Rents to surge as demand outpaces supply

by This email address is being protected from spam bots, you need Javascript enabled to view it on Thursday, 29 November 2007

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Abu Dhabi city's population may grow by about 5.8% per year for the next six years, according to government projections. (Getty Images)

Rents and property prices in Abu Dhabi, which surged 22% and 18% respectively in the second-half, are likely to rise further as demand outpaces supply and banks offer more mortgages, HSBC Holdings said.

The shortage and a delay in the delivery of properties will spur profits at Aldar Properties and Sorouh Real Estate, whose share-price target HSBC raised to 20.30 UAE dirhams ($5.53) from 14.20 dirhams, and 13.20 dirhams from 5.90 dirhams, respectively.

"Given the tightness in the market, we expect still more price and rental appreciation," HSBC said in a report on real estate in the emirate.

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"Further deregulation of the sector and expansion of the mortgage market are bound to sustain pressure on prices," it said.

The office market is the most lucrative, with rents and prices rising 43% and 35% respectively, HSBC said. Land prices have about doubled to between 3,500 dirhams per square metre and 5,000 dirhams per square metre, compared with an average 2,000 dirhams per square metre last year, HSBC said.

Still, residential prices in Abu Dhabi are "relatively cheap", HSBC said.

Shares of Aldar have surged about 135% this year to 9.47 dirhams each, and Sorouh's have almost tripled to 6.87 dirhams each.

Abu Dhabi city's population may grow by about 5.8% per year for the next six years, according to government projections. (Reuters)

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