Dubai is quite popular for its cloud touching skyscrapers and lavish lifestyle, and owning real estate in the Gulf coast city may appeal to many but could seem like a non-affordable dream for many people. On the other hand, stocks of its biggest property owners and developers are becoming more and more 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 equities have fallen more than 30% in 2018 as real-estate prices in Dubai have fallen and domestic demand has stalled which has prompted the government to announce a number of strategies to stimulate the economy. Earlier this month, S&P Global Ratings cut the creditworthiness 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 decreased 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 trades at about 4.8 times estimated earnings in the next 12 months, the lowest in more than eight years. That’s less than the 6.6 times of the MSCI EM Real Estate Index. Damac Properties also trades at 4.8 times.