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UAE Real Estate Sector To Face Another Tough Year In 2017 Says Report

Dubai - United Arab Emirates

Thursday, February 16, 2017
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The United Arab Emirates' (UAE) real

estate sector faces another difficult year after a correction in 2016, S&P

Global Ratings said in a report published today, "Another Tough Year For UAE

Real Estate Market Amid Currency Woes."

With the fallout from low oil prices and continued currency woes, it is no

surprise that 2016 was a tough year for the real estate market. Dubai's

residential prices dropped by 8%-11% on average and rent fell by 6% according

to REDIN.com, with most areas of the city affected. The strength of the dollar

is also making the UAE increasingly expensive for tourists and low oil prices

in 2016 have diminished purchasing power and weakened investor sentiment.

The pound declined by 17% versus the U.S. dollar in the past 12 months due to

Brexit fears. The evolution of the pound remains a concern for the UAE as the

U.K. is traditionally among the top three source markets for visitors to

Dubai, and U.K. nationals were the fourth largest investor in residential real

estate in the first half of 2016.

For 2017, we see no signs of market improvement for the UAE real estate

sector, despite housing affordability improving from the current price

environment. We expect residential prices and rents to fall by another 5%-10%

in Dubai in 2017.

However, we do not foresee major negative movements in our real estate sector

ratings in the next 12-18 months as we think developers will be able to absorb

the fall in house prices due to low debt burdens and strong balance sheets.

Rated real estate companies are also hedged somewhat due to their high asset

quality and long-lease structures.

Only a rating committee may determine a rating action and this report does not

constitute a rating action.

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