Economy
Dubai Builders Worse Off Than Abu Dhabi Peers, Moody’s Says
(Bloomberg) — Abu Dhabi real estate companies will face less severe headwinds from the double whammy of the coronavirus pandemic and lower oil prices than those in neighboring Dubai, Moody’s Investors Service said.
Residential oversupply isn’t as pronounced in Abu Dhabi, which supports the credit quality of Aldar Investment Properties LLC and Emirates Strategic Investment Co., Moody’s analyst Lahlou Meksaoui wrote in a report on Monday. In Dubai, job losses, salary cuts and travel restrictions are slashing demand for new property.
“The economic contraction and its fiscal implications will be most acute in Dubai, where the economy is very reliant on tourism and transportation,” Meksaoui said. Still, there will be credit-quality erosion of real estate companies in the richest of the seven sheikdoms in the United Arab Emirates, he said.
As the coronavirus wreaks havoc on the global economy, it is also aggravating Dubai’s property slump where oversupply has pushed prices lower for the past six years. Now, with companies like Emirates airline laying off staff and some estimating Dubai’s population could shrink by 10%, the downturn is likely to further reduce rents and the value of homes.
Read more: Expats Leaving Dubai Is Bad News for the Economy
Residential property prices in Dubai will drop over the next 12 to 18 months, resulting in weaker profit margins and lower free cash flows, according to the report. Home prices in Dubai have declined by about 30% since hitting a peak in mid-2014, while values in Abu Dhabi sank 28%. Meksaoui said.
Emaar Development PJSC will probably see gross profit margins fall to 35.3% in 2021 from 53.4% in 2015, he said. Damac Properties Dubai Co.’s margins shrank to 25.4% in the three months through March compared with 37.5% in the third quarter of 2019, according to a company presentation.
Developers may try to stimulate demand by extending payment terms or by covering a proportion of costs such as service charges and transfer fees, Meksaoui said.
While property buyers might be lured by low interest rates and reduced down-payment requirements for first time home owners, it will not be enough to “completely offset weaker consumer sentiment,” the analyst said.
-
Oil & Gas1 month ago
Oman Oil Exports Exceed 135.3m Barrels by End of June 2024
-
Energy2 months ago
VIDEO: Dr. Firas Al-Abduwani Discusses Green Hydrogen, Potential Regions for Development & Creating a Green Ecosystem
-
Hospitality2 months ago
OMRAN Group Achieves RO31.6M Net Profit, 44.6% Revenue Growth
-
Energy2 months ago
Oil Futures Rebounds Over US$1 After 7-Week Low
-
Leaders Speak2 months ago
VIDEO: Discussing The Future of Green Hydrogen in Oman with H.E. Salim Al Aufi
-
Interviews2 months ago
VIDEO: Talking Latest Developments in Aircraft Ground Guidance & More at Oman Airports
-
Automotive2 months ago
Nissan Appoints Al Hashar Automotive as the Authorised Official Distributor in Oman
-
Technology2 months ago
Celebrating Infoline’s Remarkable 20-Year Journey