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Dubai Property Profits Take A Drubbing
August 6, 2009Article by Ray Withers
The true scale of the catastrophic property crash in Dubai is becoming clear as big developers and investment companies start reporting their accounting figures.Emaar Properties, the largest property developer in the Middle East has reported big losses as gambles on US property backfired.The firm lost £215m between April and June after it was forced to slice £287 million to support losses in US deals..Emaar made a profit of £345 million in the same period last year.
Dubai is also experiencing a slump in development as the global slowdown bites. Efforts to build the state in to a regional trade and tourism hub have left the country high and dry as finance for developments dried up and many have been put in to mothballs or had building starts delayed.The company said this year has been “extremely challenging”.
“Due to continued slowdown in the US real estate market and chapter 7 bankruptcy proceedings relating to John Laing Homes in the US, Emaar decided to write down its complete book value of JL Homes during the second quarter,” the company said.
Emaar is the company developing Burj Dubai, the world’s tallest skyscraper, which is due for completion later this year.Another big company suffering is Dubai Investments PJSC, that owns stakes in more than 40 other companies, that has announced second-quarter profit slipped 47% as the company earned nothing from property sales.Net income dropped to £47 million from £90 million a year earlier, the company said.
Dubai Investments’ total income also fell 39% to £149 million.
Dubai home prices have fallen by about 50% from their peak and may drop a further 20% this year, Deutsche Bank AG said last month.Chris Cole, chief executive of UK consultancy WSP, says work in Dubai has dropped from 70% to 20% of its Middle East turnover in 18 monthsSpeaking after the company announced results for the six months to 30 June, Cole said: “The situation will only change in Dubai as liquidity returns. The £6 billion bond issued by the UAE central bank in Abu Dhabi in February helped, but the second £6 billion hasn’t arrived yet.”
WSP has made 100 redundancies in Dubai and relocated another 100 to other areas, leaving 400 staff based in the emirate.The company has made 1,200 people redundant since November 2008, leaving about 9,000 staff. Cole said he did not anticipate further job losses.In the six months to 30 June, WSP made a pre-tax profit of £17.2 m down from £28.4 million in the previous year. Turnover grew 4% from £363.5 million to £376.9 million.