Welcome To Paradise

Cluttons has estimated that Q2 property prices dropped for the 12th consecutive quarter, with average prices falling 5.8% over the past twelve months and 14.0% over a three-year period. The real estate consultants also estimated that Q2 falls for apartments were at 1.0%, whilst villas fared worse with a 2.2 % decline. In line with others, it sees the market bottoming out and that the Expo 2020 factor will start having more of an impact on the sector in H1 2018 – a little later than most had earlier estimated. Strangely, it also indicated that villa rents could fall by up to 10% this year, with apartments remaining largely unchanged.

Knight Frank has forecast that prime office rents in Dubai are heading north as latest data shows that average rents to the 12 months to June had dipped 4.5%. However, it was noted that rents in the DIFC rose 1.3% in Q2.

Monday sees the opening of the three-day Cityscape Global and with it a raft of realty projects, including a US$ 409 million mixed-use tower on SZR. Further details will be announced at the event but it is known that Shuua Capital will be managing the development. The Dubai-based investment bank already has a US$ 817 million portfolio of real estate in the UAE and Saudi Arabia.

National Bonds Corporation is to launch phase 3 of Casa Flora, located in Motor City Green Community. Sales will occur at Cityscape Global and will comprise both villas and apartments.

Aston Property Ventures has announced  a world’s first, with its US$ 326 million development in Dubai Science Park; 20% of the project’s 750 apartments will be for sale by the use of the bitcoin; it is estimated  that the cost of a studio will be about 30 bitcoins (US$ 169k) and 85 (US$ 389k) for a two-bedroom apartment. The UK developers, the lingerie businesswoman, Michelle Mone, and her partner Doug Barrowman, expect completion by 2020.

Dubai South has launched its Park Lane residential project.

Dubai Municipality has published the first of its projects, as part of the US$ 350 million Hatta Comprehensive Development, encompassing three sectors – economic/services, education and tourism/sports. Part of the plan is to develop the Al Sherpa heritage area to include eight rest houses and pedestrian pathways.

Damac estimates that it has awarded 370 contracts, totalling US$ 954 million, in the first eight months of 2017. About half of this money has been invested in the developer’s massive 55 million sq ft Akoya Oxygen.

Kleindienst is expected to announce a US$ 681 million development next week. The company has developed The Heart of Europe islands, along with underwater Floating Seahorse housing, located on The World Islands, 4 km off Dubai’s mainland.

MAF’s newest hotel, Aloft City Centre Deira, is set to open in Q1 next year. The property, covering some 28.8k sq mt, will have 304 rooms, including 29 suites.

After the local success of its hotel brand, Emaar is set to manage The Address Madivaru Maldives Resort & Spa. Due to open in 2020, the hotel, located some 20 minutes by air from Male Airport, will have 80 beachside and over-water villas, some of which will be for sale.

The builder of Nakheel’s Deira Mall is set to raise finance of US$ 272 million. United Engineering Construction will use the proceeds for the building of this major shopping centre – a project that is estimated to cost US$ 1.7 billion.

UK’s biggest drug maker, GlaxoSmithKline, is planning to build a facility in the UAE next year, in a bid to boost regional sales. The maker of drugs, such as Augmentin and Panafon, will manufacture three, as yet undetermined, drugs in their factory which will probably cost in excess of US$ 100 million. (BMI expects the regional pharma sector to grow by 3.7% to US$ 33.4 billion this year).

The Banker magazine has ranked Dubai as tenth in the world for international financial centres, based on several factors including economic potential, business environment and financial market indicators. The 13-year old Dubai International Financial Centre is recognised as the leading financial hub in the MENA region; last year, the number of incorporated companies rose by 14.0% and by the end of June was home to 1.75k entities.

The RTA has signed an MoU with Siemens to extend its use of 3D printing technology that was first used last year by the rail agency for designing and manufacturing spare parts.

Following the recent decision by Qantas to move its Asian hub from Dubai to Singapore, comes the news that the emirate will become the regional centre for Cathay Pacific. The Hong Kong-based carrier confirmed that Dubai will become its hub for all passenger and cargo operations across the region.

Although ME airlines reported a 4.5% annual increase in passenger traffic in July, this figure is still well down on the five-year 11.2% average. IATA estimates that load factors rose 0.7% to 81.5% but noted that there was a slowdown in the expansion of non-stop services by the larger carriers. The industry has also been hit by regional conflicts, proposed US travel bans and rising costs.

July MENA hotel RevPar (revenue per available room) dropped to a five-year low, to US$ 85, as very weak demand saw hoteliers giving attractive discounts to attract business; occupancy was 1.0% higher at 60.4% but the average room rate dipped 12.7% to US$ 141. The profit per room was at its lowest level for some time at US$ 74 – a figure that was 51.8% down on the annual average.

The Department of Tourism has reported that the first seven months of the year saw tourist numbers 9.5% higher, at 9.2 million. The top three source markets – India (1.1 million), Saudi Arabia (904k) and the UK (712k) – accounted for 29.5% of the total.

The country’s third telecom operator came on line this week. Emirates Integrated Telecommunications Company (who also own du) has launched Virgin Mobile. The new entrant offers a fully digital service and increased choice for the country’s users who can select their own numbers and customise mobile packages.

August’s UAE Purchasing Managers’ Index grew at its fastest pace in over two and a half years, climbing by 1.3 to 57.3, month on month. According to the Emirates NBD’s monthly report, the main drivers behind this boost were impressive growth in new orders, inventories and output. With further investment relating to Expo 2020 due to be announced shortly, the recent economic improvement seems set to continue.

The UAE’s total non-oil trade for Q1 grew by 3.1% to US$ 109 billion – with direct foreign trade accounting for US$ 74 billion (67.8%) and trade from the free zones the balance of USS 35 billion. Both imports and reexports increased by 5.2% to US$ 67 billion and 7.4% to US$ 30 billion; exports totalled US$ 12 billion.  The three leading imports – gold (US$ 9.5 billion), mobile phones (US$ 6.6 billion) and motor vehicles (US$ 4.0 billion) – accounted for 30.0% of the total.

SOUQ.com, recently bought out by Amazon, has acquired the remaining shares in Wing.ae to take a 100% stake in the local online logistics supplier.

The DFM opened Monday (04 September), following the Eid Al Adha holiday, at 3638 and nudged 6 points higher to close on Thursday, 07 September at 3644. Volumes continued on the thin side, with trading of 175 million shares, valued at US$ 83 million, (cf 116 million shares for US$ 59 million, on Wednesday, 30 August). Emaar Properties was US$ 0.05 higher at US$ 2.37, with Arabtec down a further US$ 0.03 to US$ 0.86.

By Thursday, Brent Crude was US$ 1.63 (3.1%) higher on the week, closing at US$ 54.49, with gold continuing its recent upward trend, jumping a further US$ 27 to US$ 1,350 by 07 September 2017. According to Warren Buffet – “gold gets dug out of the ground in Africa, or some place. Then we melt it down, dig another hole, bury it again and pay people to stand around guarding it. It has no utility. Anyone watching from Mars would be scratching their heads”. Nevertheless, investing in such a “useless” metal has been profitable this year – it has risen 17.3% since its 01 January opening of US$ 1,151.

In the past week, VW has had to recall nearly 2.1 million vehicles because of a faulty fuel pump which can cause an engine to stall. 1.8 million vehicles in China were recalled, after an April 2016 investigation by authorities and 281k in the US for similar problems.

The merger between the UK engineering software firm Aveva and the software division of Schneider Electric will result in a new US$ 3.9 billion entity. The French company will be the majority shareholder.

Lego is planning to reduce its workforce by 7.7% to 16.8K on the back of a slowdown in business reflected in H1 falls in both revenue and profit – by 5.0% to US$ 2.3 billion and 3.0% to US$ 686 million. The toymaker indicated that the business had become too complex and needed a “reset”.

A US$ 30 billion deal sees a tie-up of UTC (who make Pratt & Whitney jet engines) and Rockwell Collins, who will combine their aerospace parts businesses, under a new entity, Collins Aerospace. The deal, which will need regulatory approval, is one of the biggest in aviation history and may prove a headache for plane makers, Boeing and Airbus, as they are continually striving to cut costs. Following this shakeup, the new entity will have size and greater negotiating power on its side.

This week, the World Trade Organisation reversed a previous decision to rule that Boeing had received state aid to build new aircraft. This “victory” for the US aircraft manufacturer may be short-lived as Airbus claim that other issues over alleged government support are on the table. This case concerned the state of Washington giving Boeing tax breaks, valued at US$ 9 billion, which effectively shut out imports. However, the 13-year old battle between these two aviation giants is far from over.

Bell Pottinger has been ejected from its trade body, the Public Relations and Communications Association, because of its work in South Africa, for a company owned by the Gupta family, had “incited racial hatred”. Its campaign for Oakbay Capital emphasised the power of white-owned businesses in the country. There are doubts that the firm can continue as more clients will abandon the “sinking ship” in the wake of its PRCA expulsion and negative press; by Thursday, the global firm had appointed BDO to look at options going forward, including a possible sale. (The Guptas have had close ties with President Jacob Zuma who has faced corruption allegations over his ties with them).

With a monthly fall of 0.6 in July to 53.2, the IHS Markit/CIPS PMI slowed to its lowest pace in a year on the back of rising costs for fuel, imports and payroll. It reports that lack of business confidence, mainly because of the uncertainty around Brexit, has led to delays in spending decisions.

Australian exports (up 2.7%) are performing better than expected, driven by higher volumes of LNG and iron ore. Analysts expect quarterly growth could be as high as 1.2% – a lot higher than the initial 0.7% forecast. The Australian dollar is still trading at just under the US$ 0.80 level and there may be concerns that the relatively high AUD may lead to slower economic growth.

The manufacturing sector also grew at a faster rate than expected with the August ISM PMI up by 2.5 to 58.8 – its highest level in over six years. The main driver seems to be in job growth where the index was 4.7 higher at 59.9 which pushed the employment index to 61.3. There is no doubt that business conditions in the US are on the march with backlog, employment, exports, new orders and production all heading north.

Although the 2017 hurricane season is far from over, the last two have caused untold damage and numerous fatalities. Hurricane Harvey has left 50 people dead and 43k homeless, with the Texas Governor Greg Abbott estimating that the reconstruction bill could top US$ 180 billion.

Fast on its heels came Irma that developed near Cape Verde Islands last week and by 05 September had intensified to a Category 5 hurricane. The storm wreaked catastrophic damage on many Caribbean islands – such as Anguilla, Barbuda, Saint Barthélemy, Saint Martin and Virgin Islands – before smashing Cuba and Florida. With 92 deaths already announced and a damage bill that could top that of the 2005 Hurricane Katrina, many regional economies will be in tatters and will take time (and money) to return to normality. Meanwhile many West Indians (and tourists) will be hoping for a speedy return and an early Welcome To Paradise.

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