Emaar set to generate $132bn from property sales by 2040

About 32 per cent of the company's total development portfolio will be sold in the coming five years, EFG Hermes estimates

Emaar is the developer behind the world's tallest tower, the Burj Khalifa. Reuters

Emaar Properties could generate Dh485 billion ($132.15 billion) from the sale of its development portfolio by 2040, as Dubai’s biggest listed developer continues to dominate the emirate's real estate market.

About Dh155 billion, or 32 per cent of the total portfolio, will be sold in the coming five years, Egyptian investment bank EFG Hermes said in a note to investors on Monday.

“Emaar’s communities in Dubai are premium and attract demand from a wide buyer base; hence, we expect it to maintain its market leadership,” Mai Attia, managing director and head of real estate and constructions sector research at EFG Hermes, said.

“We estimate group contracted sales of Dh35.1 billion in 2023, Dh37.3 billion in 2024 and Dh39.4 billion in 2025.”

Emaar, the developer behind the world’s tallest build, the Burj Khalifa, has remained at the heart of Dubai’s property market growth over the past decades.

The company, whose portfolio of properties span retail, residential, commercial, office and hospitality segments, has an estimated land bank of 340 million square feet in Dubai, EFG Hermes said.

The continued resurgence of Dubai's economy from the pandemic-driven slowdown also bodes well for the future growth prospects of the developer.

The emirate's economy expanded by 4.6 per cent on an annual basis in the first nine months of last year, data from the Dubai Statistics Centre shows.

Dubai's economy is estimated to have grown 5 per cent last year and is forecast to increase by 3.5 per cent in 2023, according to Emirates NBD.

The emirate, the commercial and tourism hub of the Middle East, has strengthened its status as a major global economic centre in the first half of 2023, boosted by robust performance across sectors, Sheikh Hamdan bin Mohammed, Crown Prince of Dubai said in July.

The emirate received 8.55 million visitors in the first half, as the total number of visitors surpassed the pre-pandemic levels.

It also emerged as one of the world’s three most attractive cities for the wealthy, and one of the fastest-recovering cities since the Covid-19 pandemic, Sheikh Hamdan wrote in a tweet at the time.

The property market in the emirate has continued growth momentum into this year, with total transaction value rising 80 per cent annually to Dh157 billion in the first quarter, according to official data.

Total transactions rose 49 per cent to 38,715 during the January-March period.

Average prices in Dubai's residential market increased by 16.9 per cent in the year to June, with apartment prices up 17.2 per cent and average villa prices rising by 15.1 per cent, according to a recent report by consultancy CBRE.

Emaar Properties launched The Oasis by Emaar, its latest waterfront luxury lifestyle destination, in June. Photo: Emaar

As of June, average apartment prices stood at Dh1,294 per square foot, while average villa prices were at Dh1,525 per square foot, it said.

In June, S&P Global Ratings upgraded Emaar Properties' long-term issuer credit rating based on expectations of a more robust business performance amid the strength of Dubai's property market.

EFG Hermes said property development will remain Emaar’s core business, especially its operations in Dubai.

It launched a $20 billion luxury waterfront property development in June. The project on the outskirts of the city, called The Oasis by Emaar, will consist of 7,000 residential units, including mansions and villas, the company said at the time.

The company is the leader in Dubai, having an estimated 25 per cent share of the market.

However, beyond Dubai, "any significant expansion plans in Saudi Arabia and/or Egypt (especially in the North Coast) would be a welcome step to solidify Emaar’s position further in such growing markets", Ms Attia said.

Emaar also has strong presence in Dubai’s retail and hospitality markets. The company has access to 10.3 million square feet of retail space in the emirate, predominantly across premium retail malls.

“We expect recurring income from the retail segment to continue its growth story, increasing at a 2023-2027 [estimated] CAGR [compound annual growth rate] of 6.2 per cent, with revenue from Dubai Hills mall driving growth as occupancies ramp up,” Ms Attia said.

EFG Hermes expects average occupancy rates of Emaar’s retail portfolio to remain above 95 per cent and lease rates to increase at 3 per cent per annum on average.

The company’s hotel revenue would increase 6.8 per cent annually in the five years to the end of 2027, with plans to add 600 hotel rooms by 2026, most of which will open in 2023.

“We believe the assets offer a diversified exposure to the sector through various hotel star categories, starting from the affordable segment to high-end luxury,” she said.

EFG Hermes on Monday maintained its “Buy” rating on Emaar stock and increased its target price to Dh9.50, offering a 35 per cent upside potential.

Despite the company consistently reporting solid operational and financial figures since the second half of 2021, the stock performance has lost the positive momentum it had in 2022. It has underperformed the Dubai's benchmark equities index year-to-date, "which is unjustifiable, in our view”, she said.

“We remain positive on the company’s valuation and think the stock will re-rate in the short term to reflect the company’s attractive valuation, strong visibility of earnings and cash flow, and the overall growth profile it offers on various segments of Dubai’s real estate sector.”