Prices of Saadiyat Island Villas Reflect Dollar Value of Culture

» Featured Columnists | By Alma Kadragic | December 24, 2010 9:01 AM ET

(ABU DHABI, UAE) -- In July 2006 the Guggenheim Museum in New York announced it would build a sister museum in Abu Dhabi in partnership with the Abu Dhabi government's Tourism Development & Investment Company (TDIC) on Saadiyat Island. In February 2007 the Louvre in Paris announced it would build an Abu Dhabi Louvre on Saadiyat Island.

Since then the world's leading architects have signed on to design iconic buildings for these museums and others that will make Saadiyat island a unique kind of cultural theme park. Frank Gehry was selected to design the Guggenheim following his success with the Guggenheim in Bilbao. Abu Dhabi's will be the largest Guggenheim in the world at least in size and perhaps eventually in depth of collections. Jean Nouvel was the choice for the Louvre Abu Dhabi.

Last month Lord Norman Foster's designs for the Sheikh Zayed Museum were unveiled, a spectacular plan with long oval shapes flying over the exterior that recall a falcon's wings. Earlier Japanese architect Tadeo Ando's design for the National Maritime Museum was revealed along with Zaha Hadid's ambitious National Performing Arts Center.

Through TDIC the emirate's government has committed millions to bring world class cultural institutions to Abu Dhabi. Why? First of all to differentiate itself from Dubai, the financial center of the UAE where the focus has been on developing retail, banking, logistics, and mass tourism in addition to real estate, formerly one of the economy's engines. With the financial crisis, real estate in Dubai is way down. Prices have fallen and continue to fall. Today the news locally is that the drop seems to have slowed in the fourth quarter, but it's still another drop.

In Abu Dhabi real estate prices have dropped too, and for the first time that I have seen in five years of living here, apartments are available. A potential renter or buyer can see several, and decide to wait. In October 2006 when I moved into my current apartment, I knew that if I didn't agree immediately, someone else would take it. That had happened to me twice during my search when I tried to negotiate price.

In fact next year when the landlord tries to raise my annual lease the five percent  that is the maximum allowed each year, I will resist and be ready to move if resistance doesn't work. That will be something new in Abu Dhabi where the landlord has been king.

Against this climate of declining rents and sale prices comes the news that the first group of 354 luxury villas in the Saadiyat Beach Villas development are being built and should be ready for residents by the fourth quarter next year. Potential buyers will be able to visit 10 show homes beginning in April, something that hasn't been the custom here where people used to buy apartments and houses that existed only as drawings.

But the biggest news about Saadiyat Beach Villas is their price. They are expensive, top of the market, and demonstrate that investing in big league culture pays off. For example, according to a recent story in The National daily newspaper, an 8,000 square foot villa is listed at $3.7 million; a 12,000 square foot villa at $8.2 million.

According to Peter Samaha, a director at Quest Property Services, quoted by The National, "They have been priced incredibly high." He added, "They are targeting a specific type of person at the top end of the income bracket." The homes are categorized at four levels: standard, executive, premium, and VIP.

By 2012 the completed Village will number 1600 homes. Alongside will come Saadiyat Beach Apartments, 963 apartments in 14 towers. The apartments will follow the villas. Right now the land is being prepared with pilings. Construction on the first section is due to begin in early 2012. Apartments too will be priced at the top of the market.

These projects are just the beginning. By 2020 as many as 145,000 people could be living on Saadiyat Island, the population of a small city. Although most of the housing on the island will not be as expensive as the Beach Village, it will certainly cost more than similar space in many other parts of the city. 

In addition to the museums and cultural centers, Saadiyat is surrounded by beaches and will provide residents with a casual outdoor lifestyle. It is next to Yas Island, home of the Formula 1 racetrack, the Ferrari World amusement park, and the Yas Mall for big league shopping. Finally, it is closer to Dubai than most of Abu Dhabi and thus opens the door to that city's entertainment and business possibilities.

By 2020 it will have cost TDIC an estimated $27.2 billion to develop Saadiyat Island. However, the government investment in culture is leading to much higher prices for the real estate built nearby. As many other cities in the world have discovered, investment in culture can bring serious financial returns.

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