An expected 25% drop in Dubai property prices in 2008 could hit UAE bourses as early as the fourth quarter of this year and stocks could yield most of their gains from a mid-year rally.
Stock markets in Dubai and Abu Dhabi are poised to gain up to 25% from current levels to a third-quarter peak after a Gulf-wide crash erased nearly half of their value last year according the investment banks.
But the gains could be short-lived as a flood of new properties hitting Dubai's real estate market in 2008 creates an oversupply for the first time since the emirate opened up its property sector to foreign investment in 2002.
Investors tend to watch property prices when making equity investment decisions as companies accounting for 50% of the UAE's stock market capitalisation are directly linked to the real estate sector.
The UAE stock markets are a proxy for the real estate market. In the fourth quarter of 2007 people will start to get worried about the real estate market and see signs of a slowdown.
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