Give Peace A Chance

Reidin-GDP estimate that developers have handed over 13.3k units in H1 (compared to just 8.7 units a year earlier); the consultancy expects the final figure to be in the region of 27k by 31 December 2017 and 31.3k a year later. However, that would be a marked increase on the 2015 and 2016 deliveries of 11.9k and 14.9k. Whatever materialises, there is  no doubt that developers will continue to set the supply/demand curve as close to equilibrium as possible. In an earlier blog, it has been estimated that at current levels of population growth supply would need to be nearer 40k. It is interesting to note that Dubai Silicon Oasis (2.8k units) and Dubailand (2.5k) accounted for nearly 40% of the total YTD handovers and at the higher end of the market Downtown (1.4k) and Business Bay (869). The current occupancy rates for Dubai apartments is 88.4%.

Al Nabooda Construction Group has been appointed by Emaar Properties as the main contractor for its two Creekside18 37-storey towers. The project, located in Dubai Creek Harbour, will comprise housing and commercial units.

Emaar Properties also announced the launch of its Dubai Hills Mall which will serve the residents of MBR City and surrounding environs. To open in H2 2019, the development, covering two million sq ft of gross leasable area, will have 750 outlets including seven anchor stores, a hypermarket and a Cineplex. It will also have parking for 7k vehicles and will be directly linked with the Metro.

Having been awarded a Wasl Asset Management contract to build the first phase of wasl 1 development, Kele Contracting has already started work on the four towers. The work is scheduled for completion by H2 2019 and when all four towers are built, the development will comprise 746 residential units.

Orion Real Estate Development has awarded a US$ 48 million contract to troubled Dubai-based engineering and related services company Drake & Scull subsidiary, GTCC. This is related to MEP (mechanical, electrical and plumbing) work for the developer’s 34-storey West Bay residential tower in Business Bay.

With Cityscape Global 2017 just two weeks away, Nakheel has whetted investors’ appetites by announcing that it will launch five new projects at the three-day mega event. The developer has already intimated that it expects to jump its revenue nearly three and a half times to over US$ 2.0 billion by 2021, along with a portfolio of 36.5k residences, 5k hotel rooms and 17.6k sq ft of retail space.

As Indians accounted for 13.2% (US$ 3.3 billion) of Dubai’s real estate transactions last year, it is no surprise to see Azizi Development open a sales office there. The Dubai-based developer has recently launched its massive US$ 3.3 billion Azizi Riviera project. Located in MBR City Meydan One, it comprises 69 mid-rise towers, which will house 13k residential units, along with three hotels and an integrated retail space.

Damac Properties is considering investment opportunities in Toronto, with the developer’s chairman, Hussain Sajwani (who owns 70% of the company) meeting its mayor, John Tory. The city is one of the fastest growing in the Americas.

Gulf Sotheby’s International has acquired a 51% stake in rival property developer, SPF Realty, for an undisclosed sum. The new entity will result in a doubling in the number of brokers to 100 and the integration of both entities’ client bases.

Since its inception, Dubai Chamber of Commerce’s entrepreneurship development programme, Tejar Dubai, has received 260 business ideas and has launched 28 commercial projects to date. The majority of these entities are involved in smart business, retail and logistics services.

Dubai International continued to break records as July passenger numbers showed a 5.9% hike to 8.1 million – a new monthly high for the world’s largest international airport. Although the number of flights dropped 4.7%, there was a 10.1% boost in the number of passengers per aircraft to 243. It also handled more cargo – at 213k tonnes, 5.0% up on the same month last year.

The Minister of Economy, HE Sultan Al Mansouri, is hoping that the introduction of new legislation will help the country’s productivity that in turn will boost the contribution of the non-oil sector from the current level of 70% to 80% over the next four years. Some of the new laws will cover foreign direct investment, industry regulation, commercial transactions and arbitration, all of which will improve the investment climate, along with business confidence and competitiveness. The Minister expects 2017 non-oil growth at 3.1% rising to 3.7% next year and this follows the 2016 return of 2.7% (and 3.8% for oil growth).

There was a 4.6% annual increase in UAE banks’ assets to US$ 716.6 billion, as deposits rose by 7.1% to US$ 433.8 billion, by the end of last month; over the same period, loans/advances were 3.5% higher at US$ 434.3 billion.

Despite a 9.6% hike in H1 revenue to US$ 2.29 billion, DP World posted a marginal 0.3% fall in profit to US$ 606 million. In line with the continued growth in global trade, the world’s fourth largest terminal operator expects to meet full year market expectations. The company’s cash position has grown 10.5% to US$ 1 billion since 30 June 2016 and has budgeted capex of US$ 1.2 billion for this year; the main areas of expenditure are Jebel Ali, London’s Gateway, Canada’s Prince Rupert and Somaliland’s Berbera. It also reported an 8.2% jump in the number of TEUs (20’ ft equivalent units) to 33.9 million.

Emirates REIT posted a 21.5% increase in H1 rental income to US$ 24 million, with service and other fees 6.8% higher at US$ 3 million. However, the country’s first real estate investment trust recorded a 23.1% slump in profits to US$ 18 million on the back of a fall in revaluation gains compared to the same period a year earlier. Since it announced that it has seen a 6.9% rise in its aggregate portfolio to US$ 772 million, this week it bought the European Business Centre (its tenth commercial property) in DIP for US$ 35 million.

The DFM opened Sunday (20 August) at 3601 and nudged 23 points (0.6%) higher to close on 3624. Volumes declined, closing on Thursday – 24 August – on 177 million shares, valued at US$ 77 million, (cf 234 million shares for US$ 79 million, on Thursday, 17 August). Emaar Properties was US$ 0.02 higher at US$ 2.32, with Arabtec flat at US$ US$ 0.89.

By Thursday, Brent Crude was US$ 1.22 (1.1%) lower for the week, closing at US$ 52.13, with gold down US$ 3 to US$ 1,292 by 24 August 2017.

All is not well in the Uber boardroom, already torn by a legal battle between the former chief executive, Travis Kalanick (who has control of three board seats), and major investor, Benchmark. Still searching for a new CE, COO and CFO, and with Benchmark accusing the co-founder of fraud and intervening with these executive searches, some shareholders are worried that the company is being torn apart and “losing the plot”.

Amazon.com has made progress this week in its attempt to acquire Whole Foods Market for a reported US$ 13.7 billion. If successful, it would give the world’s largest online retailer an entree in the USS 700 billion US grocery market (as well as 465 physical outlets). Although the US chain has only nine UK outlets, the country’s supermarkets were under pressure after Amazon announced that it would cut prices of everyday groceries. No wonder shares in the Big 4 – Asda, Morrisons, Sainsbury’s and Tesco – dipped on the news of the acquisition by a predator that is not too concerned about short-term loss pains for long-term gains and market share.

WPP, the world’s largest advertising group, not only announced its second sales warning of 2017 but also issued a downbeat assessment of the industry. The company has halved its forecast for full year revenue to just 1.0%, as big companies cut their traditional market spends. The result is that advertising agencies have had to slash fees and even offer clients upfront discounts just to retain business. WPP’s Chief Executive, Sir Martin Sorrell, has blamed primarily digital disruption for the slowdown that has seen his company’s shares sink 23.9% to US$ 1,886 since 01 March 2017 (and by 10.9% in one day following Tuesday’s profit warning).

At the end of the week, the vice-chairman and heir to the global mobile phone behemoth, Samsung, was sentenced to five years in prison for corruption. Lee Jae-Yong was found guilty of bribery, perjury and embezzlement and that he had paid US$ 39 million to a close friend of the recently impeached president, Park Guen-Hye, in exchange for business support. The world’s most lucrative tech firm, with Q2 profits of US$ 9.9 billion, also saw two of its executives facing four years in jail for similar offences.

A recent Fidelity study has indicated a massive fall in the value of a typical UK “pension-pot”, compared to a decade earlier. It estimates that in the ten-year period to 2007 – when average annual earnings rose by 3.5% (with 2.5% average inflation rates) – retirees earned an annual income of US$ 15.7k. In 2017, using the average annual data for the previous decade, with 1.7% wage growth and 2.7% inflation, annual income has almost halved to US$ 8.5k.

One of the most improved global economies this year is Japan where most indicators continue their recent upward trend. Its all industry activity index climbed 0.4% in June – and 2.2% on an annual basis – whilst its July Manufacturing PMI reached 52.1. There were noticeable improvements in output, new orders, new export orders, employment, input prices and inventory levels. Q growth levels since 1980 have averaged 0.51% amid a range of minus 4.8% in Q1 2009 to 3.2% (Q2 1990); the latest quarter sees a 1.0% level that could result in the country posting a healthy 4.0% annual growth in 2017.

The Bundesbank now expects the German economy to grow by over 2.0% this year on the back of recently improved data that sees an upturn on the bank’s previous June 1.9% forecast. It also shows the country benefitting from the global economy growing at a stable underlying pace.

New home sales in the US took an unexpected plunge in July, down 9.4%, month on month, to 571k, driven by sharp monthly falls in the North East (down 23.8%) and the West falling 21.3%. However, median house sales, at US$ 314k, were up 0.7% for the month and 6.3% for the year. The same has not happened in the UK, as the August average price of a house dipped 0.9% but still 3.1% higher, year on year.

At this week’s meeting in Jackson Hole, Fed Chair, Janet Yellen, has reminded all and sundry not to rush in and cut the red tape and bank regulations introduced after the GFC. Opponents, including the President, are of the opinion that the system is stifling the economy but Ms Yellen has said that the new environment is “substantially safer” and that the tighter rules are not weighing on growth or lending. It seems likely that the Fed will have a new chairman next February and early indications point to the current Fed vice-chair of financial supervision, Randal Quarles.

There is no doubt that the leaders of both the US and North Korea are rattled. Earlier in the month, President Trump warned the rogue state that it best not to make any more threats to his country or “they will be met with fire and fury like the world has never seen.” Two days later, he tweeted on 11 August that “if anything, maybe that statement wasn’t tough enough” and a day later “Military solutions are now fully in place, locked and loaded, should North Korea act unwisely. Hopefully Kim Jong Un will find another path!” This week sees North Korea protesting at the annual joint US-South Korean military exercises. With bilateral relations sinking to new depths, and the UN yet again full of resolutions but seemingly powerless to act, the last thing the world economy needs is a major political conflict that will derail the recent upturn in global trade and growth. However, it could be too late to yet again Give Peace A Chance.

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