Shake It Off

nakheel-monorailAlthough Abu Dhabi recorded a 14.7% 2014 growth in the luxury residential property sector, Dubai only managed a marginal 0.3% price increase, compared to 17.0% the previous year. The Knight Frank’s Prime International Residential Index had Muscat, at 13.2%, the best performing in the GCC and ranked 8th globally. New York topped the ranking with an 18.8% hike whilst, at the other end of the scale Singapore contracted by 12.4%.

According to Luxhabitat, there were surprisingly only 420 sales of villas and 356 apartments, costing more than US$ 1.36 million, in Dubai last year. The most popular sale areas for villas were Arabian Ranches, Palm Jumeirah and Emirates Hills whilst Downtown, Dubai Marina and Palm Jumeirah were the top three locations for apartment sales.

Meanwhile the Palm’s first large scale commercial project will incorporate a 200m observation tower and will have the existing monorail run through the middle of the upcoming Nakheel Mall. Covering an area of 300k sq mt, the project will also include a 200-key 5-star hotel and 500 serviced apartments.

Nakheel also announced the completion of 90 villas in Jumeirah Village Circle, with delivery slated to start in April. This is part of a 570 hectare development, which will eventually house 250k people; 615 villas have already been handed over in 2013 and the 1 million sq ft retail and dining Circle Mall is due to be completed by 2017.

Hilton Worldwide is the latest hotel chain to announce a new Dubai property, following a management agreement with AIG Investments. The 336-room Hilton Garden Inn Dubai Al Jadaf will open in 2017.

On Monday, there was the launch of the Trump PRVT residences, part of the Akoya by Damac development. With villa prices starting at US$ 1.77 million, there will be gated access to the island location.

Now in its 19th season, the ever-popular Global Village will have attracted over five million visitors and generated US$ 463 million by the time it closes on 11 April, after running for 159 days. The massive extravaganza has over 3.5k outlets, as well as 31 pavilions, 25 restaurants, and 150 kiosks.

The Chinese seem to be taking over the mantle of the Russians – with Chinese tourist numbers to Dubai expected to double within a decade to 545k whilst in January there 27.3% fewer Russian visitors. Last year, the Chinese spent US$ 488 million in Dubai and stayed, on average for 3.3 days.

The Dubai Airport Freezone has had to lease a 17k sq mt Al Ghusais block from the government-owned Al Wasl to meet pent-up demand. DAFZA will build 32 light industrial units to add to the 260, already operating at the airport, and hope to acquire more land to build a business park in the area.

Emirates Group company, dnata, has bought a 51% share in UK-based Imaging Cruising – a major player in not only the cruise market but also in other aspects of stay holiday distributorship.

Saturday was the last day of the Dubai International Boat Show which attracted over 26k visitors and 800 exhibitors, as well as generating sales of US$ 50 million. The exhibition highlighted the progress made by local shipbuilders including Al Shaali Group, whose showcase luxury yacht is the US$ 5.45 million AS100, and Al Hareb Marine which came away with four sales totalling US$ 2.2 million.

The Korath Group is to spend US$ 27 million in introducing the Hawes & Curtis brand to the MENA, with an ambitious expansion strategy of 25 outlets. The first men’s retail shop, located in the Wafi Mall, was launched this month by Bollywood star, Shahid Kapoor.

Last year, New World Wealth estimated that 26k millionaires resided in Dubai. A new Knight Frank report has ranked Dubai as the 8th most important city for the ultra-rich, only behind London, New York, Hong Kong, Singapore, Shanghai, Miami and Paris.

It has been reported that a subsidiary of Dubai World (which itself has a US$ 14.6 billion debt), Drydocks World, may request creditors for a restructuring of its US$ 2.3 billion outstanding balance. As did its parent company, the shipyard may opt for an early repayment, and better terms, for the balance of the debt, followed by a repayment extension. US$ 800 million is due for settlement in August 2017, with the remaining US$ 1.5 billion in 2027.

Celebrating its 50th year, Dubai Chamber of Commerce reported that its members were involved in US$ 49.0 billion of export and re-export trade within the GCC. Saudi Arabia accounted for 54% of the business – US$ 26.4 billion – with Qatar (13%) and Kuwait (12%) the other major players.

Union Properties declared its first dividend in over twelve years; patient shareholders will receive US$ 0.008 cash and a 5% bonus issue.

Official approval has been given for a 20% hike in the price of bottled water.

February saw a 3% increase in volumes on the Dubai Gold & Commodities Exchange, with 929k contracts valued at US$ 35 billion. There was a 103% surge in Indian Rupee Options to 7.2k, as well as a 22% increase in the Exchange’s Indian Equities portfolio.

Earlier in the week, Orascom Construction began trading for the first time on NASDAQ Dubai and rose 3% on the day.

Bad news for the public sector with reports that there will be no pay rises for those employees between Grades 7 – 14. The Finance Minister, HE Obaid Al Tayer, indicated to the FNC that he considered the current salary levels as sufficient.

Following an internal enquiry, it seems that six Dubai-based employees of ABN Ambro have resigned or been dismissed for apparent fraudulent behaviour and contravening the bank’s policies and procedures.

Next month will see Amlak Finance returning to the DFMI over six years since its November 2008 suspension. The mortgage lender reported a 22.2% rise in 2014 attributable profit to US$ 16 million including a US$ 572 million write off on its portfolio and a US$ 518 million gain on its restructuring deal on a mudaraba instrument

Having recorded a 2014 US$ 207 million profit, compared to US$ 78 million a year earlier, the Dubai Financial Market has approved a 7% dividend, equivalent to a total pay-out of US$ 153 million.

The DFMI started the week trading on Sunday at 3747 and dropped 1.0% to close at 3708 on Thursday, and 1.7% lower than its January opening of 3774. Bellwether stocks, Emaar Properties and Arabtec, were both down by US$ 0.02 and US$ 0.01 to US$ 1.92 and US$ 0.79 respectively.

Subsequent to February’s devaluation of the pound, it is no surprise to see Egypt’s inflation rate hit double digits – up 0.9% to 10.6% – as imports became more expensive. The currency slipped to 7.6 to the US$, compared to 7.2 at the beginning of the year but perhaps the currency has to fall even further for Egyptian exports to compete in the global arena.

There was mixed US market news with February data indicating 295k new jobs (following January’s revised figure of 239k) and a fall in the unemployment rate to 5.5%. If this trend were to continue, it is inevitable that the Fed will lift interest rates by July, particularly because of the strong dollar. On the flip side, some analysts are cutting US Q1 growth estimates from 2.3% to 1.5%, as several indicators point to some problems ahead. These include wholesale inventories rising 0.3%, wholesale sales declining 3.1% (the biggest fall in nearly six years), slowing construction spending and poor auto sales. Whether this is just a blip remains to be seen.

Even the ever optimistic ECB have got in on the act forecasting a stronger 2015 growth in the eurozone from 1.0% to 1.5% and that the current low negative inflation would turn the corner by the end of the year. This Monday (09 March), the long-overdue QE programme, with over US$ 1.25 trillion of assets being bought over the next 18 months, started as the euro was trading at the 1.09 level to the greenback. By Thursday it had sank even further to 1.05 – its lowest level in over 12 years, as Deutsche Bank forecast a further drop to 0.85 by the end of 2017.

In December, EC President, Jean-Claude Juncker introduced a US$ 341 billion investment plan to encourage growth by financing numerous projects. To date, Germany has promised US$ 16.2 billion, France US$ 8.7 billion and Spain US$ 1.6 billion.

February data from China indicates a record trade surplus of US$ 60.6 billion, with exports up 48.3% and imports down by 20.5%. However, the figures may be skewed somewhat by the fact that the Chinese New Year occurred mid-February. Where the export figures may indicate a rise in demand for Chinese goods, imports highlight the problem of weak domestic demand and the worry of deflation taking hold.

Brazilian president Dilma Rousseff’s government is being tainted by the expanding Petrobras scandal, with 54 people accused of taking bribes including many senior politicians. Although she chaired the petroleum company’s board for seven years, the president has been cleared of any charges!

It does seem incongruous that HSBC top management was unaware of the illegal activities of their Swiss private bank. Details of the scandal, involving some 30k accounts, were made known to the French authorities in 2007 and passed on by them to their UK counterparts. It was only last month that the information came into the public domain and since then the HSBC executives have been ducking and weaving.

The latest data from Baker Hughes Inc indicates that the number of US operational drilling rigs fell for the 13th straight week to 922 – 42.7% down on the October figure of 1,609. Thanks to the shale oil revolution US production, over the past five years, has risen by 67.3% from 5.2 million bpd to 8.8 million bpd. The worry is that if prices keep falling (and they were at US$ 55 at the end of the week), shale oil production becomes a loss making venture and bankruptcy becomes a fact of life. If the financial institutions have been bankrolling these ventures willy-nilly, the economic fall-out could be much worse than the sub-prime crisis and more difficult to Shake It Off. 

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One Response to Shake It Off

  1. Amber says:

    Where do they get their stats- Arabian Ranches detached family homes dropped nearly 20% last year. That mortgage cap is working a real treat for AED5 million plus houses. I expect we will never be able to sell ours!

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