Say A Little Prayer For Me! 12 July 2024
Dubai Land Department figures indicate that there has been no let-up in the emirate’s burgeoning real estate sector, with figures showing June sales at US$ 12.26 billion, (with 14.2k transactions), and record-breaking Q2 sales of US$ 33.92 billion and H1 sales, up 29.9%, to US$ 63.53 billion; in H1, there was a 32.8% surge in transactions to 80.2k.
ValuStrat’s head of real estate research, Haider Tuaima, confirms that “the demand (for branded residences) is there and is growing year-on-year,” and that “this was probably the third or fourth year, since Covid-19, that the demand for high-end luxury properties continues to grow.” More often than not, branded properties in Dubai will demand a higher premium than non-branded properties, with buyers preferring “something that is managed or that is branded, or that is associated with the brand . . . it’s always at a high standard and well maintained and well managed.” Prathyusha Gurrapu, head of research and consulting at Cushman & Wakefield Core, notes that “the main drivers for branded residences are prestige, brand identity, international appeal, being part of the brand’s global hospitality network, superior levels of service, design, furniture packages, finishes along with investment potential through premiums and rental pools.” She also noted that “typically, branded residences command price premiums of about 25%-30%, compared to non-branded residences of similar build quality.” It is estimated that the average sq ft price of a branded residence comes in at US$ 1,770, with the two most expensive currently under construction, being Bulgari Lighthouse, (US$ 3,147 per sq ft), with thirty-one units, and Bulgari Residence, (US$ 2,854 per sq ft), with one hundred and eighty-two units; a third, Bugatti Residences, (US$ 1,403 per sq ft), has one hundred and eighty-two units. Other projects already completed, include Four Seasons Residence, (US$ 2,742), Royal Atlantis Residences, (US$ 2,516), Armani Beach Residences (US$ 2,180), Baccarat Residences US$ (US$ 2,107), Ciel Tower (US$ 2,095), Oria by Omniyat, (US$ 1,928), and Six Senses Residences (US$ 1,796). Other projects still under construction include Cavalli Casa Tower, with four hundred and thirty-six units, and Mercedes-Benz Places, with one hundred and fifty units. More than 4.6k branded units are expected to be delivered in Dubai in the next five years, with more projects in the pipeline, so it is no surprise to see that the emirate boasts the highest inventory of branded residences compared to any other global city.
According to a Knight Frank report, global HNWIs will invest US$ 4.4 billion acquiring Dubai property in 2024 – a massive 74% increase on a year earlier. Many will be looking at branded residences – such as Armani Beach Residence by Arada currently being sold at a starting price of US$ 5.72 million, (AED 21 million) per unit. The company also noted that developers, such as Dar Global and Damac, are planning new launches to satisfy the growing demand at the top end of the Dubai real estate market. The former, having tested the market with four successful projects – Missoni, Aston Martin, Pagani and W residences – are planning another foray into the market. Meanwhile, Damac Properties is also looking to build new projects and is currently developing branded residential properties, in partnership with brands such as Cavalli and Swiss jewellery brand de Grisogono, which it acquired in 2022.
Knight Frank also indicated that over the past twelve months, the number of luxury homes available for sale in Dubai has fallen by 47%, to 2.9k, due to unprecedented demand from HNWIs, in areas such as Emirates Hills, Jumeirah Bay Island, Jumeirah Islands and The Palm Jumeirah. The majority of buyers are either end-users or investors, who are holding onto their assets expecting prices to rise further in the coming years.
In H1, there were one hundred and ninety properties sold, each with a value of over US$ 10 million, compared to just one less, over the same period in 2023. H1 sales for ultra-luxury homes, (worth more than US$ 25 million), totalled twenty-one. 60% of sales, in the over US$ 10 million category, were in six locations:
Palm Jumeirah Sixty
- Palm Jebel Ali Fourteen
- Business Bay Twelve
- Jumeirah Bay Island Ten
- MBR Ten
- Al Wasl Nine
The top five locations, in terms of value of US$ 10 million+ homes, sold in H1 were:
- Palm Jumeirah US$ 992.97 million
- Jumeirah Bay Island U$$ 303.12 million
- Dubai Hills Estate US$ 159.80 million
- Palm Jebel Ali US$ 159.38 million
- Jumeirah Bay Island US$ 157.86 million
At the launch of its first Dubai project in Furjan, (which is projected to be handed over in 2026), India’s Zoya Developments, announced plans for a US$ 545 million investment in the local realty market over the next three years. In India, over the past fourteen years, the prominent real estate developer has delivered over 100k units and developed more than two million sq ft of prime real estate. Its MD, Imtiaz Khan, noted that “the acquisition of prime land in top-rated areas like Furjan, Dubai Islands and JVT, underscores our commitment to creating community-centric living environments in strategic locations.”
The Marbella Resort, which is expected to be completed in 2026, will house a snow plaza and coral reefs, whilst the street where it rains all year round will be extended to a length of 1 km, to completely surround an upcoming resort. Located on the World Islands, the project boasts a one hundred and fifty-room hotel, with visitors being able to select from any of the suites, chalets or cabanas that will face the sea, the snow plaza or the raining street. The US$ 272 million luxury hotel will also have gardens, sunken courtyards, citrus and olive groves to add a touch of Andalusia and will have six restaurants, serving up authentic European cuisine at the destination. Once completed, it will be surrounded by half a million sq mt of nine different types of coral reefs that house over thirty types of fish. It is claimed that the resort will be one of the first hotels in the world, with private coral reefs for its guests. Visitors will be able to experience snorkelling and diving among the reefs that are expected to attract diverse marine species, including angelfish, anemonefish, lionfish, and green turtles, as part of the broader coral reef master plan for The Heart of Europe.
Last year, the developer, Kleindienst Group, opened doors to its French theme resort Côte d’Azur. Divided into four parts representing four cities of France – Monaco, Nice, Cannes and St Tropez- the hotel will be a neighbour to the upcoming Marbella Resort. In addition to this, the Heart of Europe also hosts the Honeymoon Island, where guests can enjoy a stay at floating seahorse villas.
There are reports that two local Indian businessmen, Afi Ahmed and Ayub Kallada, have received an initial No Objection Certificate from India’s civil aviation ministry to establish a new budget carrier, Air Kerala. It appears that Zettfly Aviation has obtained permission to operate scheduled commuter air transport services for three years, which, if it comes to fruition, will be the first regional airline from India’s southernmost state of Kerala; it will have its headquarters in Kochi and expects Dubai to be one of its first international destinations. Before then, it has to acquire aircraft, (initially three before expanding to twenty planes), and to obtain their Air Operator’s Certificate (AOC). It will have to operate regionally before it can branch out into international flights, with initial operations focussing on regional connectivity,” and connecting “Tier 2 and Tier 3 cities with Tier 1 and metro airports, which will help it improve accessibility and convenience for travellers across these regions.” The initial cost of stat up is put at US$ 30 million.
Sheikh Maktoum bin Mohammed, First Deputy Ruler of Dubai, has announced that two major entities — Dubai Municipality and DP World — will be working together to not only double the current size of the emirate’s fruit and vegetable market but also to develop the world’s largest logistics hub for foodstuffs, fruit and vegetable trade. Under the agreement, DP World will manage the project, with a unified trade window being introduced for all procedures and the entire customer journey. He commented that the aim is to make Dubai “a destination for markets, export, and re-export operations for the region and the world in various sectors”.
Dubai Customs has created a “Voluntary Disclosure System” to improve compliance among clients, by allowing them to voluntarily report any errors or violations in their customs declarations. Companies may potentially avoid or mitigate fines, associated with unintentional customs violations, if they disclose these issues before they are detected by Dubai Customs’ officials. The Customs’ Audit Department will oversee the implementation and interpretation of the policy’s provisions, ensuring consistent application across all cases.
No wonder that Dubai Mercantile Exchange is considered the region’s premier international energy futures exchange, with H1 figures such as front-month trading volume 31.2% higher on H2 2023, to five hundred and five million barrels, physical deliver volume rising 8.7% to 113 million barrels, and total exchange volume expanding by 21.0% to six hundred and eighty million barrels. The impressive results over the past six month serve to enhance DME’s position as the main crude oil benchmark in the Asia market, whilst reinforcing its standing on the global stage. Its flagship, Oman Crude Oil Futures Contract, DME Oman, now represents 36% of the ME crude heading to the Asian market – 4.5 times higher than the 8.0% registered in 2007.
The DFM opened the week on Monday 08 July, 92 points (2.3%) higher the previous five weeks, gained 34 points (0.8%) to close the trading week on 4,104 by Friday 12 July 2024. Emaar Properties, US$ 0.20 higher the previous four weeks, gained US$ 0.03, closing on US$ 2.21 by the end of the week. DEWA, Emirates NBD, DIB and DFM started the previous week on US$ 0.63, US$ 4.50, US$ 1.59 and US$ 0.34 and closed on US$ 0.63, US$ 4.59, US$ 1.57 and US$ 0.34. On 12 July, trading was at one hundred and sixty-three million shares, with a value of US$ 66 million, compared to one hundred and forty-one million shares, with a value of US$ 193 million, on 05 July.
By Friday, 12 July 2024, Brent, US$ 6.97 higher (8.8%) the previous four weeks, shed US$ 0.77 (0.9%) to close on US$ 85.77. Gold, US$ 76 (3.3%) higher the previous fortnight, gained US$ 17 (0.7%) to end the week’s trading at US$ 2,415 on 12 July 2024.
Although down on the week, oil prices ended the last two days higher on the back of indicators that inflation continues to downtrend, (with yesterday US figures showing inflation dipping 0.3% to 3.0%) and hopes of a robust summer fuel demand. Today, 12 July, Brent was trading at US$ 85.77, and future short-term growth will be helped by the slump, albeit temporary, in the greenback. Over the year, oil prices have risen 11.1% from their 01 January opening of US$ 77.23, as Opec+ has tried to rein in production to tighten the market, offsetting supply increases from producers outside the group. The bloc also forecast that demand would grow by more than two million bpd, with the IEA also predicting strong demand from rapidly growing Asian economies and the aviation, (with jet fuel demand on a four-week average basis at its strongest since January 2020), and petrochemicals industries. The report added that, more long-term, oil production will be impacted by the likes of rising electric car sales, improved fuel efficiency, reduced use of oil for electricity generation in the ME and structural economic shifts.
In a deal with the Department of Justice, Boeing has agreed to plead guilty to a criminal fraud conspiracy charge for violating a deal meant to reform it after two fatal crashes by its 737 Max planes, that killed three hundred and forty-six passengers and crew, more than five years ago; it also agreed to pay a criminal fine of US$ 244 million. This has upset the victims’ families because they see this as a “sweetheart deal” that would allow Boeing to avoid full responsibility for the deaths, as it allows the plane maker to escape a full criminal trial. A criminal trial would be the opportunity to allow all the facts surrounding the case to be aired in a fair and open forum before a jury. In 2021, prosecutors had charged Boeing with one count of conspiracy, to defraud regulators, alleging it had deceived the Federal Aviation Administration (FAA) about its MCAS flight control system, which was implicated in both crashes, but agreed not to prosecute if the company paid a penalty and successfully completed a three-year period of increased monitoring and reporting. But two days before the three years were up, Boeing was involved in another serious incident – Alaska Airlines’ door panel blowing out soon after take-off. In May, the DoJ said it had found Boeing had violated the terms of the agreement, opening up the possibility of prosecution. However, Boeing now has a criminal record that could impact on its contracting business, with the many global customers likely to boycott the company in future. Ed Pierson, executive director of Foundation for Aviation Safety and a former senior manager at Boeing, said the plea was “seriously disappointing” and “a terrible deal for justice”.
Another embarrassing week with a 757-200 losing its landing gear wheel while taking off from Los Angeles, which was a very similar to an incident in March, when another United aircraft, a 777-200 aircraft, lost a wheel shortly after taking off from San Francisco on a flight to Osaka. There are no reports of injuries, as the United flight 1001 landed at Denver, but there is no doubt that this was serious blow to Boeing’s continual downward spiral. The Federal Aviation Administration is set to investigate the incident.
More bad news came at the end of the week, with the plane maker having had to notify several 737 Max customers that delivery over the next two years could be delayed for up to six months, as it grapples with mounting challenges. The company is not permitted by the FAA to raise the output of the narrowbody, beyond thirty-eight jets per month, until it is convinced quality controls are in place and the supply chain can keep pace.
In its strategy to expand out of its home base, China’s biggest electric-car maker, BYD, is to build a US$ 1.0 billion manufacturing plant in Turkey which will be able to produce up to 150k vehicles a year; production will commence in 2026, by which time 5k jobs would have been created. The announcement comes as Chinese EV makers face increasing pressure in the EU and the US, with the European bloc hitting BYD with an extra 17.4%, on imports, along with a 10% import duty. With Turkey being part of the EU’s Customs Union, it can avoid the additional tariff on vehicles made in the country and exported to the bloc. The Turkish government has also taken action to support the country’s car makers by putting an extra 40% tariff on imports of Chinese vehicles.
In a US$ 28.0 billion agreement, Paramount Global has agreed to merge with independent film studio Skydance Media. Skydance will invest around US$ 8.0 billion in Paramount, including paying US$ 2.4 billion for National Amusements, which controls the group. Under the deal, Paramount’s non-executive chair Shari Redstone will sell her family’s controlling stake in the company which marks the end of an era for the Redstone family, whose late patriarch, Sumner Redstone, transformed a chain of drive-in cinemas into a vast media empire. As well as Paramount, the group includes the television networks CBS, Comedy Central, Nickelodeon and MTV, with its TV channels having a global reach of over 4.3 billion subscribers across more than one hundred and eighty countries. Paramount Global’s shares have fallen by more than 75% in the past five years.
As part of its restructuring strategy Cineworld is expected to close about 25% of its one-hundred portfolio of UK cinemas, renegotiate rental agreements on 50% of them, leaving the final 25% untouched. Last year, it was delisted from the London Stock Exchange, and it will formally outline its proposals to creditors before the end of next month, with the probability of a business plan rather than going on the company voluntary arrangement route. Earlier in the year, it was thought that the firm was considering a possible sale, but if landlords do not agree to a rent cut, then other operators are expected to take some of the sites over. Cineworld also operates in central and Eastern Europe, Israel and the US.
Driven by fierce competition in global markets, and part of its restructuring plans, Dyson is considering retrenching over 28% of its current UK workforce of 3.5k, as it “prepares for the future”. CEO Hanno Kinner also noted that the company operates in “increasingly fierce and competitive global markets” and it needs to be “entrepreneurial and agile”. The company was formerly based in the UK, but Sir James Dyson moved the global headquarters to Singapore in 2019. Since then, competition has intensified and some of the firm’s latest releases, including an electric car, have not been too successful and have been a drain on resources; Dyson had put aside US$ 2.56 billion to build it, but the project was soon abandoned when they realised it was too difficult.
Japan’s Softbank has acquired UK AI chip firm Graphcore – once considered a potential rival to market leader Nvidia – in a deal that asks questions why such UK firms cannot compete with global competition in this booming sector. No monetary details were available, but it is thought that the figure could be around US$ 500 million – a lot lower than the US$ 2.0 billion mark, bandied around in 2020. The Japanese conglomerate has raided this UK sector before, after its buy-out of chip designer Arm, in a controversial deal, in 2016. It also represents another blow for the UK financial markets that needs such companies to be trading on the bourse to enhance its position, as a global financial centre.
Embattled Carpetright has filed a notice of intention, (a move that would give it ten days to potentially avoid an insolvency process), to appoint administrators; it is one of the UK’s biggest floorings retailers, with 1.85k employees. Parent firm Nestware Holdings stated it was still trying to “finalise additional investment” to secure Carpetright’s long-term future but suggested that some job losses were inevitable, whatever the outcome. Nestware chief executive, Kevin Barrett, added that “we remain focused on securing external investment to ensure as few customers and colleagues are impacted as possible”. There are several factors behind the current situation, including weak consumer confidence, reduced consumer spend on big-ticket items amid the cost of living crisis, and fierce competition from rivals. Its two hundred and seventy-two stores will still remain open.
In a US$ 4.23 billion deal, Carlsberg has acquired Britvic so as to create a single beverage company called Carlsberg Britvic to grow its business in the UK and western Europe. (Britvic is famous for its non-alcoholic beverages including Robinsons squash and J20 Britvic, as well holding an exclusive licence with US firm PepsiCo to make and sell brands such as Pepsi, 7up and Lipton iced tea in the UK – with Carlsberg also having a bottling deal with the US company). Britvic shareholders will receive US$ 16.84 a share but will decide on the offer at a future general meeting. Britvic’s group revenue grew 6.3% in Q2 to US$ 644 million. The two main advantages gained by the Danish brewer are the chance to expand its global partnership with PepsiCo and to streamline its bottling operations across European markets and now the UK.
Carlsberg was also in the news again this week when it agreed to pay US$ 264 million to acquire a 40% stake in Marston’s which has brewed beer in Wolverhampton since 1875. It also agreed to take control of its UK brewing JV, Carlsberg Marston’s Limited, valued at US$ 1.00 billion, which makes beers including Hobgoblin and Pedigree. The deal indicates that brewing is still an integral part of Carlsberg’s core business. Marston’s CEO, Justin Platt, said the sale to the Danish brewing company “significantly reduced” Marston’s debt, by over US$ 256 million, with the group now able to concentrate on running about 1.37k pubs, around the UK. Marston’s said it would continue its “strong partnership” with CMBC through the long-term brand distribution agreement which remains in place, and that it leaving the brewery industry “allows us to become a pure play hospitality business and focus on what we do best – namely, giving our guests amazing pub experiences”.
Starting in 2022, the long and drawn-out Horizon IT inquiry, which started stages five and six on 01 April, is set to finish most of the evidence by the end of this month and is set for its seventh and final “critical” stage in September. The inquiry is investigating the problems, lies and failings that led to almost one thousand sub-postmasters being wrongly prosecuted for stealing between in the seventeen years to 2016 because of incorrect information from an IT system called Horizon. The next and final stage will focus on “current practice” at the Post Office and “future recommendations” for the business. It is reported that the current CEO, Nick Read, who took over the position in 2019, will temporarily step down so he can give his “entire attention” to the final hearings. He commented that “it is vitally important that we demonstrate the changes we have made and give confidence to the inquiry and the country at large that ‘nothing like this could happen again’.” It is hoped that he does not suffer from selective memory loss as exhibited by many Post Office senior management, when giving evidence to the enquiry. Although he has yet to give evidence to this hearing, he has appeared at a separate Business Select Committee where he was accused by MPs of a lack of knowledge about the scandal. Earlier in the year, he had been under investigation for an unrelated issue to Horizon but was cleared with the “full” backing of the board.
In a bid to push through better pay and benefits for its 30k members, the National Samsung Electronics Union has called on them to go on strike indefinitely; the announcement followed the last day of a three-day general strike. The NSEU, which represents about 25% of Samsung Electronics’ workers in South Korea, said it had made the decision after management showed no intention of holding talks over its demands. The union posted that about 6.5k workers have been taking part in the strike so far and called on more of its members to join the industrial action. In June, Samsung, founded by Suwon-si in 1969, witnessed its first ever walkout. The company, the flagship unit of conglomerate Samsung Group, is the world’s largest maker of memory chips, smartphones and televisions and the biggest of the family-controlled businesses in the country; until 2020, Samsung would not allow unions. Driven by a boom in AI, that has seen the prices of advanced chips rocket, Samsung is expecting Q2 profits to surge fifteen-fold.
Last week, Monaco was added to the FATF grey list, with an announcement made by the Paris-based Financial Action Task Force late last week that “in June 2024, Monaco made a high-level political commitment to work with the FATF and MONEYVAL to strengthen the effectiveness of its AML/CFT regime.” It also noted that the country had made “significant progress” on several key anti-money laundering areas since December 2022. These included establishing a new combined financial intelligence unit (FIU) and AML/CFT supervisor and implementing “targeted financial sanctions and risk-based supervision of non-profit organisations.” However, it indicated that there were multiple aspects of its AML regime that need to be improved. Whilst Venezuela was added to the list, Turkey and Jamaica were taken off. Being on this listing means that such jurisdictions are placed under increased monitoring, which tends to lead to reduced international investment.
According to the Xinhua News Agency, last month China exported 378k passenger vehicles – a 28% increase year-on-year, but flat compared to May’s figures. The agency, quoting the China Passenger Car Association, reported that, with the South American market recovering, exports of Chinese-brand cars reached 325k units in, (up 31% year on year), while the exports of luxury vehicles and cars made by Chinese and foreign-invested joint ventures reached 54k units, 12% higher on the year. In the month, the export of new energy vehicles rose on the year by 12.3% to 80k, and for H1, they topped 586k units – 21.2% higher compared to H1 2023. Data from the CPCA also showed that in H1, sales of passenger cars were 3.3% higher, at 9.84 million cars.
China’s H1 foreign goods trade jumped 6.1% to a new record high of US$ 2.97 trillion, with exports rising 6.9%, and imports up 5.2%, indicating that the state of the economy is improving. In Q2, goods trade was markedly higher on the previous year by 7.4%, compared to the 4.9% and 1.7% rises in Q1 and Q4 2023.
Following Sunday’s election, the left wing New Popular Front is now the largest group in the National Assembly, but although the leftist alliance secured the most seats, it fell short of the two hundred and eighty-nine required for a majority, it has called for a prime minister who will implement its ideas including a new wealth tax and petrol price controls. Emmanuel Macron’s Together bloc came in second and Marine Le Pen’s far-right National Rally party finished a disappointing third. It is still unclear whether the NPF, as a whole, will reach a deal with other parties to form a majority, or if more moderate parts of the coalition will splinter off in a deal with centrists. If the former eventuates, then the country could have to get used to the following policies, as laid out in the NPF’s ambitious economic programme:
• raising the minimum wage
• price controls on essential foods, electricity, gas and petrol
• lowering the retirement age to sixty
• a new 90% tax on any annual income above US$ 433k
• heavy investment in green transition and public services
The best France can hope for is the possibility that Macron – who called the snap election in a bid to counter the rise of the far-right –tries to seek a deal with more moderate elements of the NFP, such as the Socialists and the Greens. The problem is that Macron is seen by some as a undecisive, narcissistic, disconnected and unpopular president.
Tuesday saw Japan’s Nikkei hit a record high 41,580, supported by semiconductor shares, as the MSCI’s broadest index of Asia-Pacific shares outside Japan edged 0.4% higher, just a touch below a two-year top a day earlier. Taiawanes shares also reached record highs. On Wednesday, the Nasdaq and the S&P 500 rose to record levels, driven by the robust trading in mega stocks such as Nvidia, Micron Technology and Advanced Micro Devices.
An open letter, signed by 19Club de Madrid members, a forum of former leaders with over one hundred participants, has been sent to current leaders of the G20, a bloc of the world’s top twenty economies, urging support for a global tax on billionaires; it called for joint cooperation to combat tax evasion by the wealthiest. The letter said, “a global deal to tax the ultra-rich would be a shot in the arm for multilateralism: proving that governments can come together for the common good.” The move comes as Brazil’s G20 presidency, which put the proposal on the table in February, seeks to build support for a declaration at the group’s finance ministers and central bank governors meeting later this month in Rio de Janeiro, prior to the G20 Summit in November. At the July meeting, they will discuss the proposal which calls for an annual 2% levy on fortunes exceeding US$ 1 billion, which could raise up to US$ 250 billion annually from about 3k individuals. It is unlikely to go much further, with several members, including the US and Germany opposing any such move, although others, including France, Spain, Colombia, Belgium, the African Union and South Africa, support it.
Slipping further into contraction territory, June’s ISM’s manufacturing PMI dipped 0.2, on the month, to 48.5. (A PMI reading above 50 indicates growth in the manufacturing sector, which accounts for 10.3% of the US economy – below 50 signifies contraction). The PMI remains above the 42.5 level, which the ISM says over a period of time indicates an expansion of the overall economy. Eight manufacturing industries, including primary metals and chemical products, reported growth. Machinery, transportation equipment, electrical equipment, appliances and components as well as computer and electronic products were among the nine industries that contracted. Government data last week showed manufacturing contracted at a 4.3% annualised rate in Q1, with most of the decline coming from long-lasting manufactured goods.
With the BoE backpedalling on the chances of an August rate cut, sterling strengthened to a four-month high of US$ 1.2987 today, on comments by Chief Economist Huw Pill, that the timing of a rate cut was an “open question”. There are concerns that the current high rates are not an ideal environment for growth, but sticky inflation is nudging the BoE to exercise caution.
Following zero growth the previous month, finer weather in May helped the UK economy recover some lost ground, 0.4% higher on the month, with the ONS director of economic statistics, Liz McKeown noting, that the economy grew strongly in May with all the main sectors seeing increases”, with “many retailers and wholesalers both bouncing back from a weak April”.Construction posted its highest monthly return in almost a year, attributable toincreased house building and infrastructure projects, with manufacturing nudging higher, attributable to food and drink firms. A week after the election, the figures show that Q2 growth was at its fastest pace in two years with strong growth across services, partially offset by the weaker longer-term performance from construction.
In her opening speech as the country’s first female Chancellor of the Exchequer, Rachel Reeves, a former economist at the BoE, has emphasised the need to “get Britain building again” by bringing back compulsory housebuilding targets, and ending the effective ban on on-shore wind farms. As part of a wide-ranging plan to reboot the UK economy, she took no time with her intention to speed up national infrastructure projects, and that the government would make the “tough” and “hard choices” to fix the economy, adding that the UK had lagged behind other developed nations for years. She also confirmed Labour planned to build 1.5 million homes in England over the course of the next five years, but said it was not a “green light” to any kind of housing development. In a move to attract doubting investors to the UK, she promised stability and “after fourteen years, Britain has a stable government – a government that respects business, wants to partner with business and is open for business.”
One of the very few specific targets that the Labour Party set itself in its election manifesto was a promise to “get Britain building again, creating jobs across England, with 1.5 million new homes over the next parliament”. Earlier in the week, Chancellor Rachel Reeves, laid out plans to build 300k homes every year up to 2029 – a number not seen since the 1960s. To help meet the target, she restored mandatory local targets on housebuilding – that had been abandoned by Michael Gove – while planning restrictions on developing parts of the green belt will be relaxed. She also made clear that the government will “not be afraid” to overrule local authorities.
However, by mid-week, news filtered through that may help scupper the plan before it has been properly set up. Barratt Developments, the country’s biggest builder by volume, posted that it would only build up to 13.5k units over the next twelve months – a 7% fall on the year, and well down on the 17.2k homes built in the year ending 30 June 2022. The main factor behind the figures was the period between July to September 2023 when mortgage rates rose from 4.5% to 5.25%. It also noted that its average selling price fell 4.0% to US$ 394k. Barratt blamed the slowdown on “the profile of land acquisition over the past twenty-four months”.
Meanwhile, Taylor Wimpey, the UK’s biggest housebuilder by stock market valuation, expects to complete up to 10k new homes this year, excluding joint ventures, down from 10.8k last year and 14.2k in 2022. Berkeley Group, the UK’s second biggest player by stock market value, completed 3.5k homes for the year ending 30 April 2024 – 15.0% lower on the year. Its chief executive, Rob Perrins, noted that “we have not invested in new sites but are ready and able to do so once the conditions for growth return.” Persimmon, the fourth largest player by market value, expects to complete up to 10.5k homes this year – up from the 9.9k, completed last year, but still well down on the 2022 total of 14.9k. Persimmon also noted buying less spending – US$ 186 million – on land in Q1, down over 16% on the same period last year.
However, it does appear that most players in the industry, (along with many others), had little time for the outgoing Michael Gove, and will welcome the new government and its initiatives to boost residential building. Barratt made that very clear in its statement today, saying “we welcome the new government’s urgency and focus on housebuilding and reform of the planning system as key to both unlocking economic growth and tackling the chronic undersupply of new homes”, and “we look forward to working with Government and wider stakeholders to address supply side constraints and deliver the new homes, of all tenures, the country needs.” The industry will also benefit as mortgage rates start to head south, with the likes of Halifax, Nationwide, Barclays, HSBC and Santander, having already started the process. The biggest boost could come in the coming months when the BoE move in similar vein.
Many UK expats in the UAE are fearful that the incoming Labour administration will scrap the non-dom tax regime, increase inheritance tax, tinker with capital gains tax, extend VAT for UK private education, and could even start looking again at a US type of tax system which would bring all UK citizens under the UK tax umbrella. Say A Little Prayer For Me!
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