Saudi Arabia is the notable exception as it benefits from a large and growing indigenous population base and structural under-capacity for residential property, especially for low- and middle-income families," Martin Kohlhase, assistant vice president and analyst at Moody’s, said in the report. The once-booming real estate markets of Dubai and Doha will be affected most with a decline in property prices and a slowdown in construction activity, said the agency. Layoffs by many companies in the wealthy Gulf
Arab region, hit hard by a global economic crisis, will also affect demand for residential properties and create over-supply in the rest of the Gulf, said Moody’s.
Dubai’s real estate sector is facing a sharp price correction and hundreds of billions of dollars of construction projects have been cancelled in the United Arab Emirates as a result of the economic slowdown. Despite that, Moody’s said it expects strong government support to continue which will benefit most real estate firms in the region. "Public infrastructure spending remains buoyant on the back of economic stimulus packages, which have been bolstered by government surpluses accumulated during the perio
d of high oil prices," the report said.
In another development, Saudi cement firms that have already announced first-quarter earnings showed an annual contraction in net profit, which they blamed mainly on growing stockpiles due in part to a ban on exports. But all of the three companies showed improvement both in sales and profitability compared with the fourth-quarter of 2008, when uncertainties over the prospects of the global economy reached a peak. Cement output capacity is expected to double to 60 million tons within the next three years
as existing companies expand and new producers enter the market.
Analysts said a government ban on cement exports needs to be lifted for profit growth to continue, as downward price pressures from new capacity may offset any increases in demand, fuelled almost exclusively by government sponsored projects. Eastern Province Cement Co said its first quarter net profit fell 37 percent to 97 million riyals ($ 25.9 million) but was almost 30 percent above its level in the fourth-quarter of 2008. The firm said sales rose from the fourth quarter of 2008 but the government’s ban
on exports, which began in June in an effort to alleviate supply bottlenecks, had eroded profit compared to the year-earlier figure.
Qassim Cement Co said first quarter net profit fell 5.4 percent from a year ago to 151.5 million riyals, but was up more than 85 percent from the fourth quarter of 2008. Compared with a year earlier, Yanbu Cement Co’s first quarter net profit fell 10 percent to 152 million riyals, but was up 27 percent from the fourth quarter. "In addition to losses on investments and real estate, Saudi cement firms faced an uncertain fourth quarter just like the whole cement industry in the Gulf Cooperation Council (GCC),
said Hettish Kumar, analyst from Kuwait-based Global Investment House.
Demand was dampened in the fourth-quarter as people wanted to hold off the launch of new projects but the Saudi government helped the cement firms by launching a lot of projects this year," Kumar said. He noted however that cement prices may face downward pressures with the expected addition of 4 million tons this year in new capacity. "For this quarter-to-quarter improvement to continue will depend on lifting the export ban," Kumar said.
