Abu Dhabi real estate to outperform Dubai

Ominously though, both companies saw downturns towards the end of 2008. Sorouh posted a fourth-quarter loss of Dhs29.8m while Aldar posted an 84% year on year decline in Q4 profits, to Dhs84.4m from Dhs528.3m in 2007.

Worse news was to come for Aldar, after it announced it was stopping work on elements of its Al Raha Beach project, which is part of a venture with Laing O'Rourke, laying off 320 people.

Despite these signs of a weakening market, a report on the UAE real estate market from Credit Suisse - in line with popular consensus - predicts that Abu Dhabi will weather the real estate slump significantly better than neighbouring Dubai.

The company's analysts had predicted varying fourth quarter results among the large real estate companies but anticipated that Aldar and Sorouh, two of Abu Dhabi's biggest developers, would report respective increases of 62% and 13% on Q3 results.

Sorouh remained Credit Suisse's preferred company, thanks to its high margin land sales in 2008.

Analysts estimated its annual profits at $735m, a year-on-year growth of 113%.

However, despite the growth of both companies, experts at Credit Suisse warned that the proportion of Aldar's earnings coming from revaluation of investment properties remains high, at 40%. These revalued figures are also predicted to slip in the first quarter of 2009.

Transformational year

Although no comment was available from the company on the issue, Ahmed Ali Al Sayegh, chairman of the board of directors, said of the
figures: '2008 was a transformational year for Aldar. 2009 will be challenging but Aldar is well positioned to meet these new challenges and we are responding to the current environment in a prudent and appropriate manner. We are cautiously optimistic about the year ahead and are confident we will meet our long-term strategic and financial objectives.'

Sorouh maintained a similar stance on the company's performance and prospects for the real estate market. Abubaker Seddiq Al Khouri, Managing Director, commented: 'We were pleased to meet full-year expectations, despite the challenging global picture in the last quarter of 2008. We remain confident that we are positioned as positively as we can be for 2009.

'Sorouh strengthened its cash position in 2009 to ensure we have the necessary liquidity in place for the coming year and beyond. We are taking a prudent approach to the deployment of those reserves in 2009.'

The company's CEO, Mounir Haidar, added: 'We accept that 2009 will be slower than 2008, given the global financial situation, but we remain confident of the long-term outlook for Abu Dhabi and for Sorouh.'

These reports come on the back of Credit Suisse's 'EMEA real estate:
2009 outlook' report, in which it stated a preference for UAE real estate over other regional players anticipating 'a quick recovery'
despite the regional turmoil.

Influx of state financing

More specifically, the report supported the Abu Dhabi market over Dubai and other Gulf markets. Analysts Andrei Nikitin, Ahmed Badr and Hans Zayed said: 'We remain advocates of Abu Dhabi-focused developers owing to the expected influx of state money into the sector to address the current supply deficit, as well as availability of project financing from the Abu Dhabi government and/or sovereign wealth funds.

'In this respect we nominate Aldar Properties and Sorouh Real Estate as our top picks in the UAE.'

The undersupply of property in Abu Dhabi paired with government support for the ongoing health of the sector is projected to keep the market relatively buoyant.

However, the report also pointed out that the negative press reports regarding the sustainability of Dubai's property sector have had an impact on Abu Dhabi companies. It suggested that selling prices will have to reduce as a result of the knock-on effect from Dubai.

By contrast, the Credit Suisse experts 'have a cautious outlook' on Dubai's real estate market.

See also:
Gloomy real estate market at the start of 2009