Howesdubai blog – January 2017 update
Published January 2017, Tim Howe, Bed of Roses
HH Sheikh Mohammed bin Rashid Al Maktoum has approved a 300k sq ft expansion to triple the size of Dubai’s International Humanitarian City. This is in the wake of a marked increase in the global demand for emergency aid, as the number of humanitarian disasters and regional disturbances continues to proliferate.
Emaar has launched Creek Gate, a high-rise tower block, in Dubai Creek Harbour, a residential project comprising units ranging from 645 sq ft to 1,490 sq ft. No further details were available but the development will be handed over by 2020.
A MoU between Deyaar and Dubai South will see a massive 1.27 million sq ft development around the new airport. No further details were immediately available but the project will include residential units, retail outlets and hospitality facilities.
Omniyat has appointed Sun Engineering and Contracting Company as the main contractor for its twin tower project located on Dubai Canal. The Sterling building will house a total of 343 1 / 2 / 3 bedroom units. This development will add to the its current US$ 6.2 billion property development portfolio.
The developers of the Al Garhoud Towers, Hasabi Real Estate, have appointed HLG Contracting to build the three towers. The US$ 109 million project will have a 250-key 4-star hotel, a 350-room 3-star hotel with the third tower housing 100 serviced apartments. (The 10-year old HLG is now owned by Riad Al Sadik and a 45% stake with Cimic – formerly known as Leighton Contractors).
According to research from, 2016 Dubai apartment prices fell on average by 10.9% to US$ 624k, as rents slumped by 6.0%; they were affected by people moving to cheaper suburbs and new inventory entering the market. The severity of the decreases varied between sectors; for example, rents and prices fell by 8.1% (to US$ 16k) and 5.0% to US$ 210k for studios whilst 2-bedroom units fell by 8.0% to US$ 40k and by 11.0% to US$ 681k respectively.
Bulgari’s first foray in the Dubai hospitality sector will see its 121-key luxury facility, located on Jumeirah Bay Island, to open in Q4. In addition, there will be six 7-storey buildings housing 15 mansions, 165 apartments and 8 penthouses clustered around a 50-berth marina. Although private sales have already started, prices have yet to be released.
Admares confirmed that the first batch of ten “floating” homes, two restaurants and a yacht club destined for the Marasi Business Bay project, will be in the emirate by year end. This project will form part of Dubai Properties Group’s US$ 272 million development of Dubai Water Canal which also includes a 12 km promemande, five marinas and floating restaurants. (The Finnish company’s first project here was the Burj Al Arab Terrace, opened last year).
DP World announced that it will build another hotel at Ibn Batuta Mall in an agreement with Thailand’s Minor Hotels. Under the AVANI Hotels & Resorts brand, the 372-key, 18-storey property will become the 16th in the developer’s portfolio and add to its current 5.5k room inventory.
A Nested study places Dubai as having the world’s most expensive monthly average Airbnb cost at US$ 15.9k; at the other extreme, Kuala Lumpur came in with a figure of US$ 1.7k. The research indicated that it would take 187 months of “traditional” renting, compared to 46 months of Airbnb, to recuperate the cost of the average Dubai property.
It is reported that the average commission paid to Dubai brokers last year came to a staggering US$ 12.5k for every property sold! The 5.9k registered brokers received a total of US$ 414 million in commissions on the 32.9k transactions recorded; this equates to US$ 69.8k per broker – not bad for the amount of work some actually do!
Growing at a 4.9% annual rate, UAE continues to tap into the US$ 151 billion global halal travel market. The latest Global Islamic Economy Report ranks the country in top position for having the “best developed halal ecosystems” – ahead of rivals Malaysia and Turkey.
Cityland Group has released further detail of its planned US$ 300 million Cityland Mall, touted to be the first ever global nature-inspired shopping complex. Scheduled for a mid-2018 launch, the development’s focal point, Central Park, will include a 3k-seater amphitheatre, a 300-year old tree garden, a 500 metre circular running track and a park that will accommodate up to 7k visitors. The project will have connected access to the adjacent Global Village.
Despite a despondent 2016, the retail sector continues to prove its resilience, with CBRE reporting major shopping centres having near 100% occupancy. Last year, Dubai’s retail space increased by a further 7%, with the largest addition being City Walk Phase II.
Nakheel has announced a two-year US$ 41 million investment in the emirate’s welfare, as it plans to build 105 km of bicycle tracks, all linking to the government’s cycling master plan. A 10 km super loop for the more experienced rider will also be added.
It has been confirmed that DP World will hold 55% of an asset vehicle, with Canada’s Caisse de dépôt, and will invest 25% of the US$ 3.5 billion funds in greenfield opportunities and the balance to existing entities, specifically in investment-grade countries. Seeding will be with two of the Dubai’s operator’s local container terminals in Vancouver and Prince Rupert.
Although posting its second lowest annual growth rate in eight years, Dubai International reported a 7.2% hike in 2016 traffic to 83.6 million, with cargo up 3.4% to 2.6 million tonnes. Although it is the world’s busiest international airport, it is still some way off Atlanta (101.5 million) and Beijing (89.9 million) that have a large number of domestic travellers making up their numbers.
Emirates has confirmed that, although a minor restructuring has led to some posts being made redundant, jobs in other areas have been made available to those impacted by the move. It seems that since the airline has cut back on recruitment and non-essential training, the HR division has been most affected.
Emirates has made use of aviation’s “fifth amendment” and will start flying to New York (Newark) via Athens from March. Needless to say, certain American airlines have expressed their concern; this will be the carrier’s fifth daily flight to the Big Apple, with its three existing direct flights and one via Milan. There is every possibility a similar service via Budapest could be introduced this year.
It came as little surprise to see that, after more than a decade in charge, its CEO, James Hogan, is to leave Etihad Airways. Over the past five years, the airline has acquired stakes in various airlines including a 29% stake in Air Berlin and 49% in Alitalia -both drivers in Etihad’s US$ 512 million 2015 loss from European operations. The company is to analyse its current airline equity partnerships which also include Air Serbia and Air Seychelles.
There seems to have been a misunderstanding between Careem and the RTA. The car-hailing service announced a US$ 0.82 surcharge per trip which would be passed on to the government agency. Two days later the RTA seemed to refute this claim denying that it had imposed such a fee. (It is reported that the ride-hailing app is considering an IPO before the end of 2019).
Abraaj Group is set to acquire a majority stake in Jhimpir Power Limited, a Pakistani company that owns a 50MW wind power project in that country.
BMI Research indicates that the country’s CPI (consumer price index) will average 1.8% this year (its lowest level in six years); the main drivers for this fall are continued subdued growth and a high greenback. Dubai will record a slightly higher rate than the capital because it has fewer subsidies in place.
A report by Moody’s Investors Service indicates that the global average size of non-financial public sector debt is about 14% of GDP (in contrast to a 55% level of an average public government debt). It highlights that the likes of China, Dubai, Qatar and Kazakhstan had public sector liabilities of 114%, 74%, 41% and 30% of GDP respectively. In comparison, the figures for Western Europe, Canada and the UDS stood at 12%, 8% and 0.1%.
It is estimated that there are over 500k Filipinos living in the country and that in the first 11 months of last year, a total of US$ 1.9 billion was remitted to their homeland – a 6.8% increase on the same period a year earlier. The other five GCC countries account for a further US$ 4.66 billion in remittances, with Saudi Arabia the highest at US$ 2.4 billion.
The Central Bank posted that total bank deposits in December rose by US$ 11.4 billion, as gross bank assets jumped 1.6% to US$ 708 million, month on month.
Dubai Insurance Company posted a 56.5% fall in Q4 profits to US$ 783k, whilst annual returns were 4.3% higher at US$ 10 million.
Deyaar Development posted annual figures, with profits up 54.8% to US$ 60 million, whilst revenue actually jumped 66.6% to US$ 117 million, driven by progress made on its The Atria and Mont Rose projects.
As with other local banks, Mashreq has suffered from a drop in income fees and increased provisioning that resulted in a 20.7% fall in Q4 profit to US$ 120 million on the back of a 33.6% hike in impairment costs to US$ 116 million. Fees and commissions fell 8.2% to US$ 107 million.
The country’s biggest sharia-compliant lender, Dubai Islamic, surprised the market by announcing a 58.4% Q4 profit increase to US$ 373 million; annual profit was up 13.8% to US$ 1.1 billion. The Board also approved a 45% cash dividend and to a US$ 1 billion increase in the bank’s Tier 1 issued capital.
The DFM opened Sunday at 3690 and after a flat week nudged 11 points higher to close Thursday (26 January 2017) on 3701. Volumes were markedly lower, closing the last day of the week, at 601 million shares, valued at US$ 266 million, (cf 903 million shares for US$ 330 million, the previous Thursday). Emaar Properties traded US$ 0.01 higher, to US$ 2.07, as Arabtec lost ground over the week down US$ 0.03 to US$ 0.37.
This week saw Brent Crude regain more than the previous week’s US$ 1.85 loss, gaining US$ 2.04 to close on $ 56.24. Having moved US$ 7 higher over the previous four weeks, gold headed in the opposite direction, closing US$ 12 lower at US$ 1,190 by Thursday (26 January 2017).
Two Chinese companies – Shanghai Film Group and Huahua Media – have invested US$ 1 billion in Paramount Pictures that will help finance 25% of the film studio’s output over the next three years. It will also give the struggling US entity a valuable entrée into the burgeoning Chinese market, the second largest in the world after India.
Little wonder that Sky News posted a H1 fall in profit of 9% to US$ 856 million, as it paid the EPL a massive US$ 5.3 billion for the rights to televise 126 matches over a 3-year period – a staggering 82.9% higher than the previous similar contract.
Despite all its problems with recent security breaches and downsizing strategy, Yahoo posted a Q4 profit of US$ 162 million on a US$ 960 million net revenue, despite a14.0% decline in revenue to US$ 3.52 billion – its lowest annual return since 2004.
Unilever recorded a 5.5% hike in 2016 net profit to US$ 5.9 billion, whilst posting a 1.0% fall in revenue to US$ 56.5 billion. The Dutch conglomerate could have fared better but for problems in two of their largest markets – Brazil (beset with political and economic difficulties) and India’s demonetisation that saw 500 and 1k rupee notes withdrawn from circulation.
2016 has not been a good year for Ericsson as its share value has sank 35% during the year and it has had to cut its dividend (by 73%) for the first time in eight years. Its Q4 sales, at US$ 7.36 billion, were 11% down year on year as the Swedish telecom equipment maker slipped into an operating loss of US$ 34 million (compared to a profit of US$ 1.24 billion over the same quarter in 2015). The company is not performing well in its market fights with the likes of Huawei and Nokia.
Samsung Electronics posted an impressive US$ 6.1 billion Q4 profit (compared to US$ 2.8 billion in the same period a year earlier) on flat sales of US$ 45.8 billion. Despite the Galaxy Note 7 fiasco, costing the South Korean conglomerate US$ 5.0 billion, its revenue was driven by brisk chip business.
For the second year in a row, LG Electronics posted a second successive year of declining net profits driven by sluggish smartphone sales. The South Korean conglomerate’s net profit almost halved to US$ 109 million, driven by a US$ 224 million loss in Q4.
It is reported that Heineken is interested in acquiring Brasil Kirin and is in discussions with its Japanese parent group Kirin to acquire the lager brand for US$ 870 million – a far cry from the US$ 4 billion that the brewer was valued at five years ago. Brazil is the world’s third largest beer market but has struggled as the country continues to reel from one economic crisis to another over the recent past.
Also in Brazil, Teori Zavascki, the judge at the centre of the massive Petrobas corruption investigation, has died in a light plane crash. His untimely death comes just days before the court was due to hear plea bargain deals, involving 77 Odebrecht executives who had admitted corrupt deals with Petrobas. Their evidence could further implicate powerful politicians who are already mired in the scandal.
Another week, another scandal – this time involving BT’s Italian business unit having to write off US$ 661 million, following years of “inappropriate behaviour”. Despite internal corporate governance and external audit protocol, it seems that the entity has been falsifying accounting records to overstate its profits for a number of years. Little wonder BT’s shares sank 18.0% to US$ 3.19 following the revelation.
RBS is heading for its 9th straight annual loss as it takes a US$ 3.9 billion provision relating to its misdeeds in the US, selling toxic mortgage-backed securities. It is not only the bank’s stakeholders suffering financially, the loss is being borne by UK taxpayers who own 73% of the fallen institution which was involved in a US$ 56.6 billion government bailout. A court case in March will see 27k creditors taking Fred “The Shred” Goodwin to court, with three other former executives, involved in a debatable US$ 15 billion cash call at the time. (Both Credit Suisse – US$ 5.3 billion – and Deutsche Bank – US$ 7.2 billion – have recently settled with US authorities).
A strange thing happened to Indian banks on 13 January – withdrawals of US$ 140.9 trillion were US$ 9.0 billion more than the total currency in circulation. The reason behind this anomaly – if there is one – will be explained once the Central Bank has analysed all the related documents. Following the surprise November demonetarisation of the 500 and 1k rupee notes, it is reported that the discarded paper is 300 times higher than Mount Everest.
One person looking closely at the workings of the new US president is Rodrigo Duterte who has recently been critically vocal of US policies. The Filipino economy grew at an impressive 6.8% last year and is expected to reach 7%+ this year but any possible shifts in US policy could prove detrimental to the country’s progress. The Philippines’ US exports account for 4% of its GDP and revenues from outsourcing account for a further 10%. Whether Duterte can keep his future comments to himself remains to be seen.
The 19-bloc eurozone reported a marked increase in its November current account surplus – up, month on month, by 27.6% to US$ 38.6 billion – a record high level. The surplus on trade in goods jumped by 19.3% to US$ 33.1 billion, whilst the surplus on services contracted by 46.1% to US$ 1.3 billion.
December UK retail sales posted their biggest monthly fall (of 1.9%) in nearly seven years, as prices headed north following the 20% collapse of sterling. The only bright light was the fact that over the year, the sector did expand 4.3%. No doubt the industry will have to come to grips with rising costs, some of which will bite into company margins and some borne by consumers. Both scenarios point to a difficult year ahead.
President Trump did what he promised on the campaign trail – he pulled the US out of the much-maligned TPP (Trans Pacific Partnership).
On Friday, he is expected to meet UK Prime Minister Theresa May – the first world leader to meet him in the White House. Both leaders have defied popular opinion that a Trump election and a UK Brexit would be damaging to their economies. Since his election, the S&P 500 has hit record highs (now at 2297), as did the Dow Jones now topping 20000. Following Brexit, the UK economy has become the fastest growing in the western world. The special relationship that many “experts” thought would be a bed of nails is set to become a Bed of Roses!