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Dubai Population Drop to Hit Housing Demand, Says UBS

(Reuters) / 16 January 2009

DUBAI - Dubai’s population could fall 8 per cent this year as a global downturn hits its once-booming real estate sector, curbing housing demand and revenues of major developers, UBS said in a research note.

A slowdown in the real estate sector, which employs half of Dubai’s workforce, may dent the inflow of expatriates, leading to an oversupply in the property market and see revenues of major Dubai developers such as Emaar Properties fall between 5 and 10 per cent, the note said.

“A slowdown in the housing market in addition to challenging macro-conditions may lead to fewer foreign workers moving to the region for job opportunities and fewer investors engaging in local investments including real estate assets,” analyst Saud Masud said in the note.

“This would likely lower net demand growth for property and may actually create incremental headwinds should there be net population outflows,” he wrote. Dubai’s construction  and real estate workforce could fall by 20 per cent and 10 per cent in 2009 and 2010 respectively, the note said,   leading to an overall population decline of 8 per cent and 2 per cent  in  those  same  years.

Excess supply in the property market was seen reaching 27 per cent — or 87,000 units — by the end of 2010, Masud wrote.  UBS expects revenues for Emaar Properties in 2009 and 2010 to reach Dh20.47 billion and Dh20.66 billion respectively. Revenues for Union Properties would reach Dh4.39 billion and Dh5.42 billion respectively, the note said. “Clearly should this scenario play out there would be sustained and possibly incremental pressure on house prices,” Masud wrote. 



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