Property shares in the United Arab Emirates continued their downward momentum on Monday, despite the announcement of a new law which will allow more retirees to stay in the country.

By the end of Monday's trading, an index of UAE property shares closed lower, taking losses so far this year to 26.2 percent, according to data from Thomson Reuters Eikon.

Property stocks have performed badly in the UAE so far in 2018 due to the underlying weakness of the real estate market.

“Our view is that real estate prices have not bottomed out yet and we expect them to drop further. Buyers will keep benefitting from the fact that markets have not bottomed out and will use their bargaining power to get a better deal (lower price),” Issam Kassabieh, a senior financial analyst within Menaorp's research department told Zawya.

On Sunday, the UAE government had approved a law that allows expat retirees over the age of 55 to stay in the country for a longer period if they meet certain conditions.

"In effect as of 2019, the law outlines requirements to qualify for the long-term visa, such as having an investment in a property worth AED2 million ($544,507), or financial savings of no less than AED1 million, or having an active income of no less than AED20,000 per month," the Dubai Government Media Office said on Twitter.

Analysts see the announcement as positive, arguing that it would trigger more sales of units.

“The stimulus package announced by the government is great in theory and would eventually trigger more sales of units and would, on the short term, reduce surplus,” Menacorp’s Kassabieh said.

“These unit sales won’t happen overnight, though, and the buyers would now find themselves facing two options: saving a million dirhams or investing in a property worth 2 million dirhams.”

“The real estate indices aren't currently responding to the stimulus as a result of investors' focus on book values, operational efficiencies (or lack of) among other business-related decisions such as dividends,” Kassabieh added.

On Monday, Emaar Properties' share price declined in value by 1.67 percent, Aldar Properties retreated 2.67 percent and Damac Properties was down 2.87 percent, while Deyaar Development added 0.71 percent.

For the year, Emaar Properties has retreated 26.17 percent so far and Damac Properties has dropped 38.48 percent, with both property stocks underperforming Dubai’s index, which is down 18.34 percent in 2018.

“We are seeing a lot of pressure on the sector since last year. We are not putting high expectations and we believe that unless we see key initiatives targeting the working population, we will continue to see weakness,” Amer Saqfelhait, AVP trading manager at Al Mal Capital, told Zawya.

“We hope the latest decisions from the cabinet will help to give some strength to the whole economy.”

Dubai and Abu Dhabi’s indices dropped 0.79 percent and 1.67 percent respectively on Monday.

Elsewhere in the region, Kuwait’s index was mainly flat on Monday, Bahrain’s index dropped 0.17 percent, while Oman’s index dropped 1.04 percent.

At 3:02 pm GST, Saudi Arabia’s index was trading 1.08 percent higher, and Egypt’s index was 0.96 percent lower.

(Writing by Gerard Aoun; Editing by Michael Fahy)

(gerard.aoun@thomsonreuters.com)

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