stage when the financial crisis hit and therefore easier to postpone, Downs said. Dubai is moving to tighten control of its own property supply through a planned combination of Emaar Properties PJSC, the country's biggest developer, with state-controlled Dubai Properties LLC, Sama Dubai LLC and Tatweer LLC.

A housing shortage in Abu Dhabi won't help lift prices because residents can commute from Dubai, which has an oversupply, Deutsche Bank AG said in note in June. The highway linking the two cities makes “both markets highly interconnected,” it said.

Dubai opened its property market to foreign investors in 2002, followed by Abu Dhabi three years later, fueling a boom bolstered by low interest rates. Prices slumped at the onset of the global financial crisis as banks clamped down on mortgages and speculators left the market.

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