There were reports that there could be changes, relating to the sale of future off-plan projects which could be beneficial for the consumer. A possible proposal was that off-plan projects would need to achieve 50% completion, prior to any sales launch (as opposed to the current status quo of 20% (or 20% escrow account / bank guarantee). Most contractors appear to utilise bank guarantees with a cost ranging from 0.2% – 1.0%, depending on the applicant’s track record and balance sheet. Another option was that the 20% rule would remain in place but it would cover “the total project value”, not just the “value of the construction”. With these extra costs in mind, there probably would be a slowdown in launches – especially from the smaller players – and there could be a marked reduction in project delays and potential default risks.
According to Phidar Advisory, Dubai property prices will take longer to rebound because of the continuing over supply in the luxury market sector. The consultancy estimates that there is a 5-10% oversupply situation which, under normal conditions would present no problem but the fact is that much of the new stock is in the higher value sector. The drop in real estate investment is due to various factors, including low oil prices, US$ exchange and GDP growth in key foreign buy markets such as India and UK.
S&P is also very downbeat and has forecast that the three-year Dubai property downturn is set to continue to 2020 with the “usual” key drivers – the introduction of VAT, low oil prices and a Gulf diplomatic crisis. The agency has been wrong before and it is hoped that it is wrong again. It has to be remembered that the Dubai economy is expected to grow by 3.9% this year, that energy prices are heading north again and that the population growth last year was 8%. At the beginning of every year, consultants seem to overestimate the potential number of new units for the coming year and seem to forget that for the past three years, just over 52k units have entered the market. Furthermore if the population grows at 8% this year, Dubai will be hosting 224k new residents who have to live somewhere – and the current number of 490k residential units will have to increase accordingly.
A recent Asteco report has outlined the five most expensive and five cheapest locations where to rent a one-bedroom apartment in Dubai; all ten locations saw rents from US$ 1.4k to US$ 5.4k lower than a year earlier. The five at the top end where Palm Jumeirah (US$ 30.0k – US$ 5.4k lower than in 2016), DIFC (US$ 27.2k – US$ 1.4k), Downtown (US$ 25.9k – US$ 5.4k), JBR (US$ 25.9k – US$ 2.7k) and SZR (US$ 24.5k – US$ 1.4k). At the other end of the scale, International City with a rent of US$ 10.9k down US$ 1.4k from 2016, Deira (US$ 13.6k – US$ 2.7k) and Jumeirah Village, Dubai Sports City and Discovery Gardens all at US$ 15.0k.
Omniyat announced that its One Palm development will be managed by the Dorchester Collection – a week after announcing that the same London luxury brand would also be involved in a 5-star hotel and luxury residences being built on the banks of Dubai Canal at Marasi. The penthouse at One Palm was sold for US$ 28 million last year, the most expensive ever in Dubai.
The biggest contract in recent times – at US$ 1.2 billion – was awarded by Nakheel for its mall project on Deira Islands; the main contractor will be United Engineering Construction. (This week, the contractor successfully completed a US$ 350 million finance package with local banks). Slated to be the largest in the region, the mall will host over 1k outlets and have 3.8 million sq ft of multi-storey parking. The project will be completed by 2021 and will be the focal point of Deira Central which will have fifty residential and hotel towers.
Jaleel Holdings is to build a cash and carry facility in Dubai Wholesale City, at a cost of US$ 27 million. The country’s largest fast moving consumer goods (FMCG) wholesaler is planning a fully integrated direct sale warehouse, flagship store, storage and staff accommodation on the 300k sq ft site.
A new Dubai Tourism study envisages a 10.2% compound annual growth rate in the next two years in occupied room nights, to bring the total to 35.5 million by 2019; over the same time period, room supply is expected to grow at an 11.1% CAGR to 132k. Occupancy is estimated to remain steady at between 76% – 78%. Last year, there was a 6.2% increase in the total of overnight visitors to 15.8 million, with the hotel inventory at 107.4k rooms.
The RTA unveiled the initial design of the Hyperloop project that is set to revolutionise intercity travel, by slashing travel time between Dubai and Abu Dhabi to just 12 minutes. Travelling at speeds of up to 1.2k kph, the aim is to move 10k passengers an hour using an electromagnetic propulsion system to move the passenger pods through a vacuum tube; the pods will have leather seating and an in-house entertainment system.
Emirates has agreed a new five year shirt sponsorship deal with Arsenal which will now see the Gunners in their familiar attire until at least 2024. The naming rights of The Emirates Stadium, which came into being in 2012 when the new ground was opened, will remain in place until 2028. No financial details were readily available.
The Australian Competition and Consumer Commission has rubber stamped the partnership agreement between Emirates and Qantas for another five years to 2022. This will result in an improved schedule choice for passengers and increased flyer benefits. Since its 2013 inception, over 8 million have used the network.
A good year for flydubai saw the low-cost carrier posting an 18.0% hike in 2017 profits to US$ 10 million on the back of a 9.2% increase in revenue to US$ 1.5 billion. Over the year, the airline, which saw passenger numbers 5.5% higher at 10.9 million, placed an order for 175 Boeing 737 MAX airplanes.
BMI’s latest report estimates that with the introduction of VAT – and higher oil prices – UAE inflation levels could reach 3.3% this year. The higher energy prices will see a marked increase in transportation costs that account for 10% of the “inflation basket”. It also envisages that there will be three UAE 0.25% rate hikes, in line with the Fed increases.
Emirates REIT posted 2017 rental income of US$ 54 million, as total property income rose 19.5% to US$ 61 million; net income increased 9.1% to US$ 52 million. The value of its property portfolio, 14.2% higher, topped US$ 860 million.
The Dubai-based MAF Group is planning to more than triple the number of Carrefour stores in Egypt to 137. The company had already announced a US$ 4.8 billion investment strategy in Africa’s third largest country and has on-going projects there, including the massive Mall of Egypt in Cairo and the development of City Centre Almaza.
Dubai-based Careem has acquired RoundMenu, which has a regional presence in 18 cities and nine countries. The ride hailing firm, which raised US$ 500 million finance last year from various investors, bought the website and app for an undisclosed amount. It will start trialing food delivery services this month in a sector that includes the likes of Deliveroo, Talabat, UberEats and Zomato.
The UAE-based banks’ total assets rose 19% to US$ 734 billion at the end of 2017 continuing to be the leading GC state for banks in terms of assets for the third year running. Both Saudi Arabia and Kuwait lagged behind with totals of US$ 615 billion and US$ 212 billion. The leading GCC bank, by a long chalk, was First Abu Dhabi Bank, with assets totalling US$ 182 billion; the bank also led the field when it came to profit (at US$ 3 .0 billion) and market value of US$ 30.4 billon.
Despite some rumours to the contrary, the UAE Telecommunication Regulatory Authority will not add a third mobile network operator, at least not for this year. The TRA noted that both etisalat and du have made major reductions in prices, whilst at the same time improving service quality.
The DIFC courts reported a 26% hike in the value of settlements at US$ 926 million, as the settlement rate of the 520 cases heard increased – in the Court of First Instance (dealing with disputes above US$ 27k) by 5% to 88% and in the Small Claims Tribunal 10% to 85%, where the value of total claims was 74.9% higher at US$ 10 million.
GEMS Education is to open four new schools in the country next academic year, two of which will be in Dubai. No further details were made available but the move is in line to meet increased local demands for high-quality education.
The good news continues for the 400k Filipinos living in Dubai, as the peso this week fell to its lowest level (14.19 to the dirham and 52.08 to the greenback) in over twelve years. At this rate, remitting money means more pesos being sent home and the downward trend is set to continue, at least in the short term.
The Investment Corp of Dubai (ICD) is reportedly planning a 5-year US$ 1 billion refinancing package, partly to repay a 5-year US$ 2.55 billion facility expiring this June.
Dubai Islamic made its sixth listing – a US$ 1 billion sukuk – on Nasdaq Dubai which makes the bank the bourse’s largest local debt issuer, with a total of US$ 5.25 billion. The current listing is a five-year sukuk with a 3.625% profit rate.
Nasdaq Dubai has set up future contracts – covering the country’s two main bourses in Abu Dhabi and Dubai – in a move that could add much needed liquidity to local equity markets.
Union Properties has advised the DFM that, despite rumours to the contrary, it has no intention of reducing its capital base. The Dubai-based developer posted a US$ 627 million loss last year.
Having posted a 3.0% increase in its UAE revenue to US$ 8.5 billion, and a 5.0% jump in net profits after royalty to US$ 2.2 billion, Etisalat Group has proposed a final dividend US$ 0.109, bringing the total pay-out for the year to US$ 0.218. The telco, which operates in sixteen markets across the Middle East, Africa and Asia, saw its UAE base grow 3% to 12.6 million, whilst the aggregate total was 1% higher at 142 million.
The DFM opened on Sunday (18 February), at 3330, and having lost 287 points over the past five weeks was again down – by 43 points – to close at 3287 by Thursday, 22 February. Emaar Properties regained some of its recent losses – and rallied from 14-month lows – up US$ 0.02 at US$ 1.72 but Arabtec continued its downward path losing US$ 0.04 to close on US$ 0.66. Volumes continued on the low side at 192 million shares traded on Thursday, valued at US$ 98 million (compared to 186 million shares worth US$ 81 million the previous Thursday – 15 February).
By Thursday, Brent Crude traded higher over the week, being US$ 1.06 higher at US$ 65.39, with gold heading the other direction – down US$ 22 (1.6%) to US$ 1,333 by 22 February 2018.
Although Walmart posted online figures 23% higher in Q4, they were less than half the growth recorded the previous quarter and lower than the same period in 2016. Furthermore, it lost money on its US$ 11.5 billion on-line sales recorded in 2017 and expects the same sort of losses this year. The end result was that the world’s largest retailer saw its share value fall by over 10% to US$ 94.11 – its largest percentage daily fall in over thirty years.
Europe’s largest hotel chain, AccorHotels, posted a credible 66.0% jump in 2017 profits to US$ 545 million, driven by a 17.7% rise in revenue to US$ 2.4 billion. The company, that includes Ibis, Mercure, Novotel and Sofitel in its portfolio, saw the number of its hotels 7.6% higher at 4.3k, with 616k rooms.
The banking sector is in the news for yet another week as the ECB has frozen payments by Latvia’s third largest bank, ABVL, as money laundering allegations gather momentum. Two days before Monday’s announcement, the country’s Corruption Prevention Bureau arrested the Latvian bank governor, Ilmars Rimsevics, who is also a member of the ECB governing council.
Following recent revelations of an ongoing US$ 1.8 billion scam, Punjab National Bank is laying the blame at the door of two junior officials who issued “letters of undertaking” to companies linked with diamond trader Nirav Modi and his uncle Mehul Choksi of the Gitanjali Group; over the past decade, they were then able to obtain credit from at least 32 other Indian lenders’ overseas branches. None of these documents were lodged on the bank’s internal software system. A further lapse was that many of the major listed partners in some of these companies were of “limited means”. Three firms belonging to Modi – Diamonds R Us, Solar Exports and Stellar Diamond – had a total capital of US$ 61.8 million whilst he had garnished loans totalling US$ 617 million; trade receivables were also much higher than actual sales booked. Their whereabouts are unknown.
In the year, the UK government finally divested itself of its remaining shares, following its US$ 28 billion 2008 bailout, Lloyds Banking Group posted record annual 2017 profits, up 24.0%, to US$ 7.4 billion on the back of a 6.0% hike in revenue to US$ 25.9 billion. However, the good news was tarnished by the fact that it set aside a further US$ 840 million provision to cover the cost of compensating victims of mis-sold PPI, which will eventually have cost the bank US$ 26.2 billion.
Meanwhile Barclays recorded a 9.5% improvement in profit to US$ 5.0 billion despite a US$ 1.3 billion charges – as a result of the recent changes to US corporate tax – and its investment bank reporting a 22.0% fall in earnings of US$ 2.9 billion. It too is also still paying for past misdeeds, setting aside US$ 1.7 billion for litigation and conduct, including US$ 980 million for PPI.
Driven by encouraging Asian results, HSBC reported an impressive 142% hike in 2017 profits to US$ 17.2 billion as many of the one off costs, that weighed down the 2016 figures, including the sale of its Brazilian unit, were absent. However the markets were disappointed and its share value dipped 4.5% on the day and ended trade on Thursday on US$ 10.16. Part of the problem was loan impairments of US$ 500 million, attributed to “two large corporate exposures in Europe”, thought to be the South African retail giant Steinhoff and Carillion.
This week at a joint select committee investigation, MPs were told of Carillion investors “fleeing for the hills” up to two years before its recent collapse, amid increasing concern about the company. There were complaints that the firm’s annual reports were “worthless as a guide to the true financial health of the company”. After three profit warnings in H2 2017, the company, that employed 20k, finally sank with debts of US$ 1.8 billion and an estimated pension deficit of US$ 3.6 billion.
As widely expected, Hong Kong-based Noble Group has warned of a massive 2017 loss, brought on by challenging operating conditions, as it tries to finalise a US$ 3.4 billion debt for equity swap. This will result in creditors getting 70% of the company in return for halving their senior debt, with shareholders seeing their stake diluted to just 10%. The troubled commodities trader expects Q4 losses to be around US$ 1.9 billion and an annual deficit of US$ 5 billion, following a marginal US$ 9 million profit last year and a US$ 1.9 billion loss in 2015. Little wonder then that its market value has plummeted from US$ 4.6 billion three years ago to its current value of US$ 197 million.
Japan posted a US$ 9.4 billion trade deficit in January, following a US$ 3.5 billion shortfall the previous month. Month on month, exports grew by 2.9% to 12.2% whilst imports fell 7.0% to 7.9%.
Since the economic outlook for the US is positive, there is no doubt that this will lead to perhaps three interest rate hikes in 2018. This is particularly so on the back of recent data that has seen an uptick in wage levels which in turn would normally push up the inflation rate. One thing certain is that days of almost negative interest rates and other economic stimulus measures, introduced following the GFC, are over.
Further positive news on the state of the UK economy from the Office for National Statistics indicated the strongest two quarters of productivity growth since the 2008 GFC – at 0.8% and 0.9%. On top of this wages grew by 2.5%, year on year, with output per hour rising by 0.8% in Q4 (following 0.9% in the previous quarter). A January surplus budget balance of US$ 14 billion – the second highest for a January month on record – is yet
another indicator that the UK economy is ticking over. For the ten months YTD, PSNB (public service net borrowing) excluding public sector banks has decreased 16.0% to US$ 52.8 billion – the lowest YTD borrowing in a decade. The total debt figure of US$ 2.4 trillion equates to 84.1% of GDP. There was a slight increase in the unemployment ratio (from 4.3% to 4.4%) in Q4, as the number of unemployed rose by 44k; however, the total number of people in work grew by 88k over the same period. It was also reported the economy grew by 0.4% in Q4 – weaker than expected because of a slowdown in both consumption and business investment.
Chicken jokes were out in force this week as KFC’s debacle became front page news. The fast food chain, with 900 outlets in the UK, had to close half of them because they had run out of chickens. Last week, it was decided to move its delivery contract from the South African-owned supplier Bidvent to DHL which subsequently blamed “operational problems” for the supply disruption. It is evident that both companies have forgotten the number one business mantra – Keep The Customer Satisfied!