Fog Has Lifted!

burj-al-arab-fogReidin reports that 2016 Dubai freehold transactions, including both freehold and off-plan, fell by 2.3% over the year to 23.6k, with a value of US$ 9.9 billion – 16.3% lower than in 2015 (US$ 11.8 billion); off-plan sales were down 10.6% to US$ 4.9 billion, with ready properties falling 21.1% to US$ 5.0 billion. The market did pick up towards the end of the year, as the impact of an expansion in mid-market offerings, driven by the likes of Dubai South, Damac’s Akoya and Nshama’s Town Square, took effect. Although H1 launches last year totalled 10.3k, followed by 11.6k in H2, it is unlikely that the final number of 2016 actual  handovers will top 10k.

Apartment rentals in many locations slipped during the year with Dubai Marina, Palm Jumeirah and The Greens showing average declines of 14.0%, 11.8% and 5.9% respectively. Rents in other areas including Business Bay, Discovery Gardens and International City remained flat. Arjan was the year’s standout winner, with annual rents up around 30.0%.

Meanwhile, Core Savills are less bullish, with a forecast of a 4% decline in suburban rents this year, compared to 5% a year earlier. The consultancy sees a further 20k units (probably on the high side) entering the market this year and estimates that prices, which have fallen by 15% over the past 30 months, have flattened out and that the bottom of the cycle has been reached. The main drivers for the turnaround are an increased focus on affordable housing, developers offering improved payment terms and global energy prices edging higher.

According to Reidin eight of the top ten 2016 realty sales occurred in Emirates Hills, with a total value of US$ 86.6 million. Palm Jumeirah accounted for the other two sales, totalling US$ 14.4 million.

Following the president-elect’s press conference, Damac confirmed that a US$ 2 billion agreement for a property deal in the emirate had been on the table but was declined by Donald Trump. The Dubai developer has had links with the Trump Organisation for more than three years, with Trump International Golf Club as part of its US$ 6 billion Akoya development.

An Abu Dhabi-based hotel operator has opened its first ever property – the 4-star, 168-key Royal Continental Hotel Deira Royal Continental. It also plans another property – a 5-star, 133-room hotel on Dubai Canal waterfront to be completed before Expo 2020.

Recent Dubai hotel trends continued in the same vein last month. STR figures indicate that occupancy levels remained firm – up 3.2% to a credible 79.7% – but average hotel room rates headed south to US$ 225 – a fall of 8.4%, year on year. However, December did see demand overtake supply along with the highest monthly demand increase in over five years.

In 2016, a further 129k sq mt of gross leasable area was added bringing Dubai’s total office space portfolio to 8.55 million sq mt, with an expected 3.5% to be brought to market this year; Business Bay (30%), The Greens (22%) and JLT (20%) will account for most of the 2017 development, as a marked shift away from the CBD becomes more apparent; in 2016, JLL had noted that vacancy levels in the CBD had fallen to 15%.

The RTA has announced an agreement with Uber to look into the viability of more affordable taxi and limousine services in Dubai. The ride-hailing company will also provide 14k vehicles to be booked via its smart app.

Following a recent IATA report indicating that ME carriers could witness a 67% decline in 2017 profits to US$ 300 million, it is no surprise to hear that Emirates is expecting 2017 to be a “flat” year. The drivers behind their H1 September results, that saw profits sink 75% to US$ 214 million, still exist – a strong greenback, increased competition, economic uncertainty and various security concerns.

In its embryo stages, the newly formed US$ 1 billion Dubai tech company, Noon, will highlight high-street fashion in its drive to dominate the MENA e-commerce sector. Buyers will have access to more than three million products, with payments per NoonPay and same day delivery via Noon Transportation. Its long-term aim is to expand its regional online sales to top 15% (US$ 70 billion) within a decade.

Dubai-listed Gulf Navigation Holding has signed an agreement with Polimar Turkish to expand its range of services. As a result of this partnership deal, the Dubai company’s fleet will expand from four to ten vessels, with a value of US$ 30 million, and annual revenue should grow by US$ 27 million. In December, Gulf Navigation signed contracts with Mena Energy, for cooperation in vessel acquisition and chartering, and Swiss-based SeaQuest to grow its project management services.

Amanat Holdings has invested US$ 97 million to acquire a 13.18% share in Saudi’s International Medical Company. The Dubai-listed healthcare investment company also has a 33.25% share in Jeddah’s Sukoon International.

Having gained 2.7% (97 points) in the first week of 2017 trading, the DFM opened Sunday at 3628 and continued its upward trajectory, climbing 93 points (2.6%) to close Thursday (12 January 2017) on 3721. Volumes were at their highest for some time, closing the last day of the week, at 1.48 billion shares, valued at US$ 414 million, (cf 504 million shares for US$ 171 million, the previous Thursday). Emaar Properties and Arabtec were both higher – by US$ 0.08, to US$ 2.09 and US$ 0.04 to US$ 0.41 respectively.

This week saw Brent Crude shed a little of its recent gains, trading down US$ 0.88 at US$ 56.01. Having already moved US$ 50 higher over the previous two weeks, gold continued with a further US$ 19 uptick, closing at US$ 1,200 by Thursday (12 January 2017).

2016 proved to be a flat year for Boeing, with deliveries 1.8% lower at 748 planes and the 668 booked orders down 13.0% from a year earlier; the value of orders came in at US$ 94.1 billion. The iconic 737 proved its most popular model, grabbing almost 66% of the total deliveries with the number of 747s dropping to a paltry nine. The plane maker has just 28 unfilled orders, after closing 17 sales of the freighter version of the jet last year. Further bad news for the plane maker came when it announced that it was cutting its annual production of the 777 from 84 to 60, in the wake of weakening demand.

On the other hand, Airbus reported an 8.3% jump in 2016 deliveries to 688 planes (including 49 of its long delayed A350s) – and this despite numerous engine and production problems with stakeholders.

Despite Lufthansa posting a 1.8% hike in 2016 passenger numbers to 110 million, it has lost its premier position, as the continent’s largest carrier, to Ryanair. The Irish budget airline had another impressive year, with traffic up 15.0% to 117 million. Two other low cost carriers recorded double digit growth over the year – Wizz Air up 19% to 23 million and Norwegian Air Shuttle by 14% to 29 million passengers. Meanwhile EasyJet saw numbers up 6.6% to 75 million.

If – but more like when – Yahoo sells its digital services to Verizon for US$ 4.8 billion, it will change its name to Altaba, although the buyer will probably retain the Yahoo links. The leaner tech company will become more of a holding company for its e-commerce assets, including the Alibaba Group.

Having seen its 2016 revenue expand by 10.6%, TSMC, the world’s largest contract chipmaker, expects up to double-digit growth again this year. Q4 figures saw the Taiwanese company with record revenue up 28.8%, as profit came in 37.6% higher at US$ 3.2 billion.

Despite all the hullabaloo surrounding Brexit and the dire forecasts of economic disaster, UK retailers reported a rise in Christmas trade. Morrisons, Waitrose, John Lewis, Debenhams and Tesco posted like for like sales increases of 2.9%, 2.8%, 2.7%, 1.0% and 0.7% respectively. Even troubled M&S came to the Christmas party, recording a 2.3% jump in its clothing and homeware division – well above the expected 0.5%.

Having just criticised GM for making cars in Mexico, the president-elect has also tweeted Toyota that it will be heavily penalised if it moved its Corolla production line to Mexico; nevertheless Akio Toyoda indicated that the company had no plans to curb production south of the border. In equally defiant mood, VW is “absolutely committed” to a new Mexican plant, whilst BMW is spending US$ 1 billion on a plant in Mexico. (However, Fiat Chrysler is planning to move its Mexican Ram pickup production line to the US, as well as announcing a US$ 1 billion investment to produce its Jeep models).

The US Department of Justice has finally settled with VW in relation to the German automaker’s scheme, involving 590k diesel vehicles being fitted with a defeat device to cheat on emissions tests. VW will have to pay a fine of US$ 2.8 billion and a further US$ 1.5 billion in civil penalties.

Another carmaker in trouble for the same cheating as carried out by VW is Fiat Chrysler. US regulators have indicated that the company had fitted software which gave distorted emissions readings on a possible 104k vehicles.

The World Bank expects a slightly bigger increase, at 2.7%, in global growth this year following the 2.3% figure for 2016 – the worst since the GFC. It expects the US economy to improve and expand at the rate of 2.2%, compared to 1.6% last year.

For the 10th straight quarter, China’s reserves have fallen – this time by US$ 41.1 billion to a 5-year low of US$ 3.01 trillion, as confidence in the yuan plummets. The country will have to monitor this deteriorating situation closely and maintain a grip on its strict capital controls, along with a worrying surge in debt. However, the good news is that many indicators – such as the service and manufacturing PMIs – are heading north, with a possibility that growth this year may top 7.0%, compared to an estimated 6.7% in 2016.

Australia’s November trade figures impressed the markets as it posted its first trade surplus – at US$ 890 million – in three years; analysts were expecting a US$ 370 million deficit. Exports were 8% higher (with coal, 26%, and iron ore, 11%, the big movers), as imports remained flat. A falling dollar, down some 6.5% since the beginning of November, helped the cause. If this upward trend continues, it could see the country escaping a recessionary slowdown this year.

On the back of higher public and private spending, at 4.2% and 2.0% respectively, Germany recorded a 1.9% GDP increase in 2016 (compared to 1.7% and 1.4% over the previous two years), as Q4 growth tipped an estimated 0.5%. Despite exports only increasing by 2.4%, compared to a 3.4% growth in imports, the country still posted a budget surplus of 0.6% of GDP.

With only a week to go before the Trump inauguration, the US economy continues to steam ahead. December job numbers increased by 156k, as November figures were revised up by 29k to 204k. With jobless claims at just 247k, (and below the 300k mark for the 97th straight week), there are signs that the labour market is tightening. More importantly, the annual rate of wage increase at 2.7% was at its highest level in nearly eight years, as the unemployment level fell to 4.7%. (It must be remembered that these figures do not include those who have given up looking for a job or those who want to work longer hours). There is a feeling that certain measures that the Trump administration plans – tax cuts and infrastructure spending – may overheat the economy which will move ahead even without this added impetus.

Sterling took a bit of a beating this week and at one time was trading at 1.208 but recovered somewhat by Thursday to close on US$ 1.221. The fall followed remarks by UK PM Theresa May – the recovery was thanks to remarks made by president-elect Trump in his first press conference in over six months. Simultaneously, the FTSE 100 discovered new record territory that saw it close on Thursday at 7292 – its 11th successive daily rise.

One of the biggest supporters for the UK to remain in the EU was the Canadian Bank of England Governor, Mark Carney. He has now declared that Brexit no longer remains the biggest domestic risk to the UK economy – if it ever was! Now he has to admit that, despite his pre-referendum protestations, the economy is growing faster than he expected – so much so that there is a distinct possibility that economic forecasts may soon have to be upgraded. (Not surprisingly, he did not agree with his Chief Economist, Andy Haldane, who likened the bank’s forecasting errors as a “Michael Fish” moment). Over the past week, Dubai has had its fair share of misty weather – now hopefully, for the emirate and the BoE forecasters, the Fog Has Lifted!

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