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Wednesday, 17 July 2019

Property price rises would “most definitely” hit sales -Shuaa

A warning to real estate developers: Increasing property prices in response to rising fuel costs risks weakening demand and hitting sales, Sara Maher, equity analyst at Shuaa Securities, wrote in a note. The impact of the subsidy cuts is already reducing consumer purchasing power, and passing the added cost burden of developers onto prospective homebuyers will only make it more challenging for low and medium earners to afford property.

Having said that: Buyers in the upper echelons of the pay scale will be less affected by the rising cost of living, and are unlikely to be swayed should property prices increase.

Developers are unlikely to see their input costs rise: The decline in steel and cement prices over the past year will help to soften the blow of higher fuel costs, making it unlikely that developers raise their prices, Maher wrote. However, some companies have said that they will wait to assess how the subsidy cuts will affect their costs before making a decision about pricing.

Watch prices in new developments: Although Shuaa is confident that developers will ultimately not want to risk raising prices, it believes that any increases will be applied to new projects and phases. Sales in the primary market will “most definitely” fall if this happens, Maher says, and smaller companies may eventually be forced to shut up shop.

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