Dubai set for another fall in property prices, says S&P

Average house prices in Dubai are likely to fall by another 10 per cent this year with no sign of improvement on the immediate horizon, according to the ratings agency Standard & Poor’s.

The agency, which rates bonds issued by three UAE developers – Emaar Properties, Damac Properties and Aldar Properties – said that the historically low price of oil and the strong dollar would continue to push property prices down in Dubai throughout the year, while prices in Abu Dhabi will start to follow suit.

In a note published on Wednesday, S&P said that after falling between 10 and 13 per cent last year, it expected similar falls this year with few signs of optimism for the year after.

“For the coming year we see no sign of market improvement for the UAE real estate sector, despite housing affordability improving from the current price environment,” said Sapna Jagtiani, the primary credit analyst for S&P in Dubai.

“Pressures have arisen from declining oil prices, dampening the hiring and expansion plans of oil-exposed companies; non-oil private companies’ business activities having softened; and the strong US dollar rendering UAE real estate more expensive for international investors holding non-US dollar liquidities.”

But S&P said that despite the negative outlook for the real estate market it did not expect to downgrade the ratings on the three developers, which for Emaar and Damac stand at “stable” and for Aldar “positive”.

“Generally we believe that our rated developers could absorb a 10 per cent drop in residential sales prices in Dubai this year,” Ms Jagtiani said.

The ratings agency said that it came up with its predictions based on reports from property brokers in the UAE as well as from talking to the companies it rated rather than from any specific analysis of Dubai house prices.

S&P said that it did not foresee a rebound in oil prices until at least next year.

S&P’s predictions come as property brokers debate the timing of a potential property market recovery in Dubai.

This month, JLL reported that despite a 10 per cent fall in house prices in the year to the end of last month, average prices in the city were close to bottoming out and values were likely to increase later this year.

But Cluttons reported that sales prices fell by 2.2 per cent in the first quarter of the year and uncertainty over oil prices, which has a knock-on effect on banks’ liquidity, meant a recovery in the short term was unlikely.

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