Low demand, inflation 'to hurt UAE real estate'

Dubai, June 16, 2011

The real estate sector in the United Arab Emirates continues to languish due to high inflation and reduced demand, despite improving liquidity, Nomura said, and cut its price targets on four real-estate developers in the region.

Nomura cuts its price target on Aldar to 1.66 dirhams from 2.01 dirhams, citing the company's ongoing restructuring programme, while reducing its price target on Rak Properties to 0.44 dirhams from 0.50 dirhams, and on Emaar Properties  to 4.26 dirhams from 4.84 dirhams.   

'Real estate capital remains 'sticky' and we think the sector is part-way through a prolonged period of asset stagflation rather than asset reflation,' Nomura said in a note.

The brokerage also cut its price target on Sorouh to 2.64 dirhams from 2.78 dirhams, but elevated the stock to 'top sector' status, citing its promising near-term prospects.

'We think the direct market (residential) is slowly forming a base, but commercial pressures continue,' Nomura said, adding that it still sees overall asset and rental values falling 10 percent in aggregate in 2011.

Nomura, which raised its price target on Union Properties, said it continued to favour large real estate companies like Sorouh, with medium-term prospects looking attractive. - Reuters

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