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The UAE’s real estate market might take some time to recover from the slowdown induced by the coronavirus this year.
Ratings agency S&P said on Thursday that prices will likely decline more steeply in 2020 and the real estate slump will linger well into 2021.
“We now expect to see international demand for property in UAE to be subdued and the fall in residential prices to be steeper than we had expected, and lingering well into 2021,” S&P said.
The widespread lockdowns and bans on cross-border travels due to coronavirus have kept investors away from the property market. In March alone, off-plan residential sales transactions volume in Dubai plunged 42 percent compared to February, according to ValuStrat.
“The real estate sector is an important part of the UAE’s activity. The current supply-demand imbalance in the sector, particularly in Dubai, had been exacerbated by the pandemic’s effects,” said S&P.
It said that the job losses or reduced disposable income could lead to cancelled sales and lower prices. Demand from institutional investors could also weaken, especially in the case of built-to-let schemes.
Considering the bleak economic backdrop, S&P has taken negative rating actions on major property developers in the UAE, based on the pandemic’s effects.
The rating for Emaar, the master developer of the world’s tallest tower Burj Khalifa, has been downgraded fro BBB-/Stable to BBB-/Neg.
For Damac Properties, a luxury real estate developer, the rating has been downgraded to B/Negative from B+/Negative.
S&P said there is indeed a high degree of uncertainty about the rate of spread and peak of the coronavirus outbreak.
Some government authorities have predicted that the pandemic will peak in the middle of the year. S&P said they are using this assumption in assessing the economic and credit implications.
(Writing by Cleofe Maceda; editing by Seban Scaria)
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