Skip to content

Gulf property companies post profit drops

The outlook is grim for the Gulf region according to Kuwait based investment bank Markaz and the property sector is a determining key factor in terms of over supply and constrained demand.

The reluctance of banks to lend due to the lack of confidence in the industry had also removed the necessary lubricants in the system, and pushed the region into deeper negative growth, Markaz said in its outlook report for the second quarter of 2009.

'The persistent uncertainties in demand expectations, especially in Dubai, will continue to haunt the real estate sector. Though some banks have offered renewed mortgage lending, the extent of takers for such loans is questionable given the huge uncertainty in demand prospects, especially in Dubai,' its report said.

The outlook for the GCC real estate sector as a whole remained negative, due to weak demand and abundant supply, the report concluded.

The impact on property companies is clear. Dubai's Emaar Properties posted a 73.6% drop in first-quarter profit as the property slump hit sales and deliveries. Net income in the first quarter fell to 237 million dirhams, down from 896 million dirhams in the year-earlier period.

'The revenues and profit for the first quarter 2009 are lower than the same period of 2008 due to lower deliveries and also lower sales of completed units,' Emaar said in a statement.

The company returned to profit after posting a 1.77 billion dirham loss in the fourth quarter after it was forced to take impairments and writedowns related to struggling US home builder John Laing Homes, which it took over in June 2006.

Emaar took about 4 billion dirhams of losses related to that acquisition before John Laing in February sought Chapter 11 bankruptcy protection, a move analysts said would allow Emaar to concentrate on performance in its home market.

Abu Dhabi's Aldar Properties and Sorouh Real Estate also recorded first-quarter profit drops of 35% and 65% respectively.