UAE property firms' Q2's seen hit by lower sales

EMAAR PROPERTIES: Shuaa Capital expects Dubai developer to buck trend by reporting higher earnings in Q2. (Getty Images)

Property firms in the UAE are poised to report weaker second-quarter profits on lower revenues from land and property sales, as the real estate sector continues to suffer in the global financial crisis.

Dubai's Deyaar, the emirate's second-largest developer by market capitalisation, set the tone, reporting on Sunday its earnings for the period slumped 69.5 percent from the previous year.

"Earnings across the UAE real estate board are likely to be weak for the second quarter...with real estate companies unable to book revenues from land sales," said Chet Riley, an analyst at investment bank Nomura.

"Any development delays, which we are starting to see, will not allow developers to recognise sales revenues and may lead to further analyst earnings downgrades," he said.

Property prices have been under pressure since late last year, when the financial crisis and a slump in oil prices ended an economic boom in the Gulf region.

Hundreds of billions of dollars of projects have been cancelled in the UAE, Dubai firms have laid off thousands of employees and UAE banks have been loathe to extend mortgage loans.

Dubai house prices will fall another 20 percent this year, while prices in the country's capital, Abu Dhabi, are seen falling 25 percent on average for the full year, according to a Reuters poll last month.

However, earnings for Emaar Properties, the second-largest developer in the Gulf Arab region, are expected to be higher than the first quarter due to a higher delivery of properties, said Roy Cherry, vice president, research, at Shuaa Capital.

There were no comparative figures with the second quarter of last year in a Reuters poll this month, as the developer changed its accounting methods in the last quarter.

Emaar, which is building the world's tallest tower and is set to merge with three local property firms, made an AED237 million $64.52 million) profit in the first quarter after posting a loss in the fourth quarter.

Analysts predicted the second-quarter profits of Abu Dhabi developers Aldar Properties and Sorouh Real Estate would fall 77 percent and 29 percent respectively.

"Aldar booked significant revenues from land sales in the second quarter of last year, and in the first quarter of this year, they recorded almost AED920 million of fair gains on investment properties," Cherry said.

"In comparison, we expect significantly lower fair value gains and no land sales in the second quarter of 2009 ... however, there could be a surprise on the land sales front."

The gloomy outlook for real estate firms' earnings extends throughout the Gulf Arab region after Saudi Arabia's Dar al-Arkan, the largest real estate developer in the Gulf Arab region, posted a 10.1 percent in second-quarter profit on Saturday. (Reuters)

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