But new plans to improve transport links will help attract investors and the Emirate's population is expected to triple in the next 20 years, officials said.
At present demand is outreaching supply and as a result the price of residential houses and apartments has risen 53 per cent in the past 12 months, according to a report by Colliers International. This compares with 18% the previous year.
Colliers also found that occupancy levels have reached 98 per cent and that rents for new leases would continue to rise as the market will remain under supplied for the next three years.
In fact it predicts that an additional 100,000 units are needed by 2010 to absorb excess demand. However, between 2011 and 2013, assuming developments are completed on time, as many as 140,000 additional units are expected to be delivered, the report found.
But the report added that the risk of oversupply was likely to be offset by probable development delays and the opportunity to widen scope of foreign ownership framework.
A new five year plan for the transport infrastructure should help in terms of attracting new investors and cope with the expected population increases.
A new fleet of air-conditioned buses, a high-speed rail network and water taxis along the coast is aimed at getting people out of cars and on to public transport, according to the Department of Transport (DoT).
'If you get out of the metro you need to see a bus, if you get out of a ferry, you need to see a bus,' said Abdulla Rashid al Otaiba, the chairman of the DoT. 'We need to connect and integrate all this transportation together.'
The department estimates that the emirate's existing road network will reach capacity before 2020. To ease congestion, a fleet of 90 new air-conditioned buses will be on the road at the end of next month and air-conditioned bus shelters would be operational by June 2009, Mr Otaiba said.
The transportation plan will also see the introduction of water taxis to ferry passengers from Abu Dhabi to its surrounding islands.
New laws governing the emirate's waterways are also expected. Mr Otaiba said there were no regulations for rights of way at present. With leisure boating expected to increase in popularity and a new port under development in Taweelah, Mr Otaiba said he hoped maritime laws would be put in place by next year.
