UAE real estate hit by double whammy of coronavirus, slumping oil price

The credit quality of real estate companies in the United Arab Emirates will erode on the back of the double hit from coronavirus and the oil price slump, Moody’s Investors Service said in a new report.

“The economic contraction and its fiscal implications will be most acute in Dubai, where the economy is very reliant on tourism and transportation,” said Lahlou Meksaoui, Lead Analyst.

The rating agency said that Dubai homebuilders face further market weakening as job losses and salary cuts curb local buyer demand for new properties and travel restrictions reduce international demand.

Gross profit margins of homebuilders like Emaar Properties PJSC (Baa3 negative) will continue to weaken.

Coronavirus headwinds are likely to be less severe for real estate companies in Abu Dhabi, where there is less of an imbalance between residential supply and demand, supporting the credit quality of Aldar Investment Properties, Aldar Properties PJSC (Baa2 stable) and Emirates Strategic Investment Company (Baa3 stable).