For Whom The Bell Tolls                                                  28 March 2019

According to the UAE real estate portal Property Finder, 55% of the emirate’s realty sales, for the first two months of the year, were for off-plan homes, with the balance in the secondary market comprising the balance, equating to 2.5k transactions. Compared to last year for the same period, off-plan sales were 7.8% off and the secondary market witnessed a drop of only 1.4%.

The latest Cavendish Maxwell report just confirms what most already knew – that Dubai average house prices continue to decline, sinking to US$ 710k, (equivalent to a 10.6% twelve month fall and 4.5% lower, quarter on quarter). The average price of a villa is currently US$ 1.25 million and an apartment US$ 490k. Although still relatively high, the rate of off-plan apartment sales was 24% lower than at the same time in 2018, whilst the volume of villa/townhouse transfers nearly doubled.

Despite the apparent dismal state of the local real estate market, Emaar announced that revenue from its villa sales last year was 90% higher, year on year, at US$ 2.13 billion. The news comes at a time when estimates indicate that home prices and rents have slumped by up to 33% since its 2014 peak. The fall was reflected in the fact that there was a 39% 2018 decline in the Real Estate & Construction Index on Dubai’s stock market.

Pantheon Development has started work on its second Dubai project in Jumeirah Village Circle, the US $49 million Pantheon Elysee with 268 residential units and retail outlets; the first – Pantheon Boulevard – has already been successfully launched at District 13, also in JVC. With structural work already 12% complete, completion is slated for Q4 2020. CJTech Contractors is the main contractor, whilst Al Khawajah Engineering Consultants is the project consultant.

Sobha Realty has launched its twin-tower residential development Creek Vistas at Sobha Hartland in MBR City. The twin-tower building, the second of its projects in that location, is part of a development covering eighty million sq ft and follows a sell-out of the first one. The 28-floor towers will house 390 1-2 B/R apartments, with prices starting at US$ 223k, and should be completed by Q3 2021.

Omniyat has secured a US$ 41 million financing package from Mashreq Bank for the fit-out of The Opus by Zaha Hadid in Downtown Dubai. As well as having over 56k sq mt of office space, a club and several restaurants, the twin tower building will house the lifestyle hotel brand ME by Meliá, due to open by the end of the year.

Dubai Airport Freezone Authority’s foreign trade volume climbed 62% last year to US$ 39.8 billion (up 78% from 2017) that saw profit at US$ 5.7 billion. The top three countries were India, China and Switzerland – with totals of US$ 6.6 billion, US$ 6.5 billion and US$ 6.3 billion respectively. In a move to enhance its role in Dubai trade, DAFZA plans to spend US$ 212 million in expansion plans this year.

With a US$ 9 million investment, dnata has opened a cargo centre at Brussels Airport in a 14k sq mt facility that will increase its annual capacity to 125k tonnes in the three Benelux countries; Singapore Airlines will be the Emirates-owned company’s first customer in the new location. It already provides services to 25 cargo and eight passenger airlines at Amsterdam’s Schiphol Airport. dnata now provides ground handling and cargo services at 88 airports in 14 countries, handling over 1.9k flights and moving more than 9k tonnes of cargo a day.

Following a freeze on school fees last year, the Dubai Executive Council has announced that 90% of schools (those that that maintained their KHDA ranking) will have a 2.07% fees cap for the school year 2019-2020. The new School Fees Framework will not permit private profitable schools, that are experiencing a decline in the quality of education, to increase their fees.

Fuel prices will be up to 9.9% higher on Monday, as April sees Special 95 increase by US$ 0.052 to US$ 0.575, with diesel up US$ 0.022 to US$ 0.678.

The RTA is to spend US$ 161 million to expand the smart traffic system in the emirate – work is already 23% complete. The aim of the exercise is to expand the Dubai road by increasing smart systems from 11% to 60%, with the aim of detecting accidents and congestion on roads a lot quicker. A new control centre is being built that will enhance traffic movement by new measures such as variable messaging signs and smart apps. Money will also be spent on a further 112 signs to provide immediate information to drivers about road conditions, as well as data capturing systems including 116 cameras, 100 radar detection systems, 114 Bluetooth devices, and 17 weather information systems.

Latest figures indicate the UAE government posted a US$ 18.4 billion surplus in 2018 as revenue reached US$ 124.1 billion, with expenditure coming in lower at US$ 105.7 billion. Oil price improvements in the latter half of the year, along with ongoing fiscal reforms, were the main drivers behind the revenue improvement.

Last year, Dubai’s economy grew 1.94%, (2.8% in 2017), driven by growth in trade and government investments in infrastructure; trade activities were 1.3% higher – contributing 18.1% of the emirate’s total economy, equating to US$ 108.5 billion. Surprisingly, the real estate sector expanded by 7% and accounted for nearly a quarter of the total growth.

In January, the emirate approved its 2019 budget, with higher revenue targets and setting expenditure at US$ 15.5 billion, a slight rise from a year earlier. The budget also included US$ 2.5 billion for infrastructure projects ahead of Expo 2020.

Dubai-based Network International has signed an agreement with MasterCard, for the US financial services firm to invest US$ 300 million in the upcoming London IPO. The deal will also see both firms enter a ‘strategic partnership’ to support the development of electronic payments in the MENA and establish shared development products.

There were 275 happy Dubai employees this week on news that Uber had acquired the local ride hailing firm Careem in a massive US$ 3.1 billion deal. All became dirham millionaires (US$ 272k) by virtue of shares they owned; there are at least 400 staff, with share options which will be bought as part of the deal. Careem drivers, being not directly employed by the company, will unfortunately miss out. This is by far out the biggest tech deal in the ME, easily surpassing Amazon’s US$ 580 million acquisition of Souq.com in 2017.

There was another very happy person, HH Sheikh Mohammed bin Rashid Al Maktoum, who started the ball rolling some twenty years ago. He said “in 1999, many people questioned our idea to establish Dubai Internet City in the desert. Two years ago, Amazon acquired the multi-billion-dirham Souq.com and today, Uber acquired Careem for AED11 billion. These giant companies flourished from the ‘desert’ of Dubai.”

Shuaa Capital’s share value skyrocketed the maximum allowed (15%) early in the week on the news of a possible merger with its biggest shareholder, Abu Dhabi Financial Group. The Abu Dhabi entity, an alternative investment company with more than US$ 20 billion in assets under management, acquired a 48.36% stake in the Dubai investment bank in 2016.

Amanat Holdings has approved a US$ 10 million dividend for 2018 and also approved a 10% share back of its shares, subject to regulatory approval. To date, the GCC’s largest healthcare and education investment company has deployed 79% of its US$ 681 million share capital and is in the market to acquire further complementary opportunities in selected markets.

The bourse opened for trading on Sunday 24 Mar, at 2629, and having gained 55 points (2.1%) the previous week ended just 2 points higher by Thursday, 28 March, on 2631. Emaar Properties, having closed US$ 0.03 higher last week shed US$ 0.03 to close at US$ 1.25, with Arabtec flat for the fourth straight week at US$ 0.58. Thursday 28 March saw increased trades of 124 million shares, valued at US$ 64 million, compared to a week earlier of 95 million shares at US$ 41 million.

By Thursday, 28 March, Brent traded US$ 0.04 lower to close on US$ 67.82; gold continued its recent weeks of ups and downs, shedding US$ 12 (0.9%) to US$ 1,295.

Aramco has acquired 70% of petrochemicals behemoth Sabic from the Public Investment Fund of Saudi Arabia in a US$ 69.1 billion deal. Sabic, with 34k employees and operations in over fifty countries, posted annual revenue in excess of US$ 45 billion (with a production volume of 75 million tonnes) and a US$ 5.7 billion bottom line. This will allow PIF extra funds to expand into other areas and diversify its revenue streams further. It will also offer Aramco opportunities of quicker growth to transform its downstream growth strategy of integrated refining and petrochemicals.

Miami Nikki Beach Hotels & Resorts hopes to double its portfolio of hotels and resorts by 2022, from its current four resorts and 13 beach clubs worldwide, including one in the emirate, the Nikki Beach Resort & Spa Dubai opened in 2017,

Eight years after HP acquired Autonomy in a US$ 11 billion deal, UK’s biggest ever fraud trial has finally started. The US conglomerate is claiming that the UK software firm’s founder Mike Lynch and chief financial officer Sushovan Hussain inflated the value of Autonomy in the three years prior to the sale. The other side of the argument is that HP is using this as an excuse to blame the two for its mismanagement. Mike Lynch is also facing seventeen charges in the US.

UK’s National Cyber Security Centre has indicated that it can provide “only limited assurance that the long-term security risks can be managed in the Huawei equipment currently deployed in the UK”. The Chinese company, which supplies telecoms companies operating in the UK, has failed to address previously identified problems, continuing with poor practices that could create vulnerabilities that in turn pose security risks. The critical report comes weeks before the government decides whether to allow the company to build next generation 5G networks in the UK.

In the week Uber acquired Dubai-based Careem for a mouth-watering US$ 3.1 billion, Lyft has priced itself at US$ 24.3 billion ahead of its Friday IPO on Nasdaq. The seven-year old US ride-hailing firm expects strong consumer demand, even though it has yet to turn in a profit; last year it doubled its revenue to US$ 2.2 billion but losses increased 32.4% to US$ 911 million. These figures could be a good omen for Uber that expects to go public next year. Has Uber, that could debut at US$ 120 billion, left their stock market entry too late?

The Icelandic Wow Air ended immediate closure of all operations, after failing to reach agreement with investors, and advised passengers to check for available flights with other airlines. Earlier the seven-year old budget carrier indicated that it was in the “final stages” of raising new equity from a group of investors in a US$ 160 million turnaround plan. Last year, it carried 3.5 million passengers.

January IATA figures point to the ME having the weakest passenger demand growth in the world, with demand only 1.5% higher, year on year, compared to the 6.5% global average; at the same time, capacity climbed 3.2% and load factor dipped 1.3% to 75.6%, (with global figures of 6.4% and 0.1% higher at 79.6% respectively).

It seems that US regulators are close to approving a proposed fix that could get the Boeing 737 Max jets flying again after all had been grounded following two major crashes involving Lion Air and Ethiopian Airlines. The US plane maker has asked airline owners of its 737 Max jet to submit orders for a free update of anti-stall software being readied for deployment; the upgrade may take less than an hour to implement for each aircraft.

In a massive US$ 34 billion deal – and a slap in the face for Boeing – Airbus has secured a Chinese order for 300 jets, comprising 290 A320 and ten A350 XWB aircraft. The deal was signed in Paris by the Chinese president Xi on the second stage of his European tour. His first stop was Italy where it became the, in a US$ 2.5 billion deal.

To reduce the negative impact of the global economic slowdown, China is to introduce lower tariffs and expedite debt sales, as well as negotiating with the US about tariffs. The government also plans to cut import taxes and bring in measures to forbid forced technology transfers. The Finance Minister Liu Kun will also speed up bond sales with the aim of boosting domestic consumption.

To date, the US has already slapped tariffs of US$ 250 billion on Chinese goods, with the threat of a further US$ 267 billion if the talks fail; to date, China has retaliated with duties on US$ 110 billion on US products.

There was an unexpected March fall in US consumer confidence with the Conference Board’s index dropping 7.0 to 124.1, with the market expecting a rise to 133.0. Specific one-off reasons for this decline appear to be volatility in global markets, a partial government shutdown and a very weak February jobs report. However, it does appear that consumers continue to be confident that the economy will expand in the coming months – but at a slower rate.

Global trade has taken a sharp turn down, reinforcing the view that the world economy is in its worst state since the financial crisis a decade ago. Latest quarterly figures to January indicate that trade slumped 1.8% compared to the previous period. There is no doubt that the IMF are right to assume “growing risks and uncertainties” and is in line with Chicago Federal Reserve’s assertion that the “risks from the downside scenarios loom larger than those from the upside ones.”

Australians were a little poorer by the end of 2018 with latest figures showing that households’ wealth had shed a decade-high 2.1% of US$ 177 billion in Q4 on the back of falls in both values of properties (US$ 121 billion) and shares (US$ 100 billion). In Q4, the ASX slumped 10% in value whilst the quarterly house price index lost 2.4%; household wealth per capita also fell 2.5% to US$ 287k. More worrying is the level of household debt as a percentage of household income now standing at a new high of 200%.

These statistics just reflect the main problem facing the global economy – debt. If nothing is done about the level of debt incurred by nations, big and small companies and households, the economic environment will just continue to tail spin out of control with dire consequences. If you think 2018 was bad and that 2019 will not be much better, wait until 2020 before a global economic implosion.

A slow but gradual pick-up in wages, along with weakening inflation figures, have apparently not done much to help the UK High street. UK March retail sales have fallen by their highest in seventeen months, indicating shoppers’ concern and consumer confidence impacted by escalating uncertainty over both Brexit and local and international economies.

Tomorrow, the supposed date of Brexit, the UK Prime Minister faces inevitable defeat for the third time which will plunge the UK into an even deeper crisis. If that were to happen, the country will either crash out of Europe without a deal on the new deadline of 12 April or face a lengthy delay to Brexit. Earlier in the week, the shambolic British parliament could not agree on eight alternatives put before them, although a plan for the UK to remain in a EU customs union with EU fell short by only six votes. Tomorrow will be the day that it will be Theresa May For Whom The Bell Tolls.