The value of construction projects scrapped or on hold in the UAE soared to $958bn in the 12 months to October, Citigroup said Tuesday, signalling the Gulf state’s battered project market is still some way from recovery.
The Gulf country, which accounts for more than half of the stalled or cancelled projects in the MENA region, saw $20bn worth of developments added to the list over the last year.
More cancellations are likely as the UAE battles a fresh slowdown in infrastructure projects, Citi analysts said in the MENA construction projects tracker report.
“This is 80 percent weighted to delayed projects. Given the slowdown in this market we believe there is further risk of cancellations,” the report said.
The Gulf nation now has $604bn worth of projects planned or underway, a decline of 33 percent on the year-earlier period, Citigroup said. Just $14bn worth of new projects were announced in 2011, representing a 58 percent fall on the previous year.
The UAE's property boom ended in 2008, with home prices in the Dubai emirate plunging by about 60 percent, forcing many developers to abandon projects. More than half of the projects in Gulf country were scrapped or cancelled as project finance dried up.
Dubai developer Nakheel, which overstretched itself by building islands in the shape of palms and other ambitious projects, wrote off up to AED78.6bn ($21.4bn) of its real estate assets.
Dubai’s Real Estate Regulatory Authority (RERA) said in May up to 500 property projects were facing the axe and around 90,000 units were ‘under review’.
More recently, a slowdown in Abu Dhabi’s construction market has alarmed the industry, which fears a reduction in spending in the oil-rich emirate could crimp any fledgling recovery in Dubai.
The UAE capital has pushed back the delivery of major projects including its planned Louvre and Guggenheim museums, in a sign it may be feeling the pinch of its $500bn ‘2030’ plan.
Across the main MENA markets, Citigroup reported an average of 65 percent of projects were delayed and 35 percent cancelled.
Andrew Goodwin, director of real estate consultancy firm DTZ, said the UAE’s declining construction market could unnerve investors.
“The region is familiar with the reasons for the slowdown in UAE construction but we need to bring the proportion of ‘cancelled against on hold’ schemes in line with other countries before we will see real confidence in the market growing,” he said.
Citigroup said Saudi Arabia and Iraq had replaced the UAE as the region’s dominate construction market. Saudi, which has rolled out an ambitious $130bn state spending plan that promises in part to overhaul the country’s affordable housing market, has $648bn worth of projects in the pipeline, the report said. That represents a 90 percent increase on 2010.
Iraq, which is struggling to rebuild its infrastructure after the US-led invasion that toppled Saddam Hussein, awarded almost $17bn of projects in 2011, up from $10bn last year.
The country has $356bn worth of projects planned, the report said.
The building boom expected in Qatar to ready the emirate to host the 2022 World Cup has yet to materialise into projects on the ground, Citigroup said. The country has almost $214bn worth of construction projects planned, marking a 19 percent drop on last year, the report said.
The gas-rich country has also cancelled $7bn worth of projects in the last 12 months, raising the value of its cancelled and delayed projects four percent to $156bn
We would argue that this market has peaked and that growth will now slow,” the Citigroup report said.
In Kuwait, $4bn worth of projects was awarded, a decline of 56 percent year-on-year, bringing the total value of its pipeline to $83bn. “Kuwait has faced ongoing political issues which have stalled spending plans,” the report noted.
A review of construction firms showed Asian companies continued to dominate contract wins, with Samsung and Hyundai bidding for the biggest share of projects in the pipeline. Saipem and Al-Habtoor Leighton were also strong players in the region, the report said.