Bring It On!

dfmSome analysts speak of a glut in the residential market but with the current major population influx, it is difficult to agree when only 9.7k units came on stream in 2013 and an estimated 28k coming to the market this year.

Dubai Land Department’s 2013 real estate transactions showed a healthy 53.2% surge to top US$ 64 billion, including US$ 45.2 billion of land sales and US$ 16.9 billion of housing units.  It is interesting to note that of the estimated US$ 8.4 billion in 2013 residential sales, only 41.3% were via mortgage lending – an indicator that perhaps the banks could do more in this sector. There is no doubt that last year was extraordinary and such growth is unlikely to continue in 2014, although both major property developers remain bullish.

Saturday sees the launch of Emaar’s latest development – the 63-storey Boulevard Point in Downtown. Comprising 297 one to three bedroom luxury apartments, it will have its own dedicated bridge link with Dubai Mall. (There are reports that Emaar’s new Group Chief Executive is Abdulla Lahej, having replaced Singaporean Low Ping late last year).

Nakheel’s chairman, Ali Rashid Lootah, has indicated that he expects the government-owned developer to launch projects to the value of US$ 2.2 billion this year alone. In 2013, Nakheel delivered 3,150 units – a lot more than the 1,600 planned for this year. In addition to  its already announced 2 million sq ft shopping mall, the company is expected to build nine hotels, some of which will be located on its Deira Island (aka Palm Deira), as it seems to be emulating a similar strategy that saw Emaar’s successful foray into the hospitality sector.

As the company recovers from its huge debt overhang as a result of the GFC, the chairman is confident that he is getting his house in order, having already settled with 80% of purchasers of previously stalled projects.

Nakheel’s 2008 development, The World – with its 300 man-made islands – is seeing more projects starting with news that the Kleindienst Group has commenced compaction work on six of the islands that represent the heart of Europe. Work is slated for completion within three years and the islands will reflect the architecture and ambience of different European countries.

A subsidiary of National Bonds, National Properties, is planning a major development in Motor City which will include over 150 luxury villas and 58 apartments. Work is expected to get under way in Q2 and be complete by the end of 2015.

Istithmar World has sold Palm Utilities, that includes Palm District Cooling, to Empwer for an undisclosed amount.

Arabtec has won yet another huge contract – this time for the construction of a resort in Jordan. Located in Aqaba, the US$ 1.55 billion project will include four hotels, a Star Trek themed park and a man-made lagoon with an opening by the end of 2017.

Abraaj is planning its seventh investment in Turkey – this time to buy a majority shareholding in dairy company Yorsan for an undisclosed sum. Late last year, the Dubai-based company spent US$ 300 million for African Fan Milk International – West Africa’s biggest frozen dairy producer.

Majid Al Futtaim’s Chief Executive, Iyad Malas, has indicated that the Dubai-based conglomerate is planning to spend a further US$ 2.3 billion in Egypt. This is in addition to its US$ 460 million Mall of Egypt project, ready for completion next year.

It seems that the government owned utility company, Dubai Electricity and Water Authority, will not be tapping the markets for funds this year. With a US$ 1 billion bond, due for an April 2015 repayment, DEWA has enough reserves to cover their 2014 capital and operating requirements. (Incidentally, Energy Minister HE Suhail bin Mohamed Al Mazrouei has hinted of increased energy prices as a way to cut back on very high consumption rates in the country).

Dubai Group has finally managed to restructure its US$ 10 billion debt with US$ 4 billion soon to be repaid to creditors. The balance is being restructured, with payments extended to 2016 for secured debt and to 2024 for unsecured facilities.

The Dubai General Market Index opened the week at 3609 points and gained a massive 5.54% when closing on Thursday at 3809 and is already up 13.02% on its 01 January opening of 3370. Bellwether stocks, Emaar and Arabtec, were trading at US$ 2.19 and US$ 1.13 respectively. Such surges cannot continue indefinitely!

As China tries to move from an investment fuelled growth strategy to a consumer driven one, it will have to pull out all stops to shore up its banking system. Latest figures show that official non-performing loans, lodged with financial institutions, reached over US$ 88 billion, or almost 1% of all outstanding balances. This is at a time when the Chinese economy is expanding at its slowest rate this century as the country’s bureaucrats attempt difficult but necessary reforms to revamp its financial structures. A reduced 2013 growth of 7.7% will be followed by even smaller levels of 7.5% and 7.3% over the next two years.

Even the US banks are facing problems with their three largest – JP Morgan Chase, Wells Fargo and Bank of America – reporting double digit declines in their mortgage business, with more of the same expected in 2014. Furthermore, mortgage rates have begun to edge up and now average around the 4.5% level, reducing the number of future mortgages as potential clients get priced out of the market.

The IMF has revamped its global growth forecasts, mostly upwards, but with a caveat that deflation could easily reverse any upcoming growth. Overall global growth for the next two years will be 3.7% and 3.9% respectively. However the eurozone and the ‘fragile five’ will continue having problems. The former has too much debt and many of its member countries are reluctant to introduce long-needed economic reform. The latter will not be helped by the scaling back of quantitative easing in the US with a potential outflow of funds not helping already inflated current accounts.

The rumour mill is working overtime with unsubstantiated reports that the 35 km of the SZR – from Jebel Ali to the Creek – will become a double decker highway. Bring It On!

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