UAE property stocks drop on negative ratings outlook

'Rumours on the real estate situation that sales are going down really hard,' said one broker.

Property stocks struggled on the DFM after reports predicted a fall in home prices this year. Sarah Dea / The National

Property stocks in Dubai took a hit on Thursday after the ratings agency Standard & Poor’s and the consultancy JLL released bearish views on the emirate’s real estate sector this week.

“The reports have had a big effect on the sentiment of investors,” said Samer Abuzahra, the head of institutional sales at Mubasher Trade in Dubai.

“That bearishness has affected property stocks, which have a heavy weighting on the index.”

S&P on Wednesday said that it expected a correction of as much as 20 per cent for Dubai’s home prices. The view echoed that of JLL, which on Tuesday said it expected prices and rents to drop this year by an average of 10 per cent.

Also last year the value of Dubai property transactions fell 7.6 per cent compared with the previous year to Dh218 billion, according to Dubai Land Department data.

Meanwhile, a list of cancelled projects on the Dubai Courts website was expanded to include more than 150 developments. When it was first published last summer, it cited 36 developments.

Emaar Properties shares dropped 2.9 per cent to Dh6.70. Union Properties lost 2.7 per cent to Dh1.07 a share. Deyaar Development fell 4.4 per cent to 76 fils a share.

The benchmark Dubai index fell 1.66 per cent to 3,674.40 points.

On the Abu Dhabi Securities Exchange, Aldar Properties shares declined 3.2 per cent to Dh2.37, while RAK Properties shed 4 per cent to 72 fils a share.

The broader index in the capital lost 1.31 per cent to 4,456.82 points.

“There’s rumours on the real estate situation that sales are going down really hard – that’s the new topic,” said a broker who spoke on condition of anonymity. “Our clients are also investors in real estate, and these companies have issued disappointing results for 2014 when it was supposed to be a very good year, and that’s worrying.”

Union Properties this week reported a 45 per cent drop in profit to Dh858.6 million for last year, according to financial statements posted on the Dubai Financial Market website.

“It definitely gives you an indication of a drop in real estate value, and in addition to a drop in appetite, which is filtering through to sales and revenue,” said Tariq Qaqish, the head of asset management at Al Mal Capital in Dubai.

Abu Dhabi Islamic Bank’s fourth quarter results show a provision of Dh70m on real estate, Mr Qaqish said.

“That indicates real estate is being hit, and the outlook appears that consolidation and potentially a drop in real estate are on the horizon for 2015-16,” he added.

Fathi Ben Grira, the chief executive of the Abu Dhabi stockbrokerage Mena Corp, said investors were awaiting Damac results next week, which could be a signal for hope.

“There’s not much volumes on it, but when they see this is a property developer with potentially some good results, investors will have some action on it,” Mr Ben Grira said.

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