Shiny Happy People

dubai-paddle-boardScarcely a week goes by without some report reaffirming the buoyancy of the Dubai real estate sector; the latest, that house prices are rising faster than anywhere else on the planet. With an annual 21.7% surge in the year to June 2013, the emirate leads the likes of Hong Kong (19.1%), Turkey (12.2%) and Brazil (11.9%), and is well ahead of mainland Europe, which managed a meagre 0.7% rise, and poor Greece, recording a fall of 11.5%.

Unfortunately, it came as no surprise to see July hospitality figures indicating a decline in both revenue and profit;  the double whammy of the holy month of Ramadan and the summer heat, resulted in falls in RevPAR (16.8%) and occupancy from 65.1% to 54.6% – however ARR crept up by 2.2% to US$ 196.87.

Dubai developer, Sheffield Holdings, is working with US-based Hampshire Hotels Management to invest in and run the Dream Dubai Marina. The 101-storey, 420 mt high, building will cost an estimated  US$ 410 million, and house 300 hotel rooms and 420 serviced apartments – the hotel is expected to open late next year whilst the remainder to be ready by 2017.

Damac Properties awarded its largest ever contract of US$ 272 million to Turkish company, TAV Tepe Afken Investment, to build its Damac Towers by Paramount. The four-tower development will include the luxury Paramount Hotel, with the other three buildings as serviced residences and is slated for completion within thirty-three months.

Drake and Scull have been awarded an Abu Dhabi government contract, valued at US$ 68 million, which brings their projects signed this year to a credible US$ 1.66 billion. The capital seems to be a good hunting ground for the Dubai-based company as it has recently procured work for the Fairmont Hotel and the prestigious Louvre Museum.

Majid Al Futtaim is planning to spend US$ 272 million further expanding its flagship Mall of the Emirates. The project – Evolution 2015 – will see a new fashion area, a sports and leisure zone along with additional luxury retail outlet and is expected to be finished within two years.

The Al Futtaim Group, with franchise rights to Toyota, Lexus, Honda, Jeep and others in Dubai, is to move further afield, with its first investment in Africa. It has offered US$ 86 million to take over CMC Holdings with its exclusive Ford distributorship in Kenya, Uganda and Tanzania.

Flydubai, one of the world’s fastest growing airlines, has announced its 66th destination – this time to Chisinau in Moldova. Interestingly, this will be the low cost carrier’s 45th destination that previously did not have direct UAE carrier links to Dubai. These new destinations can only benefit Dubai’s burgeouning trade and tourism sectors.

Following weeks of negotiations, Dubai Aerospace Enterprise has failed to cut a proposed deal with BBA Aviation. It was reported that the British based aircraft services company was in merger talks with US StandardAero – a company bought by DAE in 2007.

Already running the world’s longest driverless metro system at 75km, the RTA is planning to extend its network by almost 50% with 24km and 12km extensions to its Red and Green Lines respectively. Its current fleet of 58 trains carry over 366k passengers daily.

Although not in the same league as the big boys, Dubai continues to expand its foreign exchange trading. Currently, the UK takes 41.0% of the total trade with the US (19.0%), Singapore (5.7%), Japan (5.6%) and Hong Kong (4.1%) making up the top five forex centres. The Dubai Gold and Commodities Exchange witnessed a 23% increase in August business with currencies accounting for 97% of the 1.159 million trades – an impressive 89% surge in YTD business.

This week, there was a 5.7%  hike in the price of diesel sold in Dubai by the locally government-owned Emirates National Oil Company (Enoc), and its subsidiary, Emirates Petroleum Products Company (Eppco), to US$ 1.00 per litre. Emarat, Dubai’s third fuel retailer, established by the federal government, has followed suit. However, it is reported that Abu Dhabi’s Adnoc has fixed its diesel price at US$ 0.89. Unlike diesel, federal authorities fix the petrol price which is currently being sold at the subsidised rate of US$ 0.47.

Dubai Holding Investment Group has renegotiated a US$ 1.2 billion loan agreement with its creditors, who have agreed to an extension until 2020. DHIG is part of Dubai Holding and was formed by the amalgamation of Dubai Group and Dubai International Capital.

H1 saw Dubai’s exports jump 21.7% to US$ 22.9 billion whilst its imports rose by 16.3% to US$ 110.6 billion. In 2012, Dubai’s foreign trade growth rose 13% and in H1, this has improved by 16.2% to US$ 159.1 billion. As usual, gold was both the top imported and exported commodity at US$ 22.1 billion and US$ 13.6 billion respectively.

Central Bank reports highlight the fact that during the first seven months of the year, money supply aggregate M2 (currency, current accounts, call accounts and deposit accounts) increased by 8% to US$ 253.3 billion, The other positive news is that bank deposits have jumped 7.3% to US$ 341.4 billion, and bank loans and advances by 5.6% to US$ 316.3 billion.

Australian property developer, Sunland lost its US$ 15.5 million appeal against Matthew Joyce and Angus Reed, former employees of Nakheel. The three Australian judges rejected the appeal as “groundless” in a case that involved another Australian company, Prudentia, in an alleged scam to secure a Nakheel Dubai Waterfront plot, known as D17. In May, both men were found guilty of fraud in a Dubai court and received ten year sentences. Reed had already left the country whilst Joyce, the former GM of Dubai Waterfront, was also fined US$ 25 million and is under house arrest whilst his appeal is being heard.

Another week sees another roller coaster ride for the Dubai Financial Market General Index. Having lost 6.6% and 9.3% over the past two weeks, it opened on Sunday at 2337 points and regained 8.3% to close on 2539. Whether this week’s movement represents a ‘dead cat bounce’ remains to be seen.

It seems that the slower growth pattern coming out of China earlier in the year has now begun to move in the other direction with most analysts predicting that the world’s second largest economy will edge towards 8% growth, at least in the short-term. New credit was seen to be expanding in August with 45% (or US$ 115.6 billion) attributable to new loans – this plus the fastest gain in industrial output are positive signs that recovery is taking hold. Although one warning sign is that the country’s ratio of credit to GDP stands at an exceptionally high 187% and another potential problem is that only 3% (1.25 million) of the country’s SMEs are able to secure  a bank loan, hence the other 97% rely on the flourishing but unregulated shadow banking system. (Some estimate this sector could account for nearly 70% of China’s GDP equivalent to US$ 5.72 trillion).

Consumer confidence is fast returning to the Australian economy in the wake of the election of Tony Abbott and the ousting of the Labour government, latterly led by Kevin Rudd and previously by Julia Gillard. The new coalition is promising to cut red tape and lower taxes as it declares that, once again, Australia is open for business. It will receive an added boost with the upbeat news from China which will prove a fillip for the country’s resources sector. House prices have shown an annual 5.3% rise and with the current feel good factor in play, allied with low interest rates (2.25%), this trend is set to continue.

Its neighbour, Indonesia, is not faring as well with soaring inflation (fastest growing since 2009), a falling currency (already down 11% in Q3) and a widening current account deficit (US$ 9.8 billion). This week, it sold US$ 1.5 billion of sukuks at the highest rate (6.125%) in six years, compared to its last foray ten months ago when the rate was 3.3%. Its current deposit facility rate is at a high 7.25% and is bound to rise even further this month as the country’s economy deteriorates.

There is an inevitability to the Federal Reserve start to cutting back on its QE3 policy, of US$ 85 billion monthly bond-buying, sometime this month. That being the case, there is a strong argument for gold prices to ease downwards, perhaps to the US$ 1,200 level, not helped by steady low inflation rates and an upturn in the global economy. At noon Thursday, it was trading lower at US$ 1,339 (compared to US$ 1,924 in September 2012 – 30.4% down).

A week after its buildings were rated the vainest in the world comes news that the UAE is one of the planet’s happiest countries. It is now ranked number 14 and moving up on the previous report. Some may think that the UN would be better served trying to broker peace in places like Syria and Central Africa, but no they have published “The World’s Happiness Report 2013”. HH Sheikh Mohammed bin Rashid al Maktoum has been quoted that “all development plans that we approved, all initiatives that we launched and all government policies and laws, have one common goal – achieving the happiness of our people”. No wonder then that with the economy booming, a stock market rising 8.5% in one day, and the imminent arrival of perfect winter weather, Dubai is full of Shiny Happy People!

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