Amid Weak Market Conditions, Says Report
Primary Credit Analysts:
Franck Delage, Paris (33) 1-4420-6778; franck.delage@standardandpoors.com
Sapna Jagtiani, Dubai +971 (0) 4 372-7122; sapna.jagtiani@standardandpoors.com
Secondary Contact:
Mounia Chaoui Roquai, London 00 44 20 7176 3750; mounia.chaoui-roquai@standardandpoors.com
PARIS (Standard & Poor's) April 27, 2016--Real estate prices in the United
Arab Emirates (UAE) are likely to continue declining in 2016, says Standard &
Poor's Ratings Services in a report published today (see "Inside Credit: UAE
Real Estate Prices May Slide Further In 2016, As No Positive Signs Emerge" on
RatingsDirect).
For the coming year, we see no sign of market improvement for the UAE real
estate sector, despite housing affordability improving from the current price
environment. Pressures have arisen from declining oil prices dampening the
hiring and expansion plans of oil-exposed companies; non-oil private
companies' business activities having softened; the strong U.S. dollar
rendering UAE real estate more expensive for international investors holding
non-U.S.-dollar liquidities; and pressures on tourism negatively affecting
retailers and their landlords, as well as hotel operators.
That said, we do not foresee major negative movements in our real estate
sector ratings over the next 12 months. Generally, we believe that our rated
developers could absorb a 10% drop in residential sales prices in Dubai this
year.
Developers' revenues should remain robust in 2016, despite headwinds. This
reflects that most of their projects are presold--that is, the majority of
units are already sold well before construction ends--and proceeds from buyers
are blocked in an escrow account until completion. All our rated real estate
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UAE Property Prices May Drop Further In 2016 Amid Weak Market Conditions, Says Report
companies have secured lease structures with long lease tenures and more than
90% occupancies across the portfolio.
We still believe that the lifting of geopolitical restrictions, such the
sanctions on Russia and Iran, could strongly benefit the recovery of the UAE
property market. This would open new investment flows into the regions' real
estate markets and partly compensate for the softening demand from other
countries. A rebound in oil prices as well as weakening U.S. dollar would also
likely reverse the negative trend, in our view.
Only a rating committee may determine a rating action and this report does not
constitute a rating action.
Additional Contact:
Industrial Ratings Europe; Corporate_Admin_London@standardandpoors.com
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Poor's numbers: Client Support Europe (44) 20-7176-7176; London Press Office
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