Mr Orrell thinks there are still selective opportunities in Dubai and Abu Dhabi, although the market will become interesting as Al Reem properties become available. "This is the first location in Abu Dhabi where non-resident individuals are allowed to own property," he says. "They will have mortgages and so will want to lease or sell these at any cost to cover that burden. Historically, most residential property stock has been owned by big landlords, who are not as sensitive to cash flow and hence happy to leave them vacant to establish rental points. This will be an interesting dynamic over the next six months."
English by birth with a South African upbringing, Mr Orrell worked for a number of years in London, before moving to Abu Dhabi seven years ago, coming across with PriceWaterhouseCoopers initially to take a leading position in its advisory business. He remains optimistic for the UAE, but says it will need to encourage foreign investment and the depth and diversity of the private sector. It will also need to remain exciting and challenging to keep its talent, otherwise much-needed skills will move elsewhere, either back home or to new markets.
Where do your investors come from?
Predominantly institutional investors, although underneath the institutions are high-net worth individuals, but we prefer institutional investment. It takes longer to establish and there are more regulatory hoops, but it's better in the long run with a more stable revenue stream. As we've witnessed over the past few years, high net worth individuals can go broke, particularly because of excess leverage. Corporates have to manage their contractual commitments.
What is the climate like for investment in the property market?
Stagnant and needs a selective approach, especially within the UAE. The pre-sale market is non-existent at the moment. Post-sale market is holding and the prices appear to have stabilised in certain pockets. There are a few transactions, but there is a stronger market in completed units; nobody is looking to buy off-plan.
Do you see off-plan returning any time soon?
No. Although Abu Dhabi and Dubai are two different places. In Dubai there is a huge oversupply in both residential and commercial properties. Dubai has circa 30 per cent oversupply of stock. Abu Dhabi doesn't have the same scale to this problem, but off-plan sales are not going to return for a while.
But there are a lot of units coming on to the market in Abu Dhabi this year?
Absolutely. About 14,000, which will take us up to about 200,000, with a total of 40,000 additional units by 2013. Rents have corrected since 2009, but there remains a lot of traffic. People are looking to move from less attractive units to more attractive ones within Abu Dhabi. Also, as Abu Dhabi becomes more affordable, people who work here but commute from Dubai are moving here instead. There is movement in the market but still oversupply. This will predominantly impact the unattractive locations and the poor quality stock such as old buildings and compartmentalised villas.
Are you looking for other areas to invest in or other regions?
There are still opportunities even in Dubai in property. For example, there are a couple of large banks looking for offices there and they can't find them. This is because most offices are strata - different floors owned by different people - which isn't suitable because you don't want the contractual and maintenance risk spread across multiple parties with differing risk profiles. There are also pockets of opportunity in Abu Dhabi and Dubai at the high end, especially in villas, although at lower levels than in 2007 and 2008.
Is there still foreign investment?
It drove the boom until 2008-09. Currently, investors are taking a cautious approach worldwide and this region is no exception. The debt problems in Dubai and the resultant debt hangover - the IMF estimates that Dubai and Abu Dhabi will need to repay $60bn in 2011 and 2012 - is a drag on new investment.
Are there other deterrents?
Yes, two in particular - legal infrastructure and competition from quasi-government entities. The agency law impairs competition and the lack of permanent residency limits non-residents from taking risk with local real estate. Government-related entities get a natural advantage over private players.
We have looked at private equity but there are few opportunities. Better opportunities are in property in the region, particularly Saudi Arabia and Jordan.