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Dubai debt problems put downward pressure on property prices and rentals, report claims

Data for the third quarter of 2009 suggested that the UAE real estate sector was showing early signs of recovery with prices and rentals beginning to stabilize, but international brokers Goldman Sachs says in a new report the overall impact of the debt crisis will be negative although the extent of the fall out is not yet clear.
‘The extent of the impact on the sector will largely be a function of how the restructuring of Dubai World unfolds. That remains unclear at this stage,’ the report says.

Last month, Dubai raised fears of a second bout of global financial turmoil by asking for a six month repayment freeze on debt issued by Dubai World and its property development unit Nakheel.
The real estate and construction focus in the UAE is shifting to Abu Dhabi from Dubai, said Goldman Sachs, which revised its price targets on UAE real estate companies, including its top picks Aldar Properties and Arabtec Holding.

Abu Dhabi based Aldar's strong market position and government backing should allow it to benefit from the expected pick up in Abu Dhabi's economic growth on the back of high oil prices and its plans for diversification, the report pointed out.

Dubai's Arabtec should benefit from its diversification into high growth construction markets such as Saudi Arabia, Qatar and Abu Dhabi, although short term challenges relating to working capital and exposure to Dubai remain, it added.

Meanwhile Dubai based Emaar Properties is in a stronger position than it seems, due to the cancellation of its merger with three property units of Dubai Holding, according to Deutsche Bank.
The Dubai master developer, which is building the world’s tallest tower, last week announced the cancellation of merger plans with Dubai Properties, Sama Dubai and Tatweer. ‘Now that the potential merger with Dubai Holding entities is off the table we believe investors can take a fresh look and rediscover Emaar’s appealing equity story,’ Deutsche Bank analysts said.