Complex Made Simple

How deep in trouble are Dubai’s real estate and financial markets?

Bloomberg and Reuters give scathing reports of Dubai’s properties sector and the influence it is playing on Dubai’s Financial Markets (DFM).

The reports paint a dark picture, but are the numbers that bad?

Emaar woes

Emaar Properties, the biggest listed developer in the United Arab Emirates, posted the lowest quarterly profit in almost three years in the period ended September.

“Shares of the developer of the iconic Burj Khalifa skyscraper have lost 39% this year, bringing its estimated price-to-earnings ratio for the next 12 months to the lowest level since late 2009,” says Bloomberg.

A recovery of the local real estate market doesn’t appear to be happening any time, it said, with demand faltering as the oversupply has become more evident mostly in the residential market.

The UAE Central Bank said this week property prices decreased 7.4% QoQ in September, accelerating from a 5.8% decline in the previous quarter.

The Emaar stock fell 4.28% to AED 4.25 on Thursday, from AED 4.44 Wednesday.  The stock has lost a third of its value this year.

Quoting Arqaam Capital, Bloomberg said Emaar is seen as likely to deploy the majority of the proceeds from the sale of 5 hotel, including the iconic Address Dubai Mall and Address Boulevard to Abu Dhabi National Hotels (ADNH) to fund its near-term capital expenditure (CAPEX) and working capital gaps, estimated at an aggregate 681 million for the next 3 years.

“Lack of full disclosures on planned capex is adding to uncertainty. As more disclosures become available, it should bring more clarity on the company’s growth potential which is not yet factored by the market,” Arqaam said. sees 600% buyer growth: Apts go favorites

Profits down

Back in November, Emaar reported a 29% drop in third-quarter profits, the lowest in 11 quarters, according to data compiled by Bloomberg.

Emaar and Abu Dhabi’s Aldar Properties, joined forces in March 2018 to pursue local and international real estate projects worth $8.2 billion. But in July, Emaar hired Standard Chartered to sell assets worth as much as $1.4 billion, people with knowledge of the matter told Bloomberg last July.

Stocks take a beating

Zawya published a Reuters News report saying Dubai’s stock market plunged to its lowest level in more than five years on Thursday as real estate stocks continued to slide.

The oil picture didn’t help as oil prices lost nearly 5% after OPEC signalled that it may agree to a smaller output cut than expected and as concern over the economic impact of trade tensions hit global stocks.

The Dubai index slumped 2% to its lowest since September 2013.

“During the second half of the year oversupply in Dubai’s real estate market became more evident and is unlikely to reverse soon,” Naeem Brokerage analyst Amir Badran told Reuters.

Read; Emaar Development marks 119% increase in revenue to $1.9bn

Developer Union Properties also plunged, falling nearly 10% in heavy trade while Dubai Investments dropped 6.8%.

“Dubai’s DFM General Index has fallen 23 percent this year, making the gauge the worst performer globally, with Emaar Properties PJSC, Damac Properties PJSC and Union Properties PJSC losing at least 40% percent of their market value,” Bloomberg says.

With hopes for a short-term recovery faltering, Dubai shares trade cheaper when compared to peers in other emerging markets.

The MSCI Emerging Markets Index slumped more than 2%.

On Wednesday, DFM slipped 1.4% to its lowest since Jan. 26, 2016, also pressured by real estate shares, according to Reuters.

The Abu Dhabi index lost 1.5%, while Aldar Properties dropped 2.5%, while Eshraq Properties losing 4.2% on Wednesday.

“Abu Dhabi residential real estate prices dropped 6.1% YoY in Q3 after a 6.9% slide in Q2,” the central bank report added.