Not too long after upsetting and embarrassing the first black President in America’s history with the first downgrade of the US debt rating in America’s history Standard and Poor won’t be winning any friends in the gulf property market either. According to the ratings agency property prices and rents will continue to fall in the region throughout the second half of this year.
In a new outlook report on the gulf region, S&P said that they expect to see developers continuing to scale back their activities and concentrating more on rental and management of existing stocks, especially in markets that are oversupplied such as the UAE.
It also expects to see a similar sea-change as was witnessed in India 2 years ago, with developers increasingly turning their back on high-end residential developments to focus on housing and urban regeneration, particularly in Saudi Arabia.
S&P credit analyst Tommy Trask said in the report: “Despite property price falls of up to 60 percent in some markets – in the UAE, Qatar, and Bahrain for example – between late 2008 and 2010, we expect capital values and rents to continue their largely downward slide in 2011.”
Trask also highlighted risk factors such as affordability, supply-demand imbalances and lack of mortgage financing which are all impacting on the decisions of real estate companies in the region.
“In our view, much work also remains to be done in shaping legal and regulatory frameworks for real estate activity in the region,” Trask said.
Trask also predicted particular sluggishness in markets that were directly affected by the protests of the Arab Spring, naming Bahrain and Egypt.
