Background

The real estate markets in Dubai and Abu Dhabi were alive in Q309, with some unusual trends developing in both Dubai and Abu Dhabi. According to the latest report by Landmark Advisory, residential prices in the UAE were more unpredictable than in previous quarters.

In Dubai, villas accounted for 60% of Q309 residential sales, with prices increasing 8%. The report identifies that projected villa supply and current sales inventories are currently relatively stable leading Landmark Advisory to predict that villa prices are likely to remain stable in the short term. The latest report found that apartment prices fell only 3% in Q309, in comparison to falling 17% during Q2.

Apartment demand gravitates toward more affordable units, but financing appears to be an issue, with financed apartment sales declining to 14% in Q309.

Dubai’s office market continues to suffer from weak demand, which brought office prices down another 10% in Q309. Office rents, however, declined only 4% over the last quarter.

Turning to Abu Dhabi’s residential market, average listed sale prices increased, but most real transactional prices did not. The office market in Abu Dhabi remained paralyzed in Q309, despite a relatively small 3% decline in listed sale prices. In the short-term, average office prices are likely to fall further, as most freehold office supply is too far from completion to attract buyers. Rents fell between 5%-15% on Abu Dhabi Island, but off-island rents fell 20% in Q309.

Residential lands in Abu Dhabi saw a 10% drop since the 2009-start due to lack of buying lands as investors fear from another drop in prices amid the impact of global crisis.

Real estate companies in Abu Dhabi have reviewed prices of units that were sold at high prices, but the construction costs were reduced during the drop in prices of construction material. This resulted in the retrospective reduction of prices of sold residential units, belonging to companies such as Sorouh, Bani Yas and Ishraq in Abu Dhabi. Sorouh has reduced the price of The Gate towers in Al Reem Island by an average of 20%.

Real estate sources in Abu Dhabi said that the rate of construction work of residential, office and hospitality towers continued acceleration in rate during Q3 of this year.

Realtors in Abu Dhabi said that the completion and delivery of projects in a number of areas in Abu Dhabi, as well as the return of trade, largely contributed to the return of activity to the market. The most prominent real estate projects were those developed by Aldar Properties, as well as projects by Hydra, Sorouh, Manazel, Al Qudra and Mubadala.

Sector News

In the period of 15 Oct – 15 Nov 2009, the real estate sector’s media coverage was monitored and analyzed, specifically on Emaar, Aldar Properties PJSC, Sorouh and Damac. Highlights of sector news during the period were also observed.

The UAE Central Bank launched an urgent facility to boost liquidity in the banking sector. Dubai last week requested a delay in repaying billions of debts issued by business conglomerate Dubai World and property subsidiary Nakheel.

Dubai's property market is likely to face further price falls and increased concerns over the availability of finance after the emirate said it would delay debt payment issued by two of its flagship firms, analysts said. Dubai rocked the financial world when it said it would ask creditors of Dubai World and Nakheel to agree to a standstill on billions of dollars of debt as a first step to restructuring.

The UAE's real estate market has bottomed out and will begin to recover in 2010, according to economic analysts speaking at a panel discussion in Dubai on Wednesday.

Facets Of Coverage

Looking into the volume of coverage, OTS and coverage size figures for the four property developers from 15 Oct – 15 Nov 2009, a clear take over seems to be taking place. Emaar has historically enjoyed a substantial lead in all categories, armed mainly by a significantly higher volume of coverage relative to the other property developers. Since the economic crisis, Abu Dhabi developers, with their leader, Aldar have continued to seize the opportunity by cranking up their PR machine. Dubai property developers have continued to suffer amidst negative media coverage due to the weakened Dubai economy.

Aldar Properties, while in 2nd place to Emaar in terms of volume of coverage as well as both newspaper and magazine OTS (Opportunities To See), but came very close to Emaar, bridging the significant gap Emaar has historically enjoyed. What is more interesting is Aldar achieving higher Newspaper coverage size than Emaar. In terms of magazines coverage size, it was Emaar that took the lead, but followed closely by Aldar Properties PJSC. Sorouh remained 3rd ranking in all categories, while Damac came in 4th. However, Sorouh and Damac scored significantly lower in those categories, relative to Emaar and Aldar.
Messages

All four property developers selected for the purpose of this review; Emaar, Aldar Properties PJSC, Sorouh and Damac penetrated positive messages in print and web media in the monitored period. Aldar stood out with the sheer volume of positive messages that outranked Emaar and the other 2 developers. Aldar penetrated high frequency of messages on its ongoing projects and sponsorships of various events/activities. Sorouh’s messages on the other hand focused on its deals and financial related activities. Emaar and Damac, the Dubai developers, focused on their events participation and financial activities.
Content Analysis

While Emaar took the lead in terms of amount of Manifest (direct) mentions, Aldar came very close. The same applied to Latent (indirect) mentions of Emaar and Aldar. Taking over the leadership of the highest volume of PR Influence was Aldar Properties PJSC, who achieved both the highest volume of PR Influence and highest volume of PRD (Positive Reputation Drivers).

Emaar, on the other hand scored the highest volume of coverage void of PR Influence in the monitored period. It also scored the highest volume of NRD (Negative Reputation Drivers). Sorouh came in 3rd place in all categories. Followed by Damac, which has maintained powerful yet low in volume in coverage, historically.

Stock Prices’ Movement

The stocks of Emaar, Aldar Properties PJSC and Sorouh were observed and correlated in this report, throughout the period of 15 Oct to 15 Nov 2009. Aldar enjoyed the lead, followed by Emaar and Sorouh. Aldar’s stock prices seemed to be falling from 15 to 22 Oct 2009, while it recovers from the 25th to the 29th of October. Aldar’s stock prices begin with a shaky pattern from the 1st to the 5th of November and then starts climbing upwards fom the 8th to the 15th of November 2009.

Sorouh’s stock prices were unpredictable in October, while it dropped in the 1st week of November and rose in the 2nd. Emaar’s stock prices were falling in the send half of October, while it changed gears and rose in the 1st half of November 2009. Interestingly the media coverage seemed to correlate with the stock prices’ movements. Negative news on project delays as well as the crisis had a clear effect on stock prices, particularly towards the end of October 2009. It is also interesting to note that all 3 property developers experienced a rise in stock prices in the 2nd week of November 2009, aided by a heavy penetration of PRD mentions in the 1st week of November.

Conclusion

The real estate market is in a state of unpredictability, as it is subject to many variables. Dubai is suffering from lack of financing as well as restoring trust to attract investments. Apartment and office prices dropped in the 3rd Quarter of 2009 in Dubai, highlighting the continuous challenge the Dubai developers must combat. Abu Dhabi real estate market saw office, residential units as well as material costs go down, and the developers are forced to review their prices. However, they have accelerated their projects development, indicating financial health as well as confidence in their survival and perhaps leadership in the UAE arena.

News on Dubai World’s inability to pay the debt has taken a toll on Dubai developers, as they not only had to combat with a highly negative media coverage in terms of attracting investment to boost a weakened demand, but they also had to combat an increase in International media coverage, packed with NRDs (Negative Reputation Drivers).

Aldar’s media coverage performance indicates a take over, with higher volume of focused messages as well as high volumes of Manifest, PR Influence and PRD mentions. Sorouh which was beginning to bridge gaps with Aldar last year, is beginning to lose pace. Emaar is losing ground to Aldar as well, while Damac lags way behind, though it maintains focus on powerful messages in magazines and websites.

Overall, both markets; Dubai and Abu Dhabi, seem to be facing challenges. Clear hope is seen for Abu Dhabi, with developers pushing forth with projects and analysts project a healthy recovery. Abu Dhabi’s average price listings show an increase in the 3rd Quarter of 2009.

The property developers have very highly active PR programs with sponsorships, events participations, deals, projects and news on receiving awards. However, it was the two giants from each city that took the lead. Aldar seems to be gaining ground as Dubai developers suffer further with continued negative coverage. Dubai is in desperate need of good news, while Abu Dhabi seizes every minute it can to take the lead.