Just to show the rest of the world that Dubai is back on track comes the recognition that Tameer’s Princess Tower (standing at 414 metres and covering an area of over 37,000 sq ft) is now the world’s tallest residential building.
Further signs that the real estate sector is beginning to build up a head of steam was the announcement by Nakheel, the government controlled property developer, that it had sold a Palm Jumeirah plot of land – in excess of 300,000 sq ft – to an unnamed local investor for US$ 110 million. The company also reported that plot prices in certain areas of the man-made island had risen by 30% over the last year and that it has recently sold 80 plots at an average price of US$ 2.25 million.
The only glitch on the horizon is an over-abundance of commercial property available in Dubai with there still being a 40% vacancy rate. A further 800,000 sq mt is expected to be added to the inventory in H2 bringing the total amount of Dubai office space to nearly 10 million sq mt. (This is reflected in Emaar Properties’ H1 commercial property revenue falling 40% from US$ 162 million to US$ 32 million).
The Dubai Finacial Market Index reflects the growing confidence with another weekly increase. Starting Sunday at 1572, it finished Thursday trading at 1581 – almost 5% up in August trading. (This is lightly better than Facebook shares now trading at US$ 19 or 50% of their opening price in May).
Drake and Scull came out with disappointing – but not unexpected – earnings results for Q2 with a 49% drop in net profit to US$ 7.1 million mainly because of finance costs from acquisition funding and increased provisions. At the end of June, DSI had an order backlog valued at US$ 2 billion. Meanwhile Arabtec Holding, that had posted a Q2 loss of US$ 3.2 million, announced that it had secured most of the US$ 3 billion bank financing required for the new Abu Dhabi airport contract it won in June, with its Greek and Turkish partners.
Down the road, Dubai airport announced a 16% jump in H1 revenues along with a 14% increase in passenger traffic. Even though there is a US$ 7.8 billion expansion plan for the existing location, it is inevitable that the new Dubai World Central will have to start taking more of the traffic – both passengers and cargo – to relieve the growing congestion at the world’s 4th largest airport (by international passengers) and 6th largest for cargo.
This week saw the refurbished Port Rashid reopen its regional ferry services with resumed services to Iran’s Bandar Lengeh. Apart from servicing the Gulf, the 40 year old port is now the largest cruise terminal in the region. As a result, the tourist sector will receive a boost from the additional visitors arriving by sea.
The holy month of Ramadan is traditionally a boom time for retail outlets and this year is proving to be no exception with many outlets already predicting that revenue will be well up on the corresponding 2011 period. It seems that the increased number of tourists, especially from the GCC countries, will make this a prosperous time for many of Dubai’s shopkeepers. However, it is to be noted that retailers have “lost” over US$ 16 million by agreeing to a Ministry of Economy’s directive to cap prices of around 1,600 products during Ramadan.
It must have been a depressing week for two expatriates. First UK national, Michael Smith, lost his appeal over forging salary transfers of bogus employees – totalling US$ 650k – from Limitless, the indebted property arm of Dubai World. He had been on the run for eight months in Thailand prior to being tracked down in July 2011.
Then American Zach Shahin was detained in Yemen after skipping the country to apparently avoid further legal action in Dubai. The former CEO of Deyaar Developments had been granted bail whilst awaiting trial over four fraud cases involving US$ 80 million. (Meanwhile his ex-company announced that its Q2 net profit had doubled to US$ 5 million with total assets of US$ 1.8 billion).
The UAE continues to assist the US in reducing its burgeoning trade gap by importing US$ 8.7 billion of goods in the first five months of 2012 – up by 50% on a comparative basis. The country continues to be the largest importer of US goods in the Middle East. The 36% rise in 2011 exports (US$ 15.9 billion) will be easily surpassed this year. Last year, UAE exports to the US totalled US$ 2.4 billion, a trade imbalance of US$ 13.5 billion.
The region’s increasing economic importance to the US can also be seen from a 33% growth, to over one thousand, in the number of US businesses setting up here. Obviously there is greater potential for new companies to prosper compared to most other places that are now mostly in recessionary mode. US investors are ranked 7th in the number of residential units bought in H1 – they purchased 415 properties totalling US$ 190 million. (This represented about 3% of the total bought by foreign investors in this period).
Back in the US, the Obama administration heads into the last three months of electioneering with the depressing outlook that the federal budget deficit will hit US$ 1 trillion for the fourth straight year. This amount is equivalent to about 8% of the US economy and is indicative of the long term problems facing the world’s largest market which will experience even bigger problems once the new president is sworn in.
Meanwhile, the Chinese are seeing a slow-down in trade with a minimal 1% export growth in July compared to the same month last year. There are also disturbing signs in sluggish factory output (at its lowest pace in three years), new loans of US$ 85 billion at a 10-month low and faltering demand from two of its largest customers – USA and EU, which showed a 16% drop.
This negative sentiment is felt across the Far East with Taiwan reporting the fifth straight month of declines in exports, Hong Kong’s economy in contraction and Japan expanding a disappointing 0.3% in Q2.
It is clear that consumer spending is fast losing traction and the eurozone crisis continues to have a negative impact on worldwide confidence and demand. The worldwide downturn persists and there is the urgent need for policymakers to take positive action to lift the global economy out of its mire.
Then the various banking scandals will not go away. Standard Chartered have been hit with a US$ 350 million fine by the US regulators for their participation in an apparent money laundering operation involving up to US$ 250 billion! it will be no surprise if we hear more on this in days to come.
The Libor probe saw Barclays fined US$ 450 million in June. Now the same bank, along with six other major players, have received court orders from the US regulators investigating the fixing interest rates. How many “Get out of Jail” cards that are left for these crooks remains to be seen
Apart from economic and banking woes, maritime accidents and political factors also come into play. This week’s collision involving a US guided missile destroyer in the Strait of Hormuz resulted in a US$ 115 spike in the price of Brent Crude – its highest level since May The bloody conflict that is is Syria seems to be a never ending tragedy with world leaders continuing to dither. The saber-rattling over Iran gathers momentum. Then there is Lebanon fast becoming a no-go area. Ramble on!
“Political correctness is a doctrine, fostered by a delusional, illogical minority, and rabidly promoted by an unscrupulous mainstream media, which holds forth the proposition that it is entirely possible to pick up a turd by the clean end.” It also allows for the distortion of truth and fact to promote political gain and rationalize all acts to further the cause of those pushing an agenda not shared by the majority.