When Alice White learnt she and her husband Phil would be moving back to Abu Dhabi this year from Bahrain, she thought they might be able to find a nice apartment in Khalidiya such as the one they lived in during the 1980s. But upon arriving, one thing became clear: this was a new Abu Dhabi. She spent weeks looking for a place to no avail. Finally, during a fit of desperation the couple happened on a villa in Khalifa City - a stretch of desert on the outskirts of the city with swirling eddies of sand and only a few blocks of the most basic retail.
Not only was the space three times bigger than they needed, it cost Dh320,000 (US$87,000) a year. "The prices have gone ridiculous," Mrs White, 53, said as movers hauled boxes into her mammoth three-story villa last week. "There's hardly anything available, so we had to choose a place that is much too big for us." These stories proliferate in the shisha cafes, hotel bars and knitting circles of Abu Dhabi. As rental and sales prices spiral ever higher, people are having to do all sorts of things to make ends meet.
Nabeel Ibrahim, a corporal in the UAE Armed Forces working in the information technology office, said he sent his wife to live in Ras al Khaimah with a friend while he looks for a place to live. The army gives a Dh80,000 housing allowance per year, but the two-bedroom places he has looked at cost a minimum of Dh120,000, he said. "Now I'm living inside the camp on Airport Road," he said. "It's very difficult. I am planning to go back to India after my contract in six months. I can't stay."
The rising prices and rental rates all trace back to the beginning of 2005, when the ruling family of Abu Dhabi began making preparations for dramatic growth and development of the emirate. For years, Abu Dhabi had been a quiet financial powerhouse, but the plans now under way bespeak aspirations to become an economic capital of the Middle East. With nearly every industry growing - from property to renewable energy to telecommunications - companies are seeking to bring more people to live here. The result is a simple, but painful, shortage of flats.
Property experts believe that 2009 could be the most difficult year of all because the demand will continue to mount without much new supply coming onto the market. Most of the buildings rising up across the city are slated for finish in the final months of 2009 and the years after. So, while sales prices have risen by 53 per cent from 2007 to 2008 and rental rates have increased by 22 per cent during the same period, it is not over yet. Morgan Stanley said in a report last week that prices would rise another 25 per cent by 2010.
Andrea Menown, the director of leasing for LLJ Property, said that the imbalance is causing people to move off the island. Areas like Al Raha and Khalifa City have seen some of the most dramatic surges in rental prices in the last eight months. A three-bedroom villa in Khalifa City that rented at Dh180,000 a year last November is now averaging Dh350,000 ? a 90 per cent rise, And in Al Raha, prices have climbed to about Dh300,000 from Dh180,000.
"They are basically on par now with high-end apartments in the city itself," she said. She said the area was heating up because of a growing demand for family-sized homes near good schools. "It used to be a man's city, but there are a lot more family requests coming in," Ms Menown said. "There is a distinct shortage of schools, so these places, despite being very remote with little services, are in demand."
The arrival of more families to the capital is a sign of even faster growth because for each child, there is a need for a teacher and a football coach and other services. So the arrival of a single family could really presage the arrival of several families. The Urban Planning Council has taken this into account with its prediction that another 400,000 people will move to the city by 2013, a 44 per cent increase from the current population of 900,000.
"People are panicked," said Robert McGinley, a senior property consultant at Re/Max Abu Dhabi. "It's in their voice when they call. Basically, I'm trying to help them stop panicking." Mr McGinley said that some people will simply have to start moving to the towns and areas even further outside the main areas of Abu Dhabi. Last week he drove out to Al Shahama and Baniyas to look for flats for his customers.
"They have affordable villas and apartments," he said. "They are all in driving distance." He said that in the new Abu Dhabi, "if you don't want to commute, you're going to have to pay the price". Another factor in the calculus of spiralling rents is that companies are mass-leasing apartments to shield themselves from increases and lack of supply down the road. Mrs White, who found an apartment in Khalifa City, said she wandered around dozens of empty villas and floors of apartment buildings without tenants.
"No one would speak to me," she said. "They were keeping them for somebody else." Investors, too, are contributing to the problem by buying up apartments and leaving them empty, said Nicholas Maclean, the regional director of CB Richard Ellis. "This is my big concern about Abu Dhabi," he said. "There is a lot of stock sitting vacant. The Government needs to do something to encourage owner-user occupation."
Along with causing misery to residents who have to contribute a serious chunk of their income to housing, the high cost of relocating employees to Abu Dhabi is hurting companies. Rudi Fourie, 38, a director at Mushrif Trading & Contracting, said he "was just lucky" to find a place in Khalifa City for his family. "I've had colleagues who have been thrown out of their houses because landlords want more rent," he said.
"It's really quite a cash-flow problem for any company. There is no negotiating with landlords. It's their market." Phil White, who works in the oil industry, said that companies were especially having trouble relocating high-level executives because of the shortage in housing. "Maybe some landlords are benefiting from high rents, the quality of people they can bring out here suffers," he said. "Companies can't afford to bring people out here."
But hope appears to be on the horizon. Starting in January 2009, Abu Dhabi Commercial Properties (ADCP) - a private group handling the portfolio of the Government's Khalifa Committee - will start finishing up to three small apartment buildings a week. ADCP is co-ordinating the construction of 750 of these buildings, mostly in Tourist Club area, Musaffah and Al Ain. "The Government is ramping up its loans for new buildings," said Denis O'Connor, the chief executive of ADCP, in an interview recently. "They are trying to build up the housing stock as much as possible."
And later in the year, Aldar is expecting to finish a swathe of its Raha Beach development. Tamouh is planning to finish Marina Square on Reem Island by late 2009. "For Abu Dhabi, late 2009 and early 2010 is when things might start to lift up," said Mr Maclean of CB Richard Ellis. @Email:bhope@thenational.ae