Business | Property
Property sector earnings in GCC to decline this year
Earnings of real estate companies in the GCC are likely to dip 20 per cent in the financial year 2009, according to a report by the Kuwait Financial Centre, Markaz.
- By Suzanne Fenton, Staff Reporter
- Published: 23:31 May 27, 2009
- Image Credit:
- Earnings of real estate companies fell by 31 per cent year on year in 2008.
Dubai: Earnings of real estate companies in the GCC are likely to dip 20 per cent in the financial year 2009, according to a report by the Kuwait Financial Centre, Markaz.
While earnings contracted by 42 per cent in 2008 compared to 2007, the market value has also contracted by 44 per cent since the first quarter of this year.
The report points to a similarity of the corporate earnings structure to the US market in terms of the share of financial companies when, in the first half of 2007, financial services accounted for 45 per cent of the total corporate earnings.
Earnings of real estate companies fell by 31 per cent year on year in 2008 but were better than the overall earnings (- 42 per cent) while market value of real estate companies fell by 59 per cent since the first quarter of 2008.
However, the report also finds that the fall in earnings and market value bottomed out in the final quarter 2008 and are now stable.
Earnings of Kuwait real estate companies was at a negative $842 million (Dh3 billion) during the fourth quarter of last year and fared worse than the listed real estate companies in Dubai which was negative $671 million.
The contraction felt by Abu Dhabi real estate companies was 72 per cent of the first quarter of 2008 levels and Dubai real estate companies suffered an 80 per cent contraction.
Emaar recorded earnings of $831.8 million in 2008 and have expected earnings of $1.36 billion for this year.
Most other Dubai-based developers, however, are expecting a fall in earnings this year due to a lack of land sales, drop in revenues and lower gains for properties bought for investment purposes.
Deyaar predict a 21.7 per cent loss to reach $233 million and Union Properties predict a 13 per cent loss to hit $179.7 million at the end of 2009.
Deyaar is looking to expand to five other countries this year, especially in the Middle East and Africa, to tap into cheaper valuations and to spread their risk.
Union Properties is hoping for a better second quarter due to the handing over of units in its MotorCity project.
Abu Dhabi-based Aldar, expect earnings of $543 million this year. The developer, who is famously working on the Ferrari-branded theme parks, recently sold Dh4.5 billion in bonds making it the first real estate company to issue debt since August last year.
However, the property market is now stabilising and therefore market value has recovered since the beginning of the year.
Further real estate regulations, tighter controls on developers and a more savvy breed of investor all mean the market is improving with a full recovery expected in 2011, according to Jones Lang LaSalle. Qatar, Abu Dhabi and Kuwait are leading this recovery.
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