NewsMore confidence in Abu Dhabi real estate than in Dubai
Sorouh and Aldar, two of the major real estate developers in Abu Dhabi, have released their year-end financial reports for 2008. Both reports show net profit increases, even though both companies took a downturn in the last quarter of 2008. Aldar also took a hit when they announced they would stop working on parts of the Al Raha Beach-project, which is part of a venture with Laing O’Rourke, laying off 320 people.
Despite signs of a weakening market, a report from Credit Suisse on the UAE real estate market predicts that Abu Dhabi will weather the real estate slump significantly better than neighbouring Dubai.
The company’s analysts had predicted varying fourth quarter results among the large real estate companies but anticipated that Aldar and Sorouh would report respective increases of 62% and 13% on Q3 results. Sorouh remained Credit Suisse’s preferred company, thanks to its high margin land sales in 2008. Analysts estimated its annual profits at $735m, a year-on-year growth of 113%.
However, despite the growth of both companies, experts at Credit Suisse warned that the proportion of Aldar’s earnings coming from revaluation of investment properties remains high, at 40%. These revalued figures are also predicted to slip in the first quarter of 2009.
Supply and demand
The report supported the Abu Dhabi market over Dubai and other Gulf markets. Analysts Andrei Nikitin, Ahmed Badr and Hans Zayed said:
“We remain advocates of Abu Dhabi-focused developers owing to the expected influx of state money into the sector to address the current supply deficit, as well as availability of project financing from the Abu Dhabi government and/or sovereign wealth funds.”
“In this respect we nominate Aldar Properties and Sorouh Real Estate as our top picks in the UAE.”
The undersupply of property in Abu Dhabi paired with government support for the ongoing health of the sector is projected to keep the market relatively buoyant.
However, the report also pointed out that the negative press reports regarding the sustainability of Dubai’s property sector have had an impact on Abu Dhabi companies. It suggested that selling prices will have to reduce as a result of the knock-on effect from Dubai.
By contrast, the Credit Suisse experts ‘have a cautious outlook’ on Dubai’s real estate market.
Further Reading
« Sorouh puts future developments on hold | Jehaan by Aspire handed over to third party »
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