Damac Properties, the UAE's third-biggest property developer by market capitalisation, swung to a loss in the third quarter of the year as it declared almost Dh580 million worth of writedowns.
The company declared a loss of Dh544.6m, compared with a Dh51m profit in the same period last year. Revenue increased by 43 per cent to Dh1.28bn.
“We continue to endure the effects of the global Covid-19 pandemic, which negatively impacted the real estate industry. With social distancing becoming the norm, travel restrictions and a major dip in tourism, the market has been significantly impacted," Damac Properties chairman Hussain Sajwani said.
“Covid-19 has upset the balance sheets for many companies, which industry leaders have been very vocal and transparent about and while many analysts are forecasting a U-shaped recovery, we believe it may be some time before we see an upward recovery,” he added.
The company built 30,922 homes by the end of the third quarter, with another 34,000 in the pipeline to be built over 45 million square feet of land.
Profits were weighed down by the company making provisions of Dh528.5m against the value of development properties, and Dh51m against debts owed to it, "based on prevalent market conditions". For the nine-month period, the company has taken provisions of over Dh1.19bn. Damac declared a nine-month loss of Dh931.4m, compared to a profit of Dh132.6m last year despite revenue growing 32 per cent to Dh3.65bn.
Despite this, the company said in a presentation to investors that it still has net cash of Dh1.25bn as of September 30 and reduced gross debt by Dh500m during the nine-month period.
“Damac’s strong balance sheet has allowed it to absorb much of the market shock and we are optimistic that Dubai Expo next year will reap positive rewards for the real estate industry as sales and transactions will increase, offsetting the dip in the market due to Covid-19,” Mr Sajwani said.
Dubai's residential property market has reported an increase in transactions in recent months as movement restrictions related to the Covid-19 pandemic have eased, but prices have continued to fall as a result of weaker macroeconomic conditions and supply concerns. Average sale prices were 9 per cent lower in the third quarter than in the corresponding period last year, according to consultancy JLL.
"Looking ahead, the residential market is expected to remain under pressure in the short term in light of various macro uncertainties," JLL's UAE Q3 Real Estate Market Overview said, adding that investor sentiment globally remained subdued.
"As such, we expect developers to continue offering a range of incentives (fee waivers, discounts, rent-to-own), as well as partner with banks in offering reasonable home finance options to attract new investors and end-users looking to take advantage of the lower prices."