UAE developers change strategy to adapt to softening market
UAE property developers responded to a softening in the industry as more supply came online, with many making fundamental changes to their operations this year to boost earnings.
A Dh30-billion partnership between the country’s two biggest listed real estate companies, Emaar Properties and Aldar Properties, in March helped fuel investor confidence in the market. Aldar spun off $5.4bn of revenue-generating assets into a new subsidiary, Aldar Investments. In September, the planned sale by Emaar Hospitality of five of its flagship Dubai hotels to an Abu Dhabi National Hotels, and the continued foray into the expanding middle-income segment by developers including Aldar, Bloom Holding and Nakheel Properties, also illustrate the strategic thinking of the industry leaders.
For some companies, consolidation strategies started to bear fruit. Dubai contractor Arabtec more than doubled its earnings year-on-year in the third quarter to Dh181 million, thanks to project wins and an ongoing reorganisation. Revenues grew 12.7 per cent during the period.
Going into 2019, robust supply will persist. Oil prices rising to above $80 per barrel in the summer and an increase in construction activity ahead of Expo 2020 Dubai boosted sentiment and prompted growth this year. However, rising supply may keep prices low, even if this indicates a maturing market, commentators say. “Property prices are expected to continue to decline as we are most likely to see the materialisation of residential supply double, if not triple, the amount of units from past years,” said Lynnette Abad, director of research and data at UAE portal Property Finder.