Wednesday, 27 April 2016

UAE Property Prices May Drop Further In 2016



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

The report is available to subscribers of RatingsDirect at

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212-438-7280 or sending an e-mail to research_request@standardandpoors.com.

Ratings information can also be found on Standard & Poor's public Web site by

using the Ratings search box located in the left column at

www.standardandpoors.com. Alternatively, call one of the following Standard &

Poor's numbers: Client Support Europe (44) 20-7176-7176; London Press Office

(44) 20-7176-3605; Paris (33) 1-4420-6708; Frankfurt (49) 69-33-999-225;

Stockholm (46) 8-440-5914; or Moscow (7) 495-783-4009.

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