By Soren Billing
Property market is unlikely to pick up until next year, oversupply leading to drop.
The decline in Dubai’s residential property market is likely to continue until the second quarter of next year, Moody’s has said.
“Moody's notes that the Dubai residential property market generally remains oversupplied, and the downward trend in the market is unlikely to stabilise before Q2 2010,” the credit rating agency said in a special comment on Dubai-based developer Emaar.
“Furthermore, large-scale lending has not resumed and property developers have recorded a number of buyer delinquencies.”
Moody's placed the long-term issuer ratings of Emaar and Dubai Holding Commercial Operations Group (DHCOG) on review for possible downgrade on 30 June, after it was announced that the two groups would merge.
On Tuesday, it said the merged entity would create a new giant in Dubai's real estate market, with unrivalled access to a sizeable land bank
Several other factors, such as the opening of the Dubai Metro, the inauguration of Burj Dubai and the beginning of the summer period would shape Dubai's residential property market in the near term, and could lead to greater differentiation within Dubai's residential areas, from which Emaar and DHCOG's real estate divisions could benefit, Moody’s said.
But larger government ownership in Emaar may not be sufficient to mitigate the detrimental impact that the merger would have on the company's fundamental creditworthiness, said Martin Kohlhase, an associate analyst in Moody's Corporate Finance Group in Dubai.
“Furthermore, ongoing market weakness and the prospects of weaker cash flow over the near to medium term will impact the combined group going forward,” he said.
Just reminds me of role of Credit rating agency in Sub- Prime Crisis. They rated the Junk Bond as Gold. See what happened to Lehman which was Moddy's A a week before Bankruptcy.