Summer In The City

DPWorld-championshipAnother report shows that the much vaunted major correction in residential prices has yet to arrive. Cluttons indicated that Dubai prices fell by only 0.8% in Q1, and only 0.5% lower over the past twelve months. However, it was noted that 2014 activity, with only 1.3k villa sales, was 52% down year on year whilst Q1 has been 36% lower. The main driving forces have been the Dubai 2014 introduction of a 4% registration fee and the federal mortgage cap, whereby bank lending has been topped, in most cases, at 75%.

It is estimated that over the next decade, Dubai World Central will add 20k hotel rooms to the ever growing Dubai portfolio, as the US$ 32.7 billion Al Maktoum International Airport starts to increase its capacity to an expected 200 million. To date, four hotels – Studio M (750 rooms), Holiday Inn (700), Millennium (400) and Aloft (150) – have confirmed that properties will be built in the area.

At the same time, MAG Property Development and MBM Holding have announced the launch of a US$ 191 million affordable homes project in DWC which will encompass over 1k housing units. Phase 1 of the 800k sq ft development will start in Q4 and be completed within 30 months.

There were two real estate developments announced this week. Jumeirah Golf Estate’s AlAndalus, with 75 townhouses and 550 apartments on offer, will have prices starting at US$ 163k. (The company also reported a 68.0% hike in 2014 profits to US$ 117 million). Dubai Properties will launch its  Arabella Townhouses, located close to Mudon Central Park, on Saturday; GEMS is expected to open a school in September 2016 and there are plans for a 64k sq ft community centre.

IMG Worlds of Adventure has appointed Novo Cinemas to open a multiplex cinema in their temperature controlled indoor theme park – the biggest in the world. The park, set to open later in the year, will also have four separate  themed  zones – Cartoon Network, IMG Boulevard, Lost Valley and Marvel – and expects to host 20k visitors daily.

Meanwhile MAF Cinemas has announced a US$ 272 million enhancement and expansion plan with the aim of attracting an additional 50 million patrons over the next five years. In Q1, Vox Cinemas reported a 50% increase in cinema admissions in its ten UAE and three regional venues.

Although the number of Russian tourists fell by 23.5% last year, its impact on Dubai’s tourism sector will not be as bad as some analysts had forecast. Numbers from the other top ten source markets have increased by over 8% and emerging markets – such as Brazil, China and Nigeria – have showed double digit growth. As Russia and the CIS accounted for only 3% of total inbound figures, any shortfall has been made up from increased numbers from other countries.

Landmark Group has given a massive boost to Nakheel’s upcoming Al Khail Avenue by agreeing to operate 25 brands, including Centrepoint, Emax, Home Centre and SportsOne. Waitrose and Reel Cinemas will also feature in the massive 1.2 million sq ft retail area which will have over 350 outlets.

One of the most popular burger chains in North America, with over 1.2k locations, is set to soon open in Dubai. The 30-year old Five Guys will open its first ME outlet in Dubai Mall, in partnership with the franchiser, Rise.

Emrill, a JV between Al Futtaim, Carillion and Emaar, has launched a new business unit, Emrill Specialist Services, catering for the growing need for a more focussed approach to facilities management, including consultation and engineering solutions. The company is the leading entity in this sector and hopes that this new initiative will enable it to have a bigger share of the market that is expected to reach US$ 5.5 billion by next year.

According to a recent CBRE report, London is the number one shopping destination in the world with Dubai again in second slot followed by Shanghai, New York and Singapore. Last year, the emirate attracted 55.7% of international retailers including 55 new brands to Dubai.

The CEO of the 130-store Lals Group, Jayant Ganwani, thinks that Dubai is becoming too expensive for the retail shopper citing that there has been a 20% reduction at the top end of the market. The smart shopper who used to come to Dubai to bag a bargain now realises that prices elsewhere are cheaper and that the emirate could be pricing itself out of the market. He expects that there could be further decline this year – up to 10% in the mid-market sector and even more at the luxury end.

This “fear” factor might even be spreading into the hospitality sector which may be smarting from the decline in Russian tourists, a strong currency (being pegged to the US$) and regional problems which have been reflected by lower occupancy rates and revenue reduction.

The there is the on-going debate about the high cost of rentals, education and other living costs rising a lot quicker than remunerations.

Not surprisingly, the Burj Al Arab has won the Daily Telegraph’s Best Hotel in the World for the third year in a row.

Benfica is the latest beneficiary of Emirates’ largesse as the airline has just signed a three-year shirt deal with Portugal’s most popular club. The airline has been flying to Lisbon for almost three years and has confirmed a second daily flight to the capital.

This week, DP World extended its sponsorship, to 2020, of the US$ 8 million World Tour Championship. This is the final event of golfing’s The Race to Dubai which attracted 55k spectators last year and added over US$ 50 million to the local economy.

Dubai World Trade Centre became the latest in a long list of Dubai’s free zones this week. The aim of the exercise is to boost conferences and exhibitions in the emirate as well as to attract investment.

Citigroup reported that its credit card base in the UAE expanded 2.5 times over the past year, as its consumer lending rose by 10.0% in Q1.

The DIFC has licensed another investment bank. Audacia Capital, founded by Emad Mansour, has a US$ 27 million capital base and will target regional investment opportunities of between US$ 15 – US$ 50 million.

The United Investment Bank Limited has been fined US$ 56k by the Dubai Financial Services Authority for contravening a number of the authority’s regulations relating to money laundering systems and controls.

Following its November 2008 delisting and a long debt restructuring process, involving US$ 2.7 billion, Amlak Finance will rejoin the DFM on 02 June.The mortgage lender, 45% owned by Emaar Properties, reported Q1 profit down 62.5% to US$ 1.6 million.

The Dubai health and education investment company, Amanat Holdings, has purchased a 4.14% shareholding in Al Noor Hospitals for US$ 68 million. The company listed on the Dubai bourse in November with a share value of US$ 0.22 – at Thursday’s close, the share was trading at US$ 0.18.

Following two weeks of losses, the DFMI returned to profit to close the week 1.1% up at 4119. Thursday saw continued soft business with only 245 million shares, totalling US$ 114 million, changing hands – it does seem that summer has arrived early this year. Emaar Properties rose US$ 0.09 to US$ 2.23 whilst Arabtec Holdings stayed flat at US$ 0.66. 

Over the week, both Brent crude and gold headed south by US$0.79 to US$ 66.59 and US$ 17 to US$ 1,209 respectively. The benchmark oil price has had a roller coaster year reaching US$ 115 last June before sinking to US$ 46 earlier this year. It is anybody’s guess what will happen at the upcoming OPEC seminar in Vienna but it is unlikely that any firm agreement can be reached about setting quotas for producing countries – both in and out of OPEC. With so much apparent manipulation in the gold market, it is impossible to gauge what will happen to prices of the yellow metal.

The US$ continues to post strong gains against most other leading currencies. Since November, the US Dollar Index – a wighted basket of six currencies to the US$ – has risen from 85 to 95. With the eurozone still struggling and the ECB beginning its quantitative easing programme in earnest, a further strengthening of the greenback would not be a surprise.

As expected, and not for the first or last time, international banks have been hit with mega fines for cheating. This time, Barclays, Citigroup, JP Morgan, RBS and UBS will have to pay US, UK and Swiss regulators a total of US$ 5.7 billion for on-going manipulation of the forex market and rigging benchmark interest rates. It is about time that the perpetrators – and not the victims (consumers and investors) – are called to task and that grovelling apologies will no longer suffice.

This week the Japanese Nikkei hit a 15-year high mainly due to the low yen and an economy growing at a faster rate (2.4% for the year and 0.6% in Q1) than expected. However, this may be a blip for an economy that only came out of recession last year with problem areas such as stagnant wages, falling industrial production and weaker capital  spending to be resolved before Abenomics can finally be declared a success.

May’s preliminary HSBC purchasing managers’ index for China came in at a disappointing 49.1 – any number over 50 indicates expansion, below contraction.This reading shows that the economy is still sluggish and that authorities should be considering further stimulus measures. 

For the first time since 1960, the UK CPI moved into negative territory at -0.1%. Although both Chancellor George Osborne and Bank of England supremo, Mark Carney, reckoned that this was not damaging to the economy, there are fears that it is a portent that all is not well. Although falling prices and rising wages are good news to consumers, in the long term an economy has to grow and with deflation this cannot happen. 

Unless something drastic occurs, there is no way that Greece can meet its short-term debts, amounting to over US$ 19 billion, including to the IMF (US$ 2.4 billion), ECB (US$ 7.5 billion) and other external creditors (US$ 9.1 billion). At the end of June, it will also need to find US$ 2.4 billion to pay public sector salaries and pensions. It would seem that social discontent will be inevitable so Athens is one place not to go this year for a Summer In The City.

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