S&P Global Ratings report highlights continued gap between supply and demand in Dubai property market
Property price declines in Dubai are set to continue this year as values have already plunged close to levels last seen during a crash a decade ago, according to S&P Global Ratings.
A supply glut has built up even as demand faltered, feeding what S&P is calling the market’s “long decline” that’s seen prices and rents drop by as much as a third since peaking in 2014.
“Given the continued gap between supply and demand, in our base case we expect prices to fall a further 5 percent to 10 percent in 2019 before a gradual stabilization in 2020, though without a meaningful recovery in 2021,” S&P analyst Sapna Jagtiani said in a report.
Under the rating company’s “stress” scenario, the emirate’s property prices could suffer an even “more pronounced” drop and only steady in two years if more projects come on line in a weak market.
The outlook suggests the World Expo in Dubai next year won’t be a game changer for its real estate.
Hussain Sajwani, chairman of local developer Damac Properties, whose stock lost half its value last year, similarly predicted a recovery isn’t expected before the end of 2020.
Investors aren’t any more optimistic. The Dubai stock exchange’s real estate index has underperformed the bourse’s benchmark gauge in the past year.
In what may be a glimmer of hope for a recovery, some major developers in Dubai posted growth in their earnings for 2018 that exceeded analyst estimates, fueling stocks tied to Emaar Properties.
Damac stood out, however, reporting the lowest profit since its initial public offering in 2013.