Strata law little help to property sector

New rules could hurt property companies

The strata law guidelines introduced late last week were perceived to be a boon to Dubai homeowners, who could save millions of dirhams in service fees. But the new rules could place a greater financial burden on property companies, which is just one of the reasons their shares continued to slide yesterday. Dubai property companies were down across the board yesterday: Emaar Properties fell 1.76 per cent, to Dh3.35; Union Properties dropped 4.76 per cent, to 40 fils; and Deyaar Development was off 0.59 per cent to 34 fils.

Emaar, which is the biggest public company in the country by market capitalisation, is down more than 20 per cent so far this year. The full impact of the strata law is not yet clear as the details of the guidelines have not yet been released, but it was yet another blow to the emirate's developers. They have been hit by falling prices in their own sector, of course, but the current economic backdrop is not helping them either.

"Everything is tied in," said Saud Masud, a property analyst with UBS. As a rule, Mr Masud said, house prices grow at a multiple of between 1.25 and 1.5 times GDP. So when the IMF forecast last week that Dubai's GDP would contract by 0.5 per cent, it did not bode well for the near-term future of the property market. At some point, the stocks will become so oversold that bargain hunters will come in and start buying selectively. But there are no signs of such buyers yet. It seems the headlines are just too scary from day to day - from concerns about oversupply, to the fallout from the euro zone and geo-political events in the region.

It remains hard to get excited about property companies, even if they appear to be attractively priced. "People are not convinced that the property story has yet improved," Mr Masud said. Coming into earnings season, property companies have an opportunity to convince sceptics but few investors are holding their breath these days. [e-mail]