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EFG-Hermes Sees Real Estate Bailout ‘In the Pipeline’

“The government has yet to announce any bailout plans for the real estate sector, though we are inclined to believe that a federal plan is in the pipeline,” EFG-Hermes’s research department said in a report. The UAE changed its federal constitution in December, barring ministers including the prime minister from taking part in professional work, commercial, financial or trade deals with the federal or local governments, EFG-Hermes said. The changes may be clearing the way for a bailout, it said.

Property prices in the UAE “fell off a cliff” after banks reduced lending and speculators withdrew from the market because of the global economic crisis, Morgan Stanley said in a note recently. In Dubai, prices have slumped 25 per cent from the market’s peak in September, while Abu Dhabi prices have declined 20 per cent. “Although our real estate index shows that advertised prices have fallen around 8 per cent in the past few months, anecdotal evidence suggests that transacted prices have fallen by as much as 35-50 per cent in developments such as Dubai Marina, Downtown Burj Dubai, and the Palm Jumeirah,” EFG said.