Once Sky High, Abu Dhabi's Prices Tumble to Earth

ABU DHABI -- In 2008, Jane Strachan and her husband, Andrew, bought an apartment in the Empire Tower, a 230-meter building that was still under construction. Tired of paying Abu Dhabi's notoriously high rents, the South African expatriates wanted to make the apartment their home.

Four years later they are still waiting for their apartment, which was marketed at 3.5 million dirhams, or about $953,000. Construction on the project has stalled and they have been unable to get a refund of the 1 million dirhams they paid to the developer, who is not returning calls.

"We feel robbed," Ms. Strachan said. "We feel exploited and absolutely helpless."

Stories like Ms. Strachan's are common in Dubai, the neighboring emirate. After one of the biggest construction booms in history, there is a glut of luxury apartments in Dubai, prices have fallen more than 50 percent and thousands of people who paid for homes before construction are stuck with investments in half-built developments.

Now Abu Dhabi, the oil-rich capital of the United Arab Emirates, is experiencing many of the same problems.

"You would have thought Abu Dhabi would have paid attention to what happened in Dubai," said Paul Preston, managing director of Elysian Real Estate, a U.A.E. property company. "But that is not the case."

Abu Dhabi's ruling family did not open the market to international buyers until 2005, three years after Dubai. In the wake of the decision, the government announced plans to spend billions of dollars on new developments, generating a surge in buying.

"Frenzy is a good way to put it," said Craig Plumb, head of research in the U.A.E. for Jones Lang LaSalle, the property consulting firm. "People were paying more for projects that weren't built than projects that were built."

Developers were offering attractive deals with low down payments to entice buyers. Some projects sold out in one day, primarily to investors.

"Instead of just buying one apartment and putting 50 percent down, they were buying five apartments and putting 10 percent down on each," Mr. Plumb said.

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Once Sky High, Abu Dhabi's Prices Tumble to Earth