Reports show property developers in difficult cycle



Property developers' latest earnings show the sector is struggling to break a cycle of sluggish sales, rising supply and falling prices.

Deyaar Development, Dubai's second-largest developer, yesterday posted a Dh145 million (US$39.4m) loss for the third quarter, while Rak Properties said profit fell 9.8 per cent to Dh163.8m for the first nine months of this year compared with the same period a year earlier. Arabtec, the UAE's biggest builder also suffered a decline in profits of 96 per cent in the third quarter compared with the same period last year to Dh6.8m after contracts were cancelled.

Colliers International, the property broker, delivered more bad news for the market when it published a report that showed prices fell by about 6 per cent over the quarter from the previous quarter.

Ian Albert, the regional director of Colliers, said "after a period of stable prices, we are beginning to witness a shallow but lengthening slide in overall prices". The situation could become worse as 33,000 new units are released on to the market by the end of this year, he added.

Analysts had predicted prices would halt their decline and begin a gradual recovery this year as lending to home buyers resumed and companies were restructured.

But with buildings in Dubai financed directly by buyers, the downturn is lingering, according to analysts. If developers stop building, they are liable to reimburse the full amount buyers paid. And if buyers default, they can lose their payments up to that date. That is pushing both sides to continue construction on some buildings, even if they are no longer commercially viable.

Mohamed Alabbar, the chairman of Emaar Properties, said the oversupply in Dubai would last for another 20 months.

Speaking at a conference in New York, he said before the global economic crisis prices in Dubai had risen higher than in New York, "which is abnormal".

Emaar's profits also declined in the third quarter, dropping by 7 per cent compared with the same period last year to Dh612m on write-downs and increasing costs.

In Abu Dhabi, property developers are facing their own steep challenges. Sorouh Real Estate, the second-largest developer, saw its profits decline by 68 per cent on the third quarter last year after it made provisions on delayed payments from land buyers and one-off expenses.

The real barometer for the capital will come this week when Aldar Properties releases its financial statements. John Bullough, the chief executive, resigned this month and analysts predict a loss for the third quarter.

Bank of America Merill Lynch said the company needed Dh9.8bn by the end of this year to continue operating. It has more than $3.8bn of debt maturing next year.

A solution to Aldar's funding woes could come in the form of a long-term loan from the Government that would be used to pay off and refinance debts, as well as helping it to continue its projects.

The Abu Dhabi Government is playing an expanding role in the capital's property sector. The law firm Al Tamimi & Company said yesterday new businesses registering in Abu Dhabi could no longer use villas as their offices. That was likely to help fill thousands of office units across the city, it added.

Developers have been forced to "reassess their schemes, scale back more ambitious projects, seek alternative means of funding and plan product more aligned to the end-user", according to a report from Jones Lang LaSalle.

The planned supply of homes will probably be cut by about 60 per cent, compared with the developments and towers announced in 2008, JLL said, adding that residential prices and rental prices declined again in the third quarter of this year compared with the previous quarter.

Company profile

Date started: 2015

Founder: John Tsioris and Ioanna Angelidaki

Based: Dubai

Sector: Online grocery delivery

Staff: 200

Funding: Undisclosed, but investors include the Jabbar Internet Group and Venture Friends

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Friday's schedule in Madrid

Men's quarter-finals

Novak Djokivic (1) v Marin Cilic (9) from 2pm UAE time

Roger Federer (4) v Dominic Thiem (5) from 7pm

Stefanos Tsitsipas (8) v Alexander Zverev (3) from 9.30pm

Stan Wawrinka v Rafael Nadal (2) from 11.30pm

Women's semi-finals

Belinda Bencic v Simona Halep (3) from 4.30pm

Sloane Stephens (8) v Kiki Bertens (7) from 10pm

'Morbius'

Director: Daniel Espinosa

Stars: Jared Leto, Matt Smith, Adria Arjona

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Teaching your child to save

Pre-school (three - five years)

You can’t yet talk about investing or borrowing, but introduce a “classic” money bank and start putting gifts and allowances away. When the child wants a specific toy, have them save for it and help them track their progress.

Early childhood (six - eight years)

Replace the money bank with three jars labelled ‘saving’, ‘spending’ and ‘sharing’. Have the child divide their allowance into the three jars each week and explain their choices in splitting their pocket money. A guide could be 25 per cent saving, 50 per cent spending, 25 per cent for charity and gift-giving.

Middle childhood (nine - 11 years)

Open a bank savings account and help your child establish a budget and set a savings goal. Introduce the notion of ‘paying yourself first’ by putting away savings as soon as your allowance is paid.

Young teens (12 - 14 years)

Change your child’s allowance from weekly to monthly and help them pinpoint long-range goals such as a trip, so they can start longer-term saving and find new ways to increase their saving.

Teenage (15 - 18 years)

Discuss mutual expectations about university costs and identify what they can help fund and set goals. Don’t pay for everything, so they can experience the pride of contributing.

Young adulthood (19 - 22 years)

Discuss post-graduation plans and future life goals, quantify expenses such as first apartment, work wardrobe, holidays and help them continue to save towards these goals.

* JP Morgan Private Bank 

COMPANY PROFILE

Company name: Nomad Homes
Started: 2020
Founders: Helen Chen, Damien Drap, and Dan Piehler
Based: UAE and Europe
Industry: PropTech
Funds raised so far: $44m
Investors: Acrew Capital, 01 Advisors, HighSage Ventures, Abstract Ventures, Partech, Precursor Ventures, Potluck Ventures, Knollwood and several undisclosed hedge funds

COMPANY PROFILE

Name: Ejari
Based: Riyadh, Saudi Arabia
Founders: Yazeed Al Shamsi, Fahad Albedah, Mohammed Alkhelewy and Khalid Almunif
Sector: PropTech
Total funding: $1 million
Investors: Sanabil 500 Mena, Hambro Perks' Oryx Fund and angel investors
Number of employees: 8

The five pillars of Islam

1. Fasting

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3. Hajj

4. Shahada

5. Zakat

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SPECS

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Mia Man’s tips for fermentation

- Start with a simple recipe such as yogurt or sauerkraut

- Keep your hands and kitchen tools clean. Sanitize knives, cutting boards, tongs and storage jars with boiling water before you start.

- Mold is bad: the colour pink is a sign of mold. If yogurt turns pink as it ferments, you need to discard it and start again. For kraut, if you remove the top leaves and see any sign of mold, you should discard the batch.

- Always use clean, closed, airtight lids and containers such as mason jars when fermenting yogurt and kraut. Keep the lid closed to prevent insects and contaminants from getting in.

 

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The burning issue

The internal combustion engine is facing a watershed moment – major manufacturer Volvo is to stop producing petroleum-powered vehicles by 2021 and countries in Europe, including the UK, have vowed to ban their sale before 2040. The National takes a look at the story of one of the most successful technologies of the last 100 years and how it has impacted life in the UAE.

Read part three: the age of the electric vehicle begins

Read part two: how climate change drove the race for an alternative 

Read part one: how cars came to the UAE

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West’s present net worth derives from cash, his music, real estate and a stake in former wife Kim Kardashian’s shapewear firm, Skims.