Investments from high-net-worth individuals, strong economic growth as well as population growth have helped the property sector to record growth in Dubai. Victor Besa / The National
Investments from high-net-worth individuals, strong economic growth as well as population growth have helped the property sector to record growth in Dubai. Victor Besa / The National
Investments from high-net-worth individuals, strong economic growth as well as population growth have helped the property sector to record growth in Dubai. Victor Besa / The National
Investments from high-net-worth individuals, strong economic growth as well as population growth have helped the property sector to record growth in Dubai. Victor Besa / The National

Cash-rich Dubai developers expected to withstand cyclical downturn


Fareed Rahman
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Dubai's property market could start to cool over the next 12 to 18 months amid the global economic pressures, but the emirate’s developers will be able to withstand the turn in the cycle due to their strong liquidity position, according to a new report.

“We expect developers to continue to accumulate cash and improve liquidity buffers in preparation for the next cyclical trough, given their off-plan pre-sales remain healthy,” S&P Global Ratings said on Monday.

“While developers' cash flow generation and credit metrics could weaken, ratings should be able to absorb the downside pressure, assuming the market correction is mild.”

Property prices in Dubai, the commercial and tourism hub of the Middle East, have risen at double-digit rates per year since 2021, driven by government initiatives and strong demand from buyers.

Dubai has been ranked as the world’s fourth most active market in the luxury residential segment amid higher property sales.

The emirate recorded the sale of 219 homes priced above $10 million last year, with the total value of the transactions reaching $3.8 billion, global property consultancy Knight Frank said in a report earlier this year.

Dubai ranks behind New York (244 sales), Los Angeles (225 sales) and London (223 sales).

The emirate registered a 40.7 per cent annual jump in the volume of residential sales valued at more than $10 million in the third quarter of 2023.

The volume of homes priced over $10 million in Dubai – the commercial and tourism centre of the Middle East – totalled more than $1.59 billion in the July-September period, according to Knight Frank.

As real estate prices continue to rise in Dubai, the risk of a cyclical reversal is mounting, S&P said.

It expects property prices to increase 15 per cent to 18 per cent in 2023 and by another 5 per cent to 7 per cent in 2024 as the Dubai market gradually slows down.

“We don't expect a profound market disruption. Instead, we think price increases could decelerate and potentially slightly reverse over the next 12-18 months, with price declines not exceeding 5 per cent to 10 per cent,” S&P said.

Dubai recorded the sale of 219 homes priced above $10 million last year. Pawan Singh / The National
Dubai recorded the sale of 219 homes priced above $10 million last year. Pawan Singh / The National

Developers will record strong cash generation and higher earnings before interest, taxes, depreciation and amortisation (ebitda) in the run-up to the next cyclical trough, according to the report.

“This will support further deleveraging and build a buffer for the next cyclical correction,” the rating agency said.

“The balance of power has shifted in favour of developers over the past couple of years. Therefore, we believe their credit quality should be more resilient to a softer price environment or fewer transactions.”

New property launches are expected to continue, despite the expected downturn, it said.

Developers “are also likely to launch smaller units since the price per square foot has become expensive and buyers are starting to downsize spaces. This contrasts with an earlier preference for larger properties following pandemic-related restrictions,” it said.

The rating agency said it already factored in the industry's cyclicality and the emirate's particularly volatile and sentiment-driven demand while assigning credit ratings to Dubai’s developers including Emaar Properties, Damac Real Estate Development and PNC investments, also known as Sobha Realty.

THE BIO

Born: Mukalla, Yemen, 1979

Education: UAE University, Al Ain

Family: Married with two daughters: Asayel, 7, and Sara, 6

Favourite piece of music: Horse Dance by Naseer Shamma

Favourite book: Science and geology

Favourite place to travel to: Washington DC

Best advice you’ve ever been given: If you have a dream, you have to believe it, then you will see it.

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%3Cp%3E%3Cstrong%3EDirector%3A%3C%2Fstrong%3E%20Ric%20Roman%20Waugh%3C%2Fp%3E%0A%3Cp%3E%3Cstrong%3EStars%3A%C2%A0%3C%2Fstrong%3EGerard%20Butler%2C%20Navid%20Negahban%2C%20Ali%20Fazal%3C%2Fp%3E%0A%3Cp%3E%3Cstrong%3ERating%3A%3C%2Fstrong%3E%202.5%2F5%3C%2Fp%3E%0A
Six large-scale objects on show
  • Concrete wall and windows from the now demolished Robin Hood Gardens housing estate in Poplar
  • The 17th Century Agra Colonnade, from the bathhouse of the fort of Agra in India
  • A stagecloth for The Ballet Russes that is 10m high – the largest Picasso in the world
  • Frank Lloyd Wright’s 1930s Kaufmann Office
  • A full-scale Frankfurt Kitchen designed by Margarete Schütte-Lihotzky, which transformed kitchen design in the 20th century
  • Torrijos Palace dome
The specs
Engine: 4.0-litre flat-six
Power: 510hp at 9,000rpm
Torque: 450Nm at 6,100rpm
Transmission: 7-speed PDK auto or 6-speed manual
Fuel economy, combined: 13.8L/100km
On sale: Available to order now
Price: From Dh801,800
The specs

AT4 Ultimate, as tested

Engine: 6.2-litre V8

Power: 420hp

Torque: 623Nm

Transmission: 10-speed automatic

Price: From Dh330,800 (Elevation: Dh236,400; AT4: Dh286,800; Denali: Dh345,800)

On sale: Now

How to protect yourself when air quality drops

Install an air filter in your home.

Close your windows and turn on the AC.

Shower or bath after being outside.

Wear a face mask.

Stay indoors when conditions are particularly poor.

If driving, turn your engine off when stationary.

Updated: November 14, 2023, 3:48 AM`