Dubai: Falling property + stock market prices = investment opportunity?

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Dubai is famous for its high skyscrapers and lavish lifestyle, and owning real estate in the sunny Gulf city may sound like a non-affordable dream for many people. By contrast, stocks of its biggest property owners and developers are becoming increasingly within reach.

Shares of Emaar Properties PJSC, the developer of the world’s tallest building and an icon of Dubai, can be bought at the lowest valuation since 2010. Competitor Damac Properties Dubai Co PJSC, known for its business ties with U.S. President Donald Trump’s family company, traded earlier this year at the cheapest price-to-earnings ratio in more than 17 months.

Both stocks have tumbled more than 30 percent this year as real-estate prices in Dubai have dropped and domestic demand has faltered, prompting the government to announce a series of measures to stimulate the economy. Earlier this month, S&P Global Ratings cut the credit worthiness of two local companies, including one that owns properties in Dubai’s financial center, citing deteriorating credit conditions.

Dubai’s income level, as measured by gross domestic product per capita, has declined on an annual basis to $37,000 in 2018 from a peak of $45,000 in 2013, according to S&P analysts Sapna Jagtiani and Tommy Trask. “We view this decline as an indicator of weakened macroeconomic fundamentals, as a country’s income level gives an indication of the potential tax and funding base for a government,” they wrote in a report. They expect annual income to decline to $36,000 in 2020.

Emaar Properties — whose name can be seen in big letters on top of buildings in areas popular among expatriates, such as the surrounds of Burj Khalifa and Dubai Marina — trades at about 4.8 times estimated earnings in the next 12 months, the lowest in more than eight years. That’s below the 6.6 times of the MSCI EM Real Estate Index. Damac Properties also trades at 4.8 times.

Emaar declined 0.2 percent as of 11 a.m. local time, extending its drop this year to 32 percent. Damac fell 1 percent and is down 39 percent in 2018.

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