To buy shares in Emaar Development, you need a UAE stock broker that offers access to the ADX exchange like eToro.
Emaar Development’s share price retreats on property saturation
It’s been a difficult week for UAE investors Dubai-based Emaar Development, with the company’s share price taking a knock and retreating to levels not seen since the end of last year. But what exactly does the business do – and is there anything behind the sell-off that CFD traders in the UAE can take advantage of?
What do they do?
The first challenge is delineating the business. Emaar is a high profile brand when it comes to Dubai real estate, with the name emblazoned across the side of many buildings. Holding company Emaar Properties was founded back in 1997 and has built up a diverse portfolio of real estate projects over the years, covering retail, residential and commercial property. These include the Dubai Mall and the Burj Khalifa tower, the half-mile high skyscraper that dominates the skyline.
The more defined Emaar Development was spun out of Emaar Properties in 2017, with a focus on building – then selling – commercial and residential properties. Shares came to market at 6.03Dhs and it’s fair to say, the early days were disappointing. The COVID pandemic rattled sentiment, sending the share price down well below the 2Dhs level by early 2020, but as the world normalised – and Dubai’s lure became ever more attractive, the model started to work.
A sound, five-year investment
The recent Emaar Development share price growth has been brisk. UAE stock traders going long at the post-COVID low would have benefitted from a 700%+ return. Dividends haven’t been consistent but were paid out in 2018, 2022 and 2023, whilst just before the end of last year, management promised to double the return for 2024. That news resulted in significant gains for the share price, which advanced as much as 25%. Most of the headlines seemed to be supportive of the optimism here, but some signs of strain are now emerging.
What’s changed?
Prolific development means that demand is no longer outstripping supply at the same pace as noted historically. The Khaleej Times reported in late January that the pace of rent hikes was expected to slow this year, driven in part by the market absorbing hundreds of thousands of new housing units that were sold off-plan in 2022 and 2023 and are now being completed. That in turn should keep underlying property prices in check, so whilst the fundamentals remain strong and no one is suggesting a property crash – although banks have been asked not to provide mortgage financing for some fees and taxes again in a bid to cool the market – the key question being asked is in light of a changing market backdrop, can the bumper dividend payout be sustained?
Over the last week of January, the share price retreated, falling by more than 10% at one point. The interesting aspect here is that the parent holding company Emaar Properties – with its more diverse portfolio of real estate interests – hasn’t suffered in the same way. Any weakness seen here ultimately proved to be short lived – those high profile, landmark developments like Burj Khalifa aren’t scalable, but will always benefit from being in short supply. Rental income off the back of owned property should also offer greater longevity.
The outlook
Since 2020, growth in the Emaar Development share price has more accurately reflected the number of residential sales completions rather than average property prices per square foot. The former is up around 500% over that period, whilst the latter has added a more measured 60%. As such, it is concerns over a slowing pace of properties being sold, rather than any price weakness that appears to be the biggest issue. Compound this with the boost seen at the end of 2024 as investors reacted to the bumper dividend news and it’s not difficult to build a case that medium term share price growth may be more conservative.
Tony Cross is a seasoned market commentator with over 15 years of experience, delivering engaging and insightful content for both journalists and investors. Specializing in macroeconomics, UK blue-chip equities, and intermarket analysis, his commentary is highly valued for its clarity and its knack for eliminating unnecessary jargon.
You can contact Tony on tony@goodmoneyguide.com
