UAE News: Dubai Gets Flashback to Falling Property Prices

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Photographer: Christopher Pike/Bloomberg

A decade after the global financial crisis pushed Dubai’s real estate sector — known for its outlandish projects such as man-made palm-shaped islands — to the brink of collapse, the deadly coronavirus pandemic threatens to send it back there again.

S&P Global Ratings is warning that home prices could slump to 2010 levels as unemployment across key sectors such as tourism and retail eviscerates demand. Prices are currently about 5% to 10% above what they reached a year after the debt crisis in 2009, according to data from real estate services firm Asteco.

Related: Dubai’s Limitless to Hire Advisers as Third Restructuring Looms

Developers are still wrestling with debt repayments that have already gone through a number of restructurings, while earnings for some companies linked to property have fallen through the floor. Emaar Properties PJSC on Monday said three of its listed companies will not pay dividends for 2019 in “view of the current circumstances.”

The Middle Eastern business and travel hub — like many other cities around the world — is in lockdown, with Emirates passenger flights grounded, the city’s cavernous malls and luxurious hotels shuttered. Dubai is especially vulnerable to the measures as it relies heavily on tourism and trade — both of which are also essential to keep up demand for properties.

“The real estate sector is likely to see a significant impact from Covid-19, with a drop in international buyers, the social distancing measures and the weaker market sentiment,” said Monica Malik, chief economist at Abu Dhabi Commercial Bank PJSC. “The crisis will likely place additional pressure on a sector that is already suffering from oversupply.”

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