UAE Property Market Hits Bottom HSBC

The property market is beginning to bottom out in the UAE as real estate prices showed monthly gains in April and May, HSBC said in a
 report on Sunday. The property market in Dubai has suffered severely from the economic downturn, after having achieved unprecedented growth in both supply and demand, as well as high prices and rental rates, in recent years. Today, property prices are at their lowest levels, but Dubai is garnering the attention of numerous local and foreign investors who are looking to benefit from the decline in prices, the high quality of properties in the emirate, and its sound legislation 
and infrastructure. Agreed prices rose 4 per cent month-on-month in April and 5 per cent in May, but were still 23 down from a peak hit in September 2008, HSBC report said. “The stabilisation in pricing appears to be the result of several factors in play,” the report said. Liquidity was starting to return to the market as mortgage providers raised their loan-to-value ratios and eased credit norms, the report said. Rental yields were also still attractive, the report said, adding that volumes were robust.

The bank also said that while the long-term prospects for Abu Dhabi’s Aldar Properties remained favourable, its preferred exposure was now Dubai’s Emaar Properties. HSBC’s top stock pick in the real estate sector is Emaar, which has risen 40 per cent in the last three months, compared with a 62 per cent rise for Abu Dhabi based developer Aldar. Considering liquidity concerns are now subdued, improving property market fundamentals, and a solid Q1 performance, we feel that Emaar’s performance should be more in line with that of Aldar,” the bank said.HSBC has an overweight rating on Emaar and a target price of Dh8.5. Speaking on the subject, Eng. Khalid Esbaitah, CEO and Managing Director of Al Mazaya Holding, said, “There are a number of factors that any developer considers when embarking on an investment in any region in the world, and perhaps the estimated revenues of particular investments is what drives investors to go forward with the investment or to draw back from it. However, market movement, plot prices, infrastructure and legislation frameworks are the main factors for the success or failure of an investment. Bearing this in mind, we can see that the market in Dubai has all the right factors to become a sought-after investment destination, and that it is preparing for a new and organized economic leap that will compensate for the slowdown period.

The correction being experienced by the Dubai markets is a natural thing, and it presents a golden opportunity for investors who know how to make the best use of it. As such, Dubai’s market today is really a place for investors. “We expect real estate activity to return to Dubai after the summer period, as investors are studying their investment options during this period to start their businesses after the summer holidays. Therefore, Q4 of 2009 will a promising period, as it will witness the return of real estate activities,” Esbaitah said. Separately, Landmark Advisory, a real estate consultancy company, on Sunday launched its first sales price map for Abu Dhabi. Jesse Downs, Director of Research, Landmark Advisory, said that there are now signs of increasing activity in the Abu Dhabi market. As indicated by Landmark Advisory’s price map, Abu Dhabi Residential market prices are still showing signs of readjustment. While average prices for apartments have declined 5-10 per cent since the end of Q109 (a total decline of 30 per cent since Q308), villa prices have, however, remained stable as previously severe price declines (up to 45 per cent), since Q308 begin to stabilise.