Dubai’s Emaar Properties, bellwether of the emirate’s bourse, and its real estate development subsidiary, are likely to report sizeable increases in third-quarter profits versus the preceding three months as margins expand and under-construction projects reach revenue recognition thresholds.
Emaar Properties owns 79 percent of Emaar Development and also has hospitality and retail divisions. It is predicted to make a third-quarter profit of AED3 billion ($817 million), Cairo’s CI Capital forecasts.
That would be 24 percent higher than the second quarter but down 9 percent compared with the same period in the previous year when one-off gains, including the release of provisions, boosted the bottom line.
Quarterly revenue is likely to be AED20 billion, up 82 percent year on year and 12 percent higher than the second quarter.
“The biggest factor that will shape earnings trends is higher revenue recognition,” said Marlene Milad, a real estate analyst at Cairo’s CI Capital.
“This began in Q4 2023 and reflects a surge in contracted sales as these projects start to reach the revenue recognition threshold. Earnings will also be driven by higher margins as Emaar benefits from the rapid increase in property prices.”
ValuStrat’s Dubai residential price index hit another all-time high of 190.1 in September, although the pace of monthly growth slowed slightly. The index is set against a benchmark of 100 in January 2021 and so the current reading indicates property values have nearly doubled since then.
Emaar Development’s third-quarter net profit is likely to be AED1.5 billion ($409 million), CI Capital says, up 24 percent versus the second quarter but down 20 percent year on year for the same reason as the forecast annual drop in its parent’s earnings.
CI Capital has “overweight” recommendations on both Emaar Properties and Emaar Development, with price targets of AED12.20 and AED11.50 respectively.
Emaar Properties’ stock ended Wednesday at AED8.40 and Emaar Development closed at AED8.77.
“As a stock pick, we prefer Emaar Properties because its hospitality and retail units provide greater earnings diversification,” Milad said.
Emaar Development’s dividend payments should increase from 2026 onwards as under-development projects reach construction milestones that will release money from projects’ escrow accounts, Milad said.
“Emaar Development will offer a decent dividend yield,” she said.
Sector outlook
ValuStrat’s Dubai residential price index gained 29 percent in the 12 months to September, while the average home value is now AED2.92 million ($796,000). The per-square-foot price is the highest since at least 2010.
Three-quarters of Dubai home sales in September were for off-plan properties, which in volume terms were up 254 percent versus September 2023. Sales of already-complete homes last month were up 19 percent year on year.
Emaar accounted for 18.8 percent of September’s home sales, ValuStrat estimates, followed by Damac (14.7 percent).
“Demand for Dubai residential property will remain healthy throughout 2025, driven by population growth, long-term economic fundamentals, the emirate’s investor friendly environment and attractive rental yields,” Milad said.
“From 2026 onwards, the supply of finished properties will rise. This will cause a supply-demand imbalance that will last through to 2027 at least. But even if there is oversupply, we believe that demand will be strong.”
Effect of interest rate cuts
In mid-September the Federal Reserve cut the benchmark US interest rate by 50 basis points to 5.0 percent, its first reduction since late 2018. The Fed has indicated it will make further cuts this year. UAE interest rates mirror those of the United States due to the dirham’s dollar peg.
Last year 82 percent of Dubai property purchases were paid for in cash, according to CI Capital research. This is partly because of the dominance of off-plan sales, for which mortgages are only available once 50 percent of construction is complete.
“Interest rate cuts are set to have a positive effect on sales, with the positivity in the secondary market potentially flowing to the primary market,” Milad said.
The primary market refers to properties sold by developers, the secondary market to those owned by investors.
For a detailed perspective on the property market, visit: Dubai - Real Estate Review Q3 2024
