Dubai stocks surged to a 10-month high led by Emaar Properties PJSC (EMAAR) as investors bet economic growth will boost real estate prices, outweighing the effect of central bank curbs on home mortgages.
Emaar jumped to the highest level since April 2010 after the developer of the world’s tallest tower awarded a contract to Brookfield Multiplex Construction for a hotel in Dubai. Arabtec Holding Co. (ARTC) climbed 5.3 percent as it started constructing the Louvre Museum’s Abu Dhabi branch. The benchmark DFM General Index (DFMGI) gained 2.1 percent to 1,727.29, the highest level since March 5, at the close in the emirate. About 478 million shares were traded in Dubai, almost triple the 12-month daily average.
Dubai’s real estate market is rebounding after the global credit crisis caused property prices to plunge about 65 percent over four years. Home prices in prime locations are climbing as the Dubai government forecasts the economy to expand at the fastest pace in five years. The market will probably witness “a broader base recovery” this year even as increasing supply and restrictions on mortgage lending may slow price increases, Jones Lang LaSalle (JLL:US) said in a report yesterday.
“Positive news from real estate companies helped push the market up today,” said Nabil Rantisi, managing director of brokerage at Abu Dhabi-based Menacorp. “The mortgage issue will have some impact, but generally the sector still looks positive, especially because these companies have diversified away from merely selling properties.”
Emaar said today that its five-star hotel project in Downtown Dubai recorded a “sell out” response from investors. The shares rose 3 percent to 4.12 dirhams. The Dec. 30 decision of the United Arab Emirates central bank to cap mortgages for foreigners and nationals at 50 percent and 70 percent of property values will help drive out speculators, according to Emaar.
The company with the heaviest weighting on Dubai’s index may post a 15 percent increase in 2012 profit, according to the mean estimate of 11 analysts on Bloomberg. In the first half of last year, Emaar’s rental, retail and hospitality businesses contributed 51 percent to revenue, while rental and retail income grew 23 percent.
Shares of Arabtec, the biggest construction company in the U.A.E. by market value, climbed to 2.58 dirhams, the highest since Oct. 31. A venture of Arabtec, Constructora San Jose SA and Oger Abu Dhabi won a 2.4 billion-dirham ($653 million) contract from government-owned Tourism Development & Investment Co., Arabtec said today.
Arabtec shares surged 48 percent last year after government-controlled Aabar Investments PJSC raised its stake in the builder to 21.6 percent. Abu Dhabi said in 2012 it plans to resume stalled projects including branches of the Louvre and Guggenheim museums that were suspended after the property crash.
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