(Bloomberg) — Dubai real estate stocks were once the stars for investors betting on the city’s booming economy. But their fall from grace has been spectacular and seems set to continue, given an abundance of unsold homes and scant prospects for a recovery in the oil-rich region.
Shares in Emaar Properties PJSC, an industry bellwether and the developer of Burj Khalifa, the world’s tallest tower, have dropped almost 80% from their 2014 peak, when average real estate prices in the emirate were about 30% higher. Competitor Damac Properties Dubai Co. has posted a similar slump since a 2017 high. Smaller player Union Properties PJSC, which is in talks to restructure debt, trades at a 90% discount from its 2005 levels.
Not even a majority of buy recommendations from analysts, thanks to cheap valuations and expectations of government support, is enough to spur a change in sentiment. That reflects a supply glut that the companies themselves helped create, and which is worsening because of an exodus of the expatriate workers who account for most of the city’s population.
“I looked at Dubai property several times in the past, but the picture was unchanged every time, exactly because of the same issues — huge unsold stock levels and continued development activity,” said Ekaterina Iliouchenko, a portfolio manager at Union Investment Privatfonds GmbH in Frankfurt.
An index tracking eight Dubai real estate stocks is trading near the biggest discount to peers in emerging markets since 2011.
Scrutiny of real estate developers and construction companies intensified in recent days as shareholders of Arabtec Holding PJSC, which helped to build the Burj Khalifa, voted to dissolve the firm. The demise of the