Expo 2020 unlikely to end Dubai’s ongoing real estate slump: S&P

Residential prices in Dubai have fallen by about 10 percent since February, S&P said. (File photo: AFP)

The upcoming Dubai Expo 2020 will help hotels and retailers, but is unlikely to materially improve long-term conditions in the city’s real-estate sector, which is in the middle of a supply glut.

The market sentiment may improve as a result of Dubai’s hosting of the 2020 World Expo, an event that is expected to pull millions of visitors to the Gulf financial hub, the ratings agency said. But, since the price decline has been gradual, it will take longer for a meaningful recovery.

“We expect prices to remain under pressure during 2019-2020, and don't foresee a meaningful recovery in the near term due to the current supply-demand imbalance,” S&P Global ratings analyst Sapna Jagtiani said in a report.

Dubai’s real estate has seen an extended period of oversupply, which has pushed property prices down to record lows. Builders in Dubai, home to the world’s tallest building the Burj Khalifa, have still not completely recovered from the impact of the 2008 economic crash.

DAMAC Properties, which is among the top ten developers in the city, posted a 78 percent fall in its third-quarter profit. The company’s chairman Hussain Sajwani has reportedly urged property developers to refrain from launching any new residential projects in Dubai for at least a year.

“Let the market stabilize,” Sajwani told media.

Residential prices have fallen by about 10 percent since February, while the outlook remains weak in the fourth quarter as new supply hits the market, S&P said in its report.

In September, Dubai said it would establish a Higher Real Estate Planning Committee to enable the emirate to manage its real estate supply and demand.

Meanwhile, the UAE central bank in October went further and proposed a new regulatory framework to prevent banks from becoming overly-exposed to the country’s real estate sector.

Dubai reported a 2.1 percent year-on-year growth in its economy for the first half of 2019, with gross domestic product (GDP), a common measure of the total size of an economy, reaching 208.2 billion dirhams ($56.69 billion).

SHOW MORE
Last Update: 11:30 KSA 14:30 - GMT 11:30
Top