UAE realty may see 70% drop: UBS
Zawya Dow Jones/Dubai
Swiss Investment bank UBS has downgraded the UAE’s real estate sector, citing a possible 70% fall in prices and significant oversupply as its main concerns.
“We believe the recent run up in equities with positive global market sentiment, UAE government bailout as a backdrop is unsustainable,” the bank said in a research note. “We don’t yet see fundamentals improving, hence we view overall systematic risk as mispriced.”
Despite shares in Abu Dhabi’s Aldar Properties, and Dubai’s Union Properties and Emaar Properties rising 84%, 40%, and 33% respectively over the past month, UBS downgraded Emaar and Union Properties to sell, from neutral rating and Aldar to neutral, from buy.
Dubai property prices have been sliding since September when the ongoing global financial crisis and a fall in oil prices ended the Gulf region’s economic boom.
UBS expects Dubai’s population to fall 10% over the next two years due to job cuts, with residential vacancy rates reaching up to 30% by the end of 2010 due to an oversupply.
It says that this could cause the average house price to fall to as much as 500 UAE dirhams ($136.1) per square foot from a peak of 1850 dirhams in the fourth quarter of 2008.
“In our view we are still in relatively early stages of the property down cycle in the UAE,” UBS said. “We believe risk-reward profiles are not yet compelling for investors to consider market reentry hence continued price declines are expected.”
UBS said average property prices have already fallen at least 25% to approximately 1400 dirhams per square foot, but anticipates that prices will become even more attractive in the second half of the year.
Zawya Dow Jones/Dubai
Swiss Investment bank UBS has downgraded the UAE’s real estate sector, citing a possible 70% fall in prices and significant oversupply as its main concerns.
“We believe the recent run up in equities with positive global market sentiment, UAE government bailout as a backdrop is unsustainable,” the bank said in a research note. “We don’t yet see fundamentals improving, hence we view overall systematic risk as mispriced.”
Despite shares in Abu Dhabi’s Aldar Properties, and Dubai’s Union Properties and Emaar Properties rising 84%, 40%, and 33% respectively over the past month, UBS downgraded Emaar and Union Properties to sell, from neutral rating and Aldar to neutral, from buy.
Dubai property prices have been sliding since September when the ongoing global financial crisis and a fall in oil prices ended the Gulf region’s economic boom.
UBS expects Dubai’s population to fall 10% over the next two years due to job cuts, with residential vacancy rates reaching up to 30% by the end of 2010 due to an oversupply.
It says that this could cause the average house price to fall to as much as 500 UAE dirhams ($136.1) per square foot from a peak of 1850 dirhams in the fourth quarter of 2008.
“In our view we are still in relatively early stages of the property down cycle in the UAE,” UBS said. “We believe risk-reward profiles are not yet compelling for investors to consider market reentry hence continued price declines are expected.”
UBS said average property prices have already fallen at least 25% to approximately 1400 dirhams per square foot, but anticipates that prices will become even more attractive in the second half of the year.
