Property market conditions in the United Arab Emirates will remain challenging this year and next with house prices in Dubai expected to fall further as foreign workers leave the emirate, UBS said.

'In our view expat-led population outflows in Dubai and flattish trends in Abu Dhabi will pressure house prices in the foreseeable future,' the bank said in a research note.

A population decline of 8 percent in 2009 and 2 percent in 2010 may be conservative and accounting for potential payment defaults, would exacerbate Dubai's housing issues, it said.

The bank expected residential oversupply to reach 27 percent by the end of 2010 and remained cautious on the timing of property handovers.

Dubai's once-booming real estate sector has been hit hard in recent months as property prices fall, developers slow or halt projects and jobs are cut.

UBS cut Emaar Properties price target to 2.30 dirham from 3.50 dirham, Union Properties to 0.70 dirhams from 1.25 dirham and Aldar Properties to 5 dirhams from 7.50 dirham, it said.

A correction in the UAE market over the next two or three years, especially in Dubai, may burden company earnings and cash flows to repay debt it said, adding that Aldar, Emaar and Union Properties should be able to address debt repayments, given strong results in 2009 from property handovers.

Aldar Properties posted an 84.9 percent fall in fourth-quarter net profit to about 80 million dirham due to lower sales in poor market conditions, it said.

Sorouh Real Estate posted a 29 million dirham net loss in the same period partly due to rising finance costs, it said on Thursday.



Source: Trade Arabia News