Lipstick On Your Collar! 01 March 2024
Emaar Properties announced that it would be investing US$ 26.14 billion on two luxury projects – The Heights Country Club, (at an estimated US$ 15.0 billion) and Grand Club Resort, (at US$ 11.17 billion) – situated adjacent to one of its current developments, The Oasis, on the outskirts of Dubai. No specific details were released but according to the developer, both “are expected to significantly enhance sales and profitability” and include “a substantial number of villas and townhouses.” Last June, Emaar launched the US$ 20.0 billion The Oasis, a luxury waterfront property development, with 7k residential units, including mansions and villas. The market is still awaiting further details of its tower to be built at Dubai Creek Harbour, which initially was thought was to become the world’s tallest, but plans have been reportedly pared back.
A Betterhomes study concludes that sellers are currently positioned advantageously, capitalising on a surge in property transactions and escalating prices driven by growing buyer demand, resulting in Dubai’s realty sector fast turning into a sellers’ market, as the move to cash in on ‘profits’ gains traction post Covid. There is no doubt that property prices are slowing down after a three-year rally, with some investors having already sold out. The consultancy’s MD, Louis Harding, added that “one of the key benefits for sellers in this swiftly expanding market is the potential for a lucrative return on investment, with property owners currently enjoying favourable rates”, and that “the rapid growth in Dubai’s population further amplifies property demand and prices, creating an advantageous landscape for sellers, particularly areas with limited supply.” In terms of RoI, it noted that Downtown, District1 MBR, Jumeirah, Dubai Hills, Palm Jumeirah and DIFC were the best performing locations.
Emirates NBD’s Mayed Alrashdi warned that the sector could face “some headwinds in 2024, including continued high-interest rates, declining affordability for the average household, and a growth in the supply of new units,” whilst noting that there had been a 7.0% dip in 2023 mortgage transactions to US$ 34.1 billion as the continuing impact of high mortgage rates dented household spending. By the end of the year, demand was still outpacing supply but there are analysts who see the increase in inventory (which one put at 60k – 41.5k apartments and 18.5k villas) could swing the balance towards equilibrium. Indeed, if this amount of 60k units were added to Dubai’s property portfolio, at 2023-year end, of 823k, (official 2022 figures of 783.6k plus an unofficial 2023 estimate of 39.4k), it would bring the 2024 total to 31 December to 883k.
The US-based Discovery Land Company has launched an ultra-luxury, two sq km, development, adjacent to the Jetex private jet terminal at Dubai World Central; the land was bought for US$ 272 million in 2022. The development will comprise one hundred and ninety-eight mansions and villas, as well as one hundred and thirty-two apartments, on various plot sizes; plot prices start at US$ 7.5 million, up to US$ 50 million, and since December there has been an average 25% price increase. Buyers can select one of Discovery Land’s Olson Kundig designs for villas, starting at US$ 681 per sq ft, or approved custom designs for their villas, which are expected to start at around US$ 409 per sq ft. It is forecast that the site will generate approximately US$ 6 billion in total sales. There will be an annual management fee, yet unknown, for buyers that pays for the multitude of services offered on-site, including doctors and wellness specialists. According to the developer, there has been strong demand to date to live in Dunes, (with 50% of phase 1 already sold out, which will be a members-only community), with a Tom Fazio-designed golf course and several luxury amenities. The site is already home to the Lakehouse, a farm-to-table restaurant and bar overlooking the 11th hole and is close to a variety of lake-focused recreational activities, including swimming and paddle boarding. Up to 70% of the project is set aside for common space, open greenery and the golf course, which will be limited to members and their friends. The community will also have a wellness centre and spa, equestrian centre, organic farm, adventure park and kids club, and a trail that circumnavigates the site. The developer already operates more than thirty high-end global communities.
The latest Which? “best and worst airlines for 2024” ranking surveys seventeen international carriers and once again Emirates performs well, being placed second to Singapore among the top long-haul economy airlines.
| Customer | On Time | Last Minute | |||
| Score | Cancellation | ||||
| Singapore | 83.0% | 64.0% | 0.0% | ||
| Emirates | 81.0% | 75.0% | 0.1% | ||
| Virgin Atlantic | 76.0% | 77.0% | 0.8% | ||
| Qatar | 74.0% | 83.0% | 0.0% | ||
| Qantas | 71.0% | 43.0% | 1.2% | ||
| Etihad | 70.0% | 85.0% | 0.0% | ||
Seats on Singapore and Emirates had a similar pitch of 32 inches to 34 inches, compared with Etihad’s 31 inches to 33 inches, whilst both leading carriers were rated the same on customer service, seat comfort, food and drink, in-flight entertainment, cleanliness, cabin environment and value for money; they also stood out “for spotless planes, excellent entertainment systems and friendly service”. However, Singapore was rated slightly higher on boarding, with five stars as opposed to four for Emirates. British Airways was ranked joint third lowest out of the seventeen carriers at a score of 59%, followed by American Airlines, also at 59%, Air Canada at 58% and Lufthansa at 56%. Jet2.com was named the best short-haul airline with a score of 81%, whilst Wizz Air was ranked bottom for short-haul flights for the second year in a row, at 44%, followed by Ryanair at 47%, Iberia at 49% and Vueling at 53%.
Emirates has promoted two veteran senior executives, Adel Al Redha and Adnan Kazim, to added roles of deputy presidents, under President Tim Clark; both will retain their current roles of COO and CCO. The President had postponed retirement plans during Covid and there has been no apparent decision on any new date for his departure.
Boeing has been brought to task by the US Federal Aviation Administration, who has given the plane maker ninety days to come up with a plan to improve quality and meet safer safety standards. FAA administrator Mike Whitaker has told Boeing he expects it to provide the FAA with a comprehensive action plan within three months that will incorporate the coming results of the FAA production-line audit and the latest findings from an expert panel report. Now its biggest customer, Emirates has seemingly joined forces with the industry watchdog, agreeing that there was a “disconnect between the management and the safety system”, with supremo, Tim Clark, hinting at delivery delays. The carrier is the largest buyer of the 777X, with two hundred and five on order, with the first due to have been delivered in 2020, but now expected next year. There is no doubt that Boeing must take a fresh look at every aspect of their quality control and focus more on safety, with the Emirates boss agreeing and noting that “whether this means a change in the governance model, I don’t know. When you change the governance model, it invariably involves changing the people around the old governance model.”
Kenya, East Africa’s largest economy, has become the latest nation to conclude a comprehensive economic partnership agreement after becoming one of the first African countries to begin bilateral trade deal talks, with the UAE, in 2022; this was part of a strategy to diversify its oil-based economy. UAE Minister of Foreign Trade, Thani Al Zeyoudi, noted that bi-lateral non-oil trade rose 26.4%, on the year, to US$ 3.1 billion in 2023 and “we will now look to expand across sectors from food production and mining to technology and logistics.” Foreign trade is an integral part of the UAE’s economic agenda – in 2023, the country’s non-oil trade in goods came in 12.6% higher, at US$ 710.0 billion, compared to a year earlier, and up 34.7% on 2021.
Brand Finance’s latest survey shows the UAE ranked tenth globally in its latest Soft Power Index – and ranked first in the region – with its value climbing 43% from US$ 700 million to US$ 1.0 trillion. The survey, including 170k from one hundred and ninety-three nations, placed the US, the UK and China in the top three positions. Encompassing fifty-five main and sub-indicators, it measures the positive reputation of countries and their ability to have a positive impact, as well as to understand the perceptions and opinions of the global public on matters including the investment environment, products and services, living, working, studying, and visiting. The country scored well in indicators related to ‘Strong and Stable Economy’, ‘Future Growth Potential’ and ‘Influence in Diplomatic Circles’.
After February price rises, (except for diesel), the UAE Fuel Price Committee has increased all retail fuel prices, for March. Eight years ago, the federal government liberalised fuel prices so that they could be aligned with market rates until the onset of the pandemic saw prices frozen by the Fuel Price Committee. In March 2021, prices were amended to reflect the movement of the market once again, with all March 2024 retail prices heading north:
The breakdown in fuel price per litre for the month is as follows:
• Super 98: US$ 0.768, to US$ 0.826 in March (up by 5.2%)
• Special 95: US$ 0.738, to US$ 0.796 in March (up by 5.2%),
• Diesel: US$ 0.815, to US$ 0.861 in March (up by 5.7%)
• E-plus 91: US$ 0.777, to US$ 0.733 in March (up by 6.0%)
Dubai Taxi Company posted an 11.0% jump in 2023 revenue, to US$ 531 million, as the number of taxi trips in the emirate increased. EBITDA rose a credible 55% to US$ 134 million, (at a 25% margin), whilst net profit was at US$ 94 million, 54.0% higher on the year. By the end of the year, its fleet of 7.4k vehicles had managed to complete forty-six million trips – 8.0% higher on the year. The Board recommended a US$ 19 million Q4 dividend, equating to US$ 0.0077 per share, in line with the company’s IPO commitment.
Established in January, Parkin, which was set up to oversee Dubai’s parking operations, becomes the latest government entity to offer shares to the public. The latest initial public offering will see 24.99%, (equating to 49.7 million shares), being sold to the public. Subscriptions will open next Wednesday, 05 March, for a week, with up to 10% being offered to retail investors, with a minimum subscription amount of US$ 1.36k. As part of the qualified investor offering, 5% will be reserved for the Emirates Investment Authority and 5% for the Pensions and Social Security Fund of Local Military Personnel. The price range for the deal will be announced on 05 March and the final offer price will be set on 14 March, with listing on 21 March. Parkin is the largest provider of paid parking spaces and services in Dubai, accounting for more than 90% of the emirate’s on and off-street paid parking market. It manages about 175k on and off-street parking spaces across eight-five locations, and close to 18k spaces across seven developer-owned parking lots and also issues permit to drivers, enabling them to subscribe to public parking, use and operate it, and to reserve parking spaces. It becomes the sixth state-owned entity that has listed on the DFM following in the footsteps of DEWA, (which raised US$ 6.1 billion), Tecom, Salik, Empower and Dubai Taxi Company.
Dubal Holding LLC posted a 2023 US$ 488 million net profit, compared to a US$ 1.0 billion return the previous year. DH, the investment arm of the Dubai Government in the commodities and mining, power and energy, and industrial sectors, expanded operations and acquired international assets during the year. Further to the acquisition of Thermalex, (a US aluminium extrusion company specialised in aluminium multiport extruded tube), the company is also exploring the possibility of other opportunities, including large profiles and machined components for the automotive, industrial and new energy verticals such as hydrogen, as well as building a recycled aluminium/cast house facility from extrusions/ profiles. Dubal Holding is the wholly owned subsidiary through which the Investment Corporation of Dubai holds a 50% stake in EGA along with other industrial entities. Other investments comprise a minority stake in Sinoway Carbon Company Ltd, a Calcined Petroleum Coke production facility in China’s Shandong Province, full ownership in OSE Industries LLC (an aluminium extrusion company in Dubai), and a 50% shareholding in Emirates Global Aluminium.
Deyaar Development is launching a US$ 191 million, thirty-three storey project in Jebel Ali, comprising a range of studios to 3 B/R apartments. Eleve becomes Deyaar’s second project of 2024, following the January launch of Rosalia Residences in Al Furjan, which has fully sold out; completion is slated for early 2027. Chief Executive, Saeed Al Qatami, noted that Dubai had been recording “fundamental growth” in its property market and is “not a bubble”; he forecast price rises of up to 15% this year as the demand for property, especially in the affordable sector, is expected to continue growing this year, but that prices of luxury homes will stabilise. He commented that end users are buying property in the secondary or ready home market, while investors – mostly from India, Pakistan and the UAE – dominate the off-plan sector. The developer, majority owned by Dubai Islamic Bank, expects its revenue to rise 30% annually this year.
The DFM opened the week on Monday 26 February, 33 points (0.8%) lower the previous week, gained 131 points (3.1%) to close the trading week on 4,357 by Friday 01 March 2024. Emaar Properties, down US$ 0.04 the previous week, was up US$ 0.07, closing on US$ 2.26 by the end of the week. DEWA, Emirates NBD, DIB and DFM started the previous week on US$ 0.65, US$ 4.81, US$ 1.74, and US$ 0.36 and closed on US$ 0.67, US$ 4.70, US$ 1.77and US$ 0.37. On 01 March, trading was at 213 million shares, with a value of US$ 112 million, compared to 100 million shares, with a value of US$ 79 million, on 23 February 2024.
The bourse had opened the year on 4,063 and, having closed on 29 February at 4,308, was 245 points (6.0%) higher. Emaar started the year with a 01 January 2024 opening figure of US$ 2.16, to close the month at US$ 2.21. Four other bellwether stocks, DEWA, Emirates NBD, DIB and DFM started the year on US$ 0.67, US$ 4.70, US$ 1.56 and US$ 0.38 and closed YTD at US$ 0.66, US$ 4.99, US$ 1.75 and US$ 0.36. On 29 February, trading was at 220 million shares, with a value of US$ 151 million, compared to 138 million shares, with a value of US$ 58 million, on 31 December 2023.
By Friday, 01 March 2024, Brent, US$ 1.76 lower (2.1%) the previous week, shed US$ 2.19 (2.7%) to close on US$ 83.90. Gold, US$ 12 (0.5%) higher the previous week, gained US$ 32 (1.6%) to trade at US$ 2,083 on 01 March.
Brent started the year on US$ 77.23 and gained US$ 4.37(5.7%), to close 29 February 2024 on US$ 81.60. Meanwhile, the yellow metal opened 2024 trading at US$ 2,074 and shed US$ 26 (1.3%) to close YTD on US$ 2,048.
Both Boeing and the Federal Aviation Administration (FAA) said it would also review the findings of a new report for the US government which concluded that there were serious concerns about Boeing’s safety management systems, and that there was a “disconnect” between senior management and regular staff. The embattled plane-maker has had a turbulent recent history including two fatal crashes in 2018 and 2019, as well as the recent Air Alaska incident which saw a section of a plane being blown off mid-air. The report noted that Boeing staff were hesitant to report problems and worried about retaliation because of how the reporting process was set up, as well as not having a clear system for reporting problems and tracking how those concerns were resolved. All these matters will end up with Boeing having to delay deliveries of new planes much to the dismay and chagrin of many of its customers including Ryanair.
Ryanair has posted that air fares could be 10% higher this summer as the budget carrier has to manage the shortage of planes because of the delay in the Boeing production line, leading to ordered Boeing planes arriving late; delayed delivery will constrain capacity for passengers. Michael O’Leary has indicated that “delivery of fifty-seven Boeing 737 Max 820’s was due by March, but the firm thinks only 40-45 may arrive in time for the summer season,” whilst noting that “if capacity was growing, I think fares would be falling.” He has also commented that costs saved through hedging on fuel would mean that Ryanair’s fare increase would not be as steep as the 17% rise seen in 2023, and that there would be a “higher fare environment across Europe” this summer. The airline’s original forecast for the year to the end of March 2025 was that it would carry 205 million passengers, up from 183.5 million in the twelve months before, but now its supremo notes that “with less aircraft, maybe we’ll have to bring that 205 million down towards 200 million passengers.”
To increase its market share in China, in an ongoing price war with local producers such as BYD, Tesla has resorted to new incentives, including insurance subsidies; Model 3 sedans and Model Y SUVs will now be entitled to a maximum of US$ 4.8k worth of incentives comprising US$ 1.1k discount in insurance products, US$ 1.4k discount, if the buyer chooses a change of paint, and US$ 2.3k if buyers take up a limited-time preferential financing plans for purchases of Model Y. Earlier in the year, the US EV manufacturer cut prices on some Model 3 and Y cars – and last month offered cash discounts for some Model Ys. Today, 01 March, BYD lowered the starting price of a new version of its Song Pro hybrid SUV by 15.4%. Let the price battle commence. . . . again!
To help drive its transition to EVs at its Luton plant, Stellantis, the parent company of Vauxhall, has turned to the UK government for further financial investment The company has confirmed it will produce “limited” volumes of electric vans for five of its group brands – including Vauxhall Vivaro Electric, Peugeot E-Expert and Fiat Professional E-Scudo in both right and left-hand drive versions – from 2025. Last year, two other major carmakers, Nissan and Jaguar Land Rover, confirmed plans for further investment in the UK. The Japanese company will invest US$ 1.5 billion to build two electric car models at its Sunderland plant, whilst the Tata-owned car maker revealed plans for a US$ 5.1 billion EV battery plant in Somerset. Stellantis’ Ellesmere Port plant, which produces small vans, was the first in the country to go fully electric last year, with the group posting that from 2028, all the group’s vehicles will be electric-only.
There were stories a decade ago that Apple was considering entering the EV market but current reports put that rumour to bed. The tech giant has never publicly acknowledged the project, reportedly known as the Special Projects Group, which involves around 2k people. There were reports that billions of dollars on R&D were spent and that the final product would be a fully autonomous vehicle without a steering wheel and pedals. There is no doubt that the market has slowed somewhat over the past twelve months, with the likes of Ford and General Motors postponing plans to expand EV production, as well as Tesla warning that 2024 revenue will be lower on the year. Only last week, electric truck maker Rivian said it would cut its workforce by 10% and forecast no growth this year in its production.
In a bid to retain its employees, Marks & Spencer has announced staff pay rises, increasing minimum pay outside the capital to US$ 15.14 and in London to US$ 16.59. About 40k staff, across the food and clothing units, will get a raise, with the retailer announcing it would be making “substantial improvements” to its maternity, paternity and adoption policies. It joins competitors such as Aldi, Lidl and Sainsbury’s in increasing its minimum pay for staff outside of London to US$ 16.59 per hour. M&S indicated that the increases since March 2022, it had invested more than US$ 184 million in its overall retail pay package. Furthermore, maternity leave and paternity leave will be increased to twenty-six weeks and six weeks.
Five years ago, Ocado signed a deal with M&S to sell the retailer’s food on the internet and paid an upfront payment of US$ 707 million and is due to pay a further US$ 241 million, based on certain targets being met. Now, there appears to be an impasse with one company stating that “we have a very solid case to get full payment, we know that M&S may not entirely share that view ”, and the other saying that “the financial performance of Ocado Retail means the criteria for the performance payment was not met.” The 50:50 JV was signed in early 2019 and went live the following year in September so it seems the biggest winner will be the lawyers.
As it tries to save up to US$ 1.26 billion over the next three years, Sainsbury’s is planning to cut around 1.5k jobs, subject to consultation, with roles being lost at its contact centre in Cheshire, in-store bakeries, and some local fulfilment centres. The retailer said it had reassured colleagues that it would find alternative roles for them where possible, as it would “for any colleague affected by changes proposed”. The savings will be invested back into the business, the retailer added. It will invest more money in technology and innovation, resulting in the need for fewer local fulfilment centres – and hence fewer jobs.
Announcing that it was to cut costs, Sony will close its PlayStation’s London Studio and retrench 900 staff members, equating to about 8% of its workforce in the US and Japan. Supremo Jim Ryan commented that “the leadership team and I made the incredibly difficult decision to restructure operations, which regrettably includes a reduction in our workforce impacting very talented individuals who have contributed to our success.” In January, rival Microsoft revealed plans to lay off 1.9k people in its gaming division, which included those at recently acquired Activision-Blizzard. PlayStation 5 has sold more than fifty million units worldwide, more than double that of Microsoft’s Xbox Series X/S sales, whilst Nintendo’s Switch console has seen sales of over 140k units. Last month, Nintendo posted that although its revenue was 16% higher on the year, its net income slumped by more than 25%.
Elliott’s second bid of US$ 957 million – following an earlier one of US$ 885 million – has been rejected by Currys because it was”significantly undervalued”. The US firm is up against Chinese rival JD.com which has shown interest in buying the embattled retailer, with more than eight hundred stores. Under UK takeover rules, Elliott, which bought UK book shop chain Waterstones in 2018, has until 16 March to make a final offer. Currys has been struggling with falling sales, as consumer spending power dipped including a 3% fall over the usual business Christmas period.; it is also facing pressure from online traders such as Amazon. On 16 February, the day before Elliott made their first bid, Currys’ shares were trading at US$ 0.59 and by Tuesday 27 February, they had risen to US$ 0.84.
In Hong Kong, Ever Credit Ltd, a unit of Kingboard Holdings, a laminates maker and property investor, has filed a claim against China’s biggest private property developer Country Garden for non-payment of a loan worth US$ 205 million, and is now facing a liquidation petition. In January, China Evergrande, with more than US$ 300 billion of debt, was ordered to liquidate by a Hong Kong court. Shares in Country Garden fell more than 10% in early Hong Kong trade yesterday following the announcement. Since the property market accounts for about 33% of China’s economy, the Chinese government has to tread warily ensuring that the thousands of people, who have already paid for their currently incomplete apartments, can move eventually move in. The current crisis started since 2021, when authorities introduced measures to curb the amount big real estate companies could borrow, which has led to several large property developers having defaulted on their debts in the last few years.
Late last week, the Australian federal court convicted and sentencedwaste management companies Bingo Industries, and Aussie Skips Bin Services and Aussie Skips Recycling for criminal cartel offences, under sections 45AF and 45AG of the Competition and Consumer Act, relating to a price fixing arrangement for demolition waste services in Sydney. Both former MDs, Daniel Tartak, and Aussie Skips’ Emmanuel Roussakis, were also convicted and sentenced.The former was fined US$ 66k and sentenced for two criminal cartel offences to two terms of imprisonment of eighteen months each, with the latter fined US$ 50k and sentenced to eighteen months’ imprisonment for one criminal cartel offence. Both were barred from managing corporations for five years. Bingo was fined US$ 20 million and Aussie Skips over US$ 2 million, after each company pleaded guilty to having fixed and increased prices with the other for the supply of skip bins and the provision of waste processing services for building and demolition waste in the city. The cartel only operated for less than four months – from May to August 2019. Cartel conduct harms consumers, businesses, and the economy, and is likely to increase prices, reduce choice and distort innovation processes.
Wayne LaPierre, the former CEO of the National Rifle Association, has been found guilty of misspending millions of dollars of the organisation’s money which he used for trips on private planes, superyachts and travelling overseas. Last Friday, the 74-year-old, who had been at the helm for thirty-three years, was ordered to repay US$ 4.4 million, whilst the organisation’s retired finance chief, Wilson Phillips, had to pay back the group US$ 2 million. LaPierre announced his resignation the night before the trial. He had billed the NRA more than US$ 11 million for private jet flights and spent more than US$ 500k on eight trips to the Bahamas over a three-year span. He also authorised US$ 135 million in NRA contracts for a vendor whose owners showered him with free trips to the Bahamas, Greece, Dubai and India, as well as access to a 33-metre yacht. Mr LaPierre claimed he had not realised the travel tickets, hotel stays, meals, yacht access and other luxury perks counted as gifts, and that the private jet flights were necessary for his safety. Furthermore, jurors found that the NRA omitted or misrepresented information in its tax filings and violated New York law by failing to adopt a whistle-blower policy. The court case outcome is a further blow to the powerful group, which has been beset by financial troubles and dwindling membership in recent years.
In Q4, India posted an 8.4% jump in Q4 economic growth and is expected to soon become the world’s third largest economy, surpassing Japan and Germany; the main driver was the manufacturing sector which jumped 11.6% in the period, whilst private consumption, which accounts for over 65% of the country’s GDP, rose by 3.5%. Over recent times, Prime Minister Modi has raised government spending on infrastructure and offered incentives to boost the manufacturing of phones, electronics, drones and semiconductors to help India compete on the international stage. Yesterday, his government agreed to a US$ 5.2 billion investment to construct three semiconductor plants. The IMF expects India’s economy to expand by 6.5% this year as compared to 4.6% for China.
Lebanon appears to live through one crisis to another, with the latest being faced with damages, estimated at US$ 2.5 billion, due to ongoing conflict on its southern border with Israel. Amin Salam, the country’s Economy Minister, and who was in Abu Dhabi for the WTO’s thirteenth Ministerial Conference, is seeking international funding to “rehabilitate” the farmlands, impacted by the war, including the Beka Valley “that became toxic due to the specific weapons they’re using.” It has also hit the tourism sector, (which last summer season added up to US$ 7 billion from tourists and Lebanese diaspora), and caused extensive damage to buildings, infrastructure and private property, heaping more costs on an already struggling economy.
Rishi Sunak has revealed how some of the money from abandoning the HS2 northern leg will be reallocated, with Northern England receiving US$ 3.20 billion and the Midlands US$ 2.75 billion. The cash will go to a “local transport fund” to help towns, rural areas and smaller cities, with councils and local authorities deciding how to spend the money, (that seems to be a recipe for disaster). However, it seems that MPs and ministers must “hold local authorities to account” over how the new money is spent. The prime minister said it would empower local leaders “to invest in the transport projects that matter most in their communities – this is levelling-up in action”.
Twelve months after initiating an investigation into UK housing, the Competition and Markets Authority has now launched a probe whether eight major house builders – Barratt, Bellway, Berkeley, Bloor Homes, Persimmon, Redrow, Taylor Wimpey and Vistry – have been sharing information which could influence house prices. It also said “significant intervention” in the market was needed to ensure enough homes were built to meet demand. The CMA said that its investigation had uncovered evidence suggesting “information sharing”, which “could be influencing the build-out of sites and the prices of new homes” but confirmed that it had not yet reached any conclusions as to whether or not competition law has been broken. The watchdog also raised concerns over the quality of new homes, indicating there were “persistent shortfalls” in the number of homes being built. In its 2019 manifesto, the Conservative Party promised to build 300k homes by mid-2020s and to make the planning system “simpler”. Not surprisingly, it has failed to deliver on two counts – only 250k were built last year and the CMA indicating the planning system was one of the key factors slowing down construction of new homes, describing it as “complex and unpredictable”.
Despite UK housing activity remaining weak – in an environment of interest rates not falling as much as expected and even nudging slightly higher in some cases – latest BoE data shows
January approvals for house purchases rising 7.2% on the month to 55.2k, its highest level since October 2022. Property sales were slightly up compared with December, but 12% lower than January 2023. Credit card borrowing also moved higher to US$ 2.4 billion, as people spent more on the likes of car finance and other loans than they repaid in the month. As the new fixed deal mortgage rates gained traction towards the end of 2023, lenders have been shifting the interest rates charged on home loans at a quicker rate since the start of 2024. This started with some significant cuts to the cost of new fixed-rate deals, which have recently crept back up, and there are many who are awaiting further BoE rate cuts in the coming months. Recent figures show homeowners actually repaid more money on mortgages than they took out in new lending in the year to January – the first time this has happened since comparable records began thirty years ago.
For the first time in twelve months, UK property prices headed upwards, at US$ 330k, but still 3% lower than their summer 2022 peak. Nationwide saw February prices 0.7% higher on the month but noted that the outlook was still “highly uncertain, in part due to ongoing uncertainty about the future path of interest rates.” It also noted that the decline in borrowing costs around the turn of the year appears to have prompted an uptick in the housing market.”
The Institute for Fiscal Studies has warned the Sunak government that it should not cut taxes in this month’s Budget, unless it can spell out how it will afford them, saying the case for tax cuts was “weak”. The Chancellor is on record that he was looking at trimming public spending, as a way to deliver tax cuts, but the IFS noted that any tax cuts “should wait” until he was able to carry out a detailed spending review. It also commented that taxes were heading to record-high levels when measured against the size of the overall economy, and that government debt was also high and moving higher, and “barely on course” to be falling in five years’ time – one of the government’s self-imposed rules. The IFS suggested that it may be more beneficial for the economy if the Chancellor reformed stamp duty on purchasing properties or shares, rather than going ahead with minor tax cuts, such as reducing income tax or a further cut to National Insurance rates. The current betting seems to be on maintaining fuel diesel at current levels and cutting NI by 1%, which would cost US$ 5.7 billion. The IFS estimated that for the Chancellor to keep real-terms spending per person at current levels for unprotected services – including justice and local government – alongside “plausible” settlements for the NHS, childcare and other commitments, which are ring-fenced; would cost over US$ 31 billion. Other bodies – including the IMF and the Office for Budget Responsibility – are proffering advice basically ruling out immediate tax cuts.
Today saw Australia’s ASX 200 close on a fresh record high, at 7,726, after Wall Street’s S&P 500 and Nasdaq ended overnight at record highs, of 5,096 and 16,091 respectively. Not to be outdone, Japan’s Nikkei also posted a record high of 39,910. The reason for the bourses’ optimism was that a key US inflation reading was in line with expectations. However, the confidence was not felt in many Asian markets because of the uncertainty facing China’s economy, not helped by renewed turbulence in the property sector; this resulted in MSCI’s broadest index of Asia-Pacific shares, outside Japan, however, dipping 0.1%.
Several analysts are worried about the state of the Australian economy, with the distinct possibility of a recession on the horizon. There are various economic theories being thrown around, but some point to the fact that because demand for lipstick and recreational activities has picked up, this often precedes a major economic downturn. There are renewed warnings Australia’s economy could be heading for recession as shoppers tighten their purse strings. Even Treasurer, Jim Chalmers, was in sombre mood, noting that “we understand that the inevitable consequence of higher interest rates, persistent inflation and global uncertainty means that we are expecting quite weak growth in our economy.” He also added that “if we’re talking about 0.2% [economic growth] for this quarter’s growth and we’re talking the same sort of numbers in the next quarters for March and June, you don’t need very much to go wrong to suddenly produce a [recession].” As Paul Zahra, who now runs the Australian Retailers Association, noted that “when we’re seeing a downturn in sales — because I’ve been in this game for a little longer than I’d like to admit — we see that women particularly will go and actually spend money on a new lipstick to update their look, versus buying a new dress”. Maybe Jim Chalmers will judge when Australia is in recession when he sees Lipstick On Your Collar!
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