One Way Or Another

beijing-fogThere is no doubt that there is a slowdown in the Dubai realty sector and, according to Moody’s, it seems that the main cause is the emirate’s tighter property rules (including the recent doubling of registration fees to 4% and raising the minimum mortgage deposit) – rather than the oil price tanking. The credit agency reiterated that property prices had fallen since Q4 2014 and expected further declines before prices return to stability.

Meanwhile Cluttons estimated that up to 2013, prices had jumped by 51%, before declining 3.4% in 2014 – with more of the same this year. The company sees some form of equilibrium in the sector, with its debatable forecast of only 20k units coming into the market until 2017, whilst the population increases 16.7% to 2.8 million.

The first phase of the US$ 191 million MAG 5 Boulevard affordable housing project, comprising over 1k units, has already reported an 80% take-up. Work will soon start on the 800k sq ft development in Dubai South, slated for handover in Q1 2018.

Following last month’s announcement that United Engineering Co was to build phase 1, (Zahra and Safi apartments), Gulf Beaver Group has won the Nshama Town Square construction of its Zahra and Hayat Townhouses. When the total 750-acre project is completed, it will encompass 18k apartments and 3k townhouses.

The long-awaited 2k-seat Dubai Opera House is scheduled to open next March. The building, which will be the hub of The Opera District, will not only be a concept hall but could be transformed into either a theatre or a 1k-seat banquet hall.

In October, Madinat Jumeirah plans to open their 1.75k sq mt Fort Island that will be able to cater for up to 1.4k guests. As such, it is destined to become the largest hotel event space in the country and will be connected to the mainland by four bridges.

Omniyat has appointed Langham Hospitality Group to manage its proposed Business Bay property, due to open in 2017. Langham Place will have a 167-key hotel, along with 271 apartments.

It is reported that the Al Habtoor Group is considering a US$ 409 million loan to finance overseas property acquisitions. The Khalaf Al Habtoor conglomerate is busy in Dubai with the building of Al Habtoor City – comprising three 5-star hotels – and two other Dubai projects, a 4-star hotel and St Regis Dubai Polo & Resort Club.

The world’s largest indoor theme park, IMG World of Adventure, is on track to be completed by the end of the year. The 1.5 million sq ft project will encompass four zones, viz Cartoon Network, IMG Boulevard, Lost Valley – Dinosaur Adventure and Marvel.

MAF plans to open three Lego certified stores in Dubai – MoE, City Centre Mirdiff and Dubai Mall. Within 12 months, Legoland Dubai will also open as part of phase 1 of Dubai Parks & Resorts master development in Jebel Ali. The 3 million sq ft facility will include 15k Lego model structures, using over 60 million Lego parts.

Last month saw the abolition of petrol subsidies with pump prices up 24.4% to US$ 0.58 per litre, whilst diesel fell 29.0% to US$ 0.56.  The September price has been set with cuts across the board, including Special 95 petrol down 8.4% to US$ 0.53 and diesel falling 7.8% to US$ 0.51.

In August, it was reported that three major Hollywood films will be partly shot in the country – Star Wars, Episode VII: The Force Awakens, Kung Fu Yoga (with Jackie Chan) and War Machine (starring Brad Pitt). With government backing, this sector can only grow and has the potential to become a lucrative income source.

The ex-Leeds United FC director, David Haigh, has been sentenced to two years in jail for “breach of trust”, being accused of embezzling US$ 5 million from his former company, GFH. The 38-year old is to appeal but is also facing a civil case from his Dubai-based employer, where he was deputy CEO.

Abraaj Group was in the news again, this time it has finalised a US$ 375 million North African fund focused on “well-managed, mid-market businesses” in the consumer goods, education and healthcare sectors.

Surprisingly, ISC Research has concluded that the UAE – with a population of 9.6 million – has the most international schools in the world. With 511 facilities, it heads the likes of China (480), Pakistan (439) and India (411).

The troubled fit-out company Depa reported falls in both H1 revenue (down 4.0% to US$ 229 million) and profits that plummeted 44% to US$ 4 million. However, it has a project backlog totalling US$ 632 million, which is 12.0% higher than at 01 January 2015. The Dubai-based entity has a market capitalisation of US$ 307 million and a current share price of US$ 0.46.

Global port operator, DP World, recorded a 22.0% hike in H1 profits to US$ 405 million, with revenue up 14.4% at US$ 1.9 billion, assisted by the recent acquisition of logistics infrastructure firm EZW. Consolidated throughput increased by 3.5% to 14.4 million TEUs (20’ equivalent units).

In line with global markets, the DFMI had a turbulent week but managed to shed only 1.7% to close on 3648 by Thursday (27 August), having been down 8.3% to 3401 in early Monday trading. Of the bellwether stocks, Emaar Properties lost ground, dropping US$ 0.06 to US$ 1.78, whilst Arabtec inched forward US$ 0.01 to US$ 0.55. Trading volumes on Thursday continued to disappoint, but were up again on seven days earlier, with 331 million shares, valued at US$ 262 million, being exchanged (cf 307 million shares, for US$ 164 million, the previous Thursday). This week may see some consolidation as relative calm returns.

As with the equity markets, both oil and gold had a roller coaster week so that by Thursday, oil, thanks to a sudden late 10.25% spike, actually closed 2.5% up at US$ 47.56. There could be a downward market adjustment this week. The yellow metal shed recent gains to close 1.7% down at US$ 1,121; coincidentally, the UAE Central Bank continues to rebuild its stock of gold with a June balance totalling US$ 174 million – up 84.1% on last year’s figure.

As a major commodity currency, the Australian dollar, neared US$ 0.705, to hit six-year lows this week, one of its largest companies, BHP Billiton, posted a 52.0% fall in 2015 profits to US$ 6.4 billion. Consequently, the mining giant has announced 35.3% cuts in capex this year to US$ 11 billion. Australia’s close economic ties with China, and its reliance on commodity exports, will ensure that any Chinese meltdown will be felt moreso down under than in most other western economies.

Ryanair faces a major financial headache as a UK court has ruled that the world’s largest budget airline will now have to pay money to passengers who have experienced delayed flights over the past six years – as opposed to the former rule of two years. It is estimated that under the court’s decision, 2.26 million passengers could claim a total of US$ 951 million. This could also impact other airlines that have formerly relied on the two-year rule.

As a result of delivering a US$ 374 million profit last year, Qantas chief, Alan Joyce’s annual remuneration came in at US$ 8.5 million, including US$ 4.9 million in shares.

It is reported that Visa Inc is in negotiations to buy out its European sister company, Visa Europe, for US$ 20.9 billion. Strangely, the asking price is more than double the US-based company’s valuation envisioned only four months ago!

For the first time in three years, the UK recorded a fiscal surplus in July – US$ 2.0 billion – compared to a US$ 156 million deficit this time last year. Income tax revenues at US$ 28.9 billion were at their highest level in 18 years but the country’s debt level – at 87% of GDP – is still a worry.

One of the fastest growing countries in the eurozone is Spain, with recorded growth levels of 0.9% and 1.0% over the past two quarters – and similar forecasts for the remainder of 2015. The main drivers behind this turnaround have been an increase in tourism, a jump in exports and a boost in consumer confidence, which has encouraged more spending. However, the country still has an unacceptably high unemployment rate of 22.4%, eurozone’s second highest to Greece.

It is interesting to look at the worrying levels of public debt among certain countries. The current US national debt stands at a whopping US$ 18.1 trillion and it has a public debt of 74% to GDP. This compares favourably to the likes of Greece, France and the UK where the levels are at 177%, 98% and 87% respectively. One of the conditions of the Maastricht accord, to join the common currency was that a country’s ratio was no higher than 60%! Growth will help in improving debt levels but with China on the edge of a precipice, that seems unlikely in the short-term.

Since 11 August, when Chinese authorities allowed its currency to float more freely, the global equity markets have shed a staggering US$ 8 trillion in value, as the yuan has weakened. The world is faced with uncertain, and probably erroneous, economic data emanating from China, a bearish stock market (despite massive government support), dwindling consumer confidence and a shadow banking system that could implode with dire consequences. Recent forays into both the currency and equity markets by Premier Li Keqiang have resulted in abject failure and the contagion from impairments in the country’s growth rates will have very significant repercussions for the global economy.

Just as major questions are being asked about the veracity of China’s official figures, US Q2 data has been upgraded with GDP growth amended from 2.3% to 3.7%. Other statistics also point to an upward trend with consumer spending growing by 3.1%, the same percentage increase in non-residential structures and 7.8% in residential construction. However, it is the events in China that will dictate how the global economy fares in the coming months. Since the Chinese statisticians have been rumbled, it is time that the rest of the world is given the country’s true economic picture – One Way Or Another.

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