Drones and deals: should we wait for discounts on the real estate market in Dubai
J.P. Morgan analysts see downside potential for shares of key UAE developers
Dubai's main stock index rose 2.3% - Emaar Properties shares were up 5.2% in early trading, while Aldar Properties in Abu Dhabi rose more than 6%. Photo: Christopher Pike/Getty Images
On March 18, the Dubai real estate index soared by 4.5%, the volume of transactions increased by 50% at the end of the second week of the war. At the same time, Iran has been attacking the Emirates with drones and missiles almost daily for 18 days. Lyudmila Milevskaya, Oninvest's correspondent in the UAE, spoke to investors.
How customers react
On March 16, when authorities closed Dubai airport for several hours due to a drone attack, it was reported that former UFC champion Francis Ngannou bought a mansion in Dubai's Armani Beach Residence, which is located in the iconic Palm Jumeirah neighborhood. The five-bedroom, 1,500-square-foot home is under construction for $25.2 million. Last week, a villa in the World Islands was sold for about $59.4 million.
The authorities did everything to make the war not be felt, says financial consultant Vadim Poghosyan in a conversation with Oninvest. The only reminder of the war was the telephone, through which a loud air-raid alert would come on. Recently, the authorities made the "in case of potential missile threat" notification sound quieter at night.
This is the best Dubai of all time, there are no tourists, there are discounts. Of our business club of Russian-speaking entrepreneurs, about 30% have left. Many clients call and ask about distress assets - real estate or hotel business, they are also interested in airline shares. Many deals on the real estate market have stopped. Everyone is waiting for a better entry point, realizing that at current prices they will still have time to buy.
Realtor Alexei Prikhodko from Abu Dhabi confirms that clients ask for a 20-30% discount. But no one gives such discounts, at least not en masse.
During Ramadan [Muslim fasting - Oninvest note], developers offer more favorable payment terms or cancel the registration fee: about 2%. Hot offers appear on the secondary market, but not on a mass scale.
One of the buyers of real estate in the UAE, who wished to remain unnamed, told Oninvest that after the outbreak of hostilities he was offered a 1% discount, and he decided to buy anyway, as he has been living and working here for many years and expects the conflict to end as soon as possible.
What the numbers say
The real estate index (DFMREI) fell more than 30% on the first day of trading after the war began. Last week, it was down 13.8%. Meanwhile, total real estate transactions during the same period - including land deals - soared to $4.26 billion (AED 15.66 billion). That's a 51% increase in value and a 58% increase in the number of transactions compared to the previous week. Data from the Dubai Land Department (DLD) was analyzed by The Real Estate Reports platform.
The recovery is primarily driven by the number of transactions
If land is excluded to remove volatility from ultra-expensive land transactions, the total value of completed or under construction properties sold (excluding land) rose 13% to $2.25 billion, while the number of transactions rose 56% to 4,327 transactions. The divergence between the moderate increase in value and the sharp jump in volume indicates that the average transaction check has declined. This is a typical signal of a market operating in an environment of more cautious but broad-based investor participation.
Data from analytics platform DXBinteract shows that the price per square foot fell 2.7% last week to $463.
What about the stock
Analysts of J. P. Morgan in their note dated March 11 (available at Oninvest's disposal) write that shares of the largest player in the region - Emaar Development - may decline by about 18%: the company is most dependent on the cyclical real estate market in Dubai and demand from foreign investors, which accounts for about 40% of sales. Emaar Properties, meanwhile, is already trading at a level that reflects the value of its current portfolio. Aldar Properties' securities, according to J.P. Morgan's assessment, have a downside potential of about 4% - the company has a lower proportion of foreign owners, the share of local buyers is 74%, while Emaar's share is 60%.
In case of a Fed rate cut (the dirham is pegged to the dollar), analysts predict cheaper mortgage lending and increased demand for real estate.
Shares of all developers grew on March 18 - the day before S&P agency confirmed the stability of the sector. Emaar Properties added 4.37%, and Emaar Development - 6.27%. In Abu Dhabi, shares of developer Aldar Properties rose 3.7%&
This article was AI-translated and verified by a human editor
