Emaar third quarter net profit soars 32%, beats analysts’ forecasts

Published : 12 Nov 2017 ,      Source : The National

Emaar Development, the company’s real estate business which is being floated, posted a 32 per cent rise in nine-month net profit.

Higher Dubai residential sales boost the company's income

Emaar Properties, the UAE’s largest real estate developer that built Dubai’s Burj Khalifa, posted a 32 per cent increase in third quarter net profit on Sunday, beating analysts’ forecasts, thanks to an uptick in Dubai residential property sales.

Net profit for the three months ending September 30 reached Dh1.51 billion compared with Dh1.14bn for the same period last year, the company said in a statement.

Bahrain-based investment bank Sico had forecast a third quarter net profit of Dh1.36bn, according to a Reuters poll.

A Bloomberg survey quoted an analyst forecasting a third quarter net profit of Dh1.25bn.

The company’s profit beat expectations “largely due to stronge-than-expected performance of the UAE property development business,” said Ayub Ansari, a senior analyst at Sico. “Revenues from Emaar’s hospitality and lease segment business were largely in line.”

For the full year, Sico is projecting an 11 per cent increase in earnings to Dh5.8bn.

Third quarter revenue for the company surged 45 per cent to Dh5.58bn from Dh3.84bn.

Nine-month sales of residential property in Dubai hit Dh15.36bn, 32 per cent higher than a year earlier. Emaar now has a domestic sale backlog of Dh40.8bn, and an expected net cash flow of Dh18bn, the company said.

“The impressive growth in sales of our Dubai residential property launches this year puts us in a strong position to generate strong cash flows for the company of the coming years,” said Mohamed Alabbar, chairman of Emaar Properties.

“The sustained demand for projects in Dubai is a strong indicator of the investor trust in Dubai, which is today one of the fastest-growing hubs for business and leisure.”

Emaar Development, the company’s real estate development business currently undergoing an IPO process, posted a 32 per cent rise in nine-month net profit to Dh2.1bn from a year earlie, with itsnine-month revenue soaring 48 per cent to Dh6.5bn.

Emaar is selling a 20 per cent stake in the subsidiary, which is expected to raise as much as Dh5.52 billion ($1.5bn), with shares due to list on the Dubai Financial Market. It will be Emaar’s third subsidiary-listing after Emaar Malls in Dubai and Emaar Misr, its Egyptian unit in Cairo.

“The partial listing of Emaar Development and the proposed special dividends to be distributed from its proceeds highlight the continued value that we bring to our shareholders,” Mr Alabbar said.

Emaar’s shopping malls, hospitality and leisure businesses recorded flat revenue of Dh4.44bn in the first nine months of this year.

Revenue from the International property development unit rose 51 per cent to Dh2.55bn from Dh1.69bn, representing 19 per cent of total revenue.

Emaar’s total property sales including international operations in the first nine months this year stood at Dh17.63bn, with a total backlog of Dh50.54bn.

The company, which has delivered over 34,500 residential units in Dubai since 2002, has sold around 80 per cent of over 24,000 units currenlty under construction across eight projects.

Earlier this month, Emaar Malls, the retail business majority-owned by Emaar Properties that operates Dubai Mall, posted an 11 per cent increase in third quarter net profit to Dh485 million, beating an analyst’s forecast. The company benefited from its $151m acquisition of a 51 per cent stake in online retailer Namshi.

Emaar Properties shares rose 1.03 per cent to Dh7.88 in Dubai ahead of Sunday’s earnings announcement.

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From humble abra steps to sky-high icons

One of the first international engineering firms to take up residence in Dubai, Atkins’ influence on the built environment has evolved over the last half century from behind-the-scenes infrastructure consultancy to a high-profile portfolio of iconic structures.

“This year we are celebrating 50 years in the region,” says Tom Hasker, managing director — property at Atkins. “Originally, Atkins was largely recognised as an engineering and infrastructure brand, but over time we also developed our architectural business.”

Atkins’ UK expertise was first exported to the region in 1967 when a small team of engineers was sent to Kuwait to work on the country’s utilities infrastructure and road design. In 1979, client project demand saw the firm plant its feet permanently on Dubai ground with a new office and involvement in key infrastructure projects such as the dredging of Dubai Creek.

Says Hasker: “In the early days the region already had tremendous aspirations, but there wasn’t the supply of on-the-ground quality engineers, architects and contractors needed to realise the vision of the rulers.

“The people who worked here at the time always reminisce about the immense pressure they were under to make projects happen. However, in a lot of ways it was easier to deliver the big jobs back then as there were less of them, whereas these days everyone’s job is big and important, but just one of many.”

One of Atkins’ first transformational Dubai projects was, quite literally, a step change for the company, as Hasker explains: “In the early 80s the Dubai Municipality commissioned Atkins to design a reinforced concrete edge along the Deira bank of the creek to make passenger access on and off abra water taxis less of a challenge, and this resulted in the creation of the now familiar abra steps.”

In 1985, the team took on its first residential architectural commission, for the design and construction of a private villa on Al Wasl Road, and this led the way for more and more project wins, including the city’s original Standard Chartered Bank building, Dubai Police College and the Taj Palace Hotel.

Atkins’ turn to truly shine came in 1994 when it was engaged to design the city’s original hospitality icon, the Burj Al Arab, with the Jumeirah Beach Hotel and Wild Wadi Water Park also representing milestone project wins for the company.

Moving into the new millennium, the company continued to build bigger, taller and more complex structures with the Shaikh Zayed Road area home to a raft of Atkins-designed and engineered landmarks, including the first Address Hotel, The Address Downtown Dubai, along with the Princess Tower, 21st Century Tower, Chelsea Tower (now rebranded as the Al Salam Hotel Suites) and the Millennium Tower.

Its most recent high-profile accomplishment is the Dubai Opera, with Atkins managing the project from drawing board to delivery.

But its contribution to the city’s urban fabric isn’t always so immediately apparent, as Hasker explains: “Our involvement with Dubai Municipality spans years from creekside development to the Metro and in defining the areas that will promote Dubai’s growth and development. The Dubai Metro, with the Red Line the world’s longest driverless single metro line, was another hugely successful project for which we provided full multidisciplinary design and management of the civil works.

“We are also heavily involved with master planning for Al Maktoum International Airport in Dubai South.”
Urban rejuvenation is another area where Atkins is making its mark. “We see a lot more thought now going into development, rather than a desire to simply have trophy buildings, which don’t reflect the true urban fabric,” says Hasker.

“And there’s real interest in urban rejuvenation projects such as what Meraas has done with La Mer to bring new life and sensible development to existing areas,” Hasker adds. “Atkins is also lead consultant for the mixed-use waterfront Marsa Al Seef development on Dubai Creek, which is reactivating the real ‘old Dubai’.”
At the opposite end of the design spectrum, but also sited on the banks of the historic creek, Atkins’ work on the master plan for Emaar’s Dubai Creek Harbour community, in collaboration with RTKL, has a strong focus on digital innovation.

“Dubai is ahead of the curve compared to more established markets when it comes to digital infrastructure development, and that’s because a lot of the infrastructure here is so young,” says Hasker. “So, whereas not many established cities have the ability to master plan scaled communities such as Dubai Creek Harbour from scratch, we have the opportunity to leapfrog ahead. We have the view that within the next five years our business landscape, as well as Dubai’s physical landscape, will be dramatically different.

“The way that we deliver our services will reflect the massive shift towards digital engagement — or generative design — with technology that allows us to produce more efficient designs more quickly. And Dubai is embracing this far more quickly than other markets.”

15 Nov 2017

Union Properties posts Dh45m loss as construction revenue slumps

Union Properties, the developer primarily known for its projects in Dubai’s Motor City, posted a Dh45 million loss for the third quarter, as construction revenues dropped by more than a half.

The loss, reported on the Dubai stock exchange, was an improvement on the Dh2.3 billion loss posted in the previous quarter, but down from a Dh32m profit for the third quarter of 2016.

Revenues from contracting and other operating activities – the company’s largest revenue generator – fell 56 per cent year-on-year to Dh82m. Property management and sales revenue declined 15 per cent year-on-year to Dh18m.

Union Properties announced in August a Dh2.8bn write-down of the value of its assets by a new management team in its second-quarter results, leading to its worst ever quarterly loss for the three months to the end of June.

A new chairman and vice-chairman were appointed in May after an impromptu board reshuffle saw the resignation of three directors, including the chairman Khalid bin Kalban. A new chief executive, Ahmed Khouri, was appointed in July.

The Union Properties chairman Nasser bin Yousef described the actions taken in the second quarter as “a one-time charge for the accounting irregularity by the previous management.”

The company’s shares opened 1 per cent lower in early Tuesday trading.

14 Nov 2017

Dubai property market in perspective

Values across Dubai’s residential investment areas continued to moderate during Q2 2017, dipping by an average of 1.5%. This leaves the annual rate of change at -5.8% and marks the 12th consecutive quarter of price declines, during which time prices have moderated by 14%. The latest change means that average house prices stand at $350 psf, nearly 30% below the Q3 2008 market peak.

Apartments continue to fare better than villas, with prices decreasing by an average of 1% during Q2, compared to a 2.2% drop in villa values. Interestingly, however, since the last market peak in Q3 2008, there are only two villa submarkets where prices have recovered to within touching distance of their previous highs. Jumeirah Village and villas at Motor City are 2.6% and 3.6% down on their Q3 2008 market high respectively.

Meanwhile, villas on the Palm Jumeirah remain about a third cheaper than during the 2008 price boom. Apartments, on the other hand, remain well below the 2008 peak, averaging 20-71% lower. The Burj Khalifa has had the smallest price recovery over the last nine years, with prices down 70.6% to $613 psf, compared to nearly $2,368 in Q3 2008.

Despite the seemingly slow climb in values compared to 2008 levels, the market has demonstrated characteristics of maturity, even though it is just 15 years since Dubai opened up its property market to international (non-GCC) investors. This is reflected in the fact that price drops have averaged 1% per quarter over the last 12 quarters.

Clearly improved regulation around off-plan resales, the introduction of federal mortgage caps, the doubling of property registration fees, more stringent controls around developer financing and the protection of investors’ funds through the mandatory requirement of escrow accounts have all contributed to the market’s stabilising growth profile in recent years.

The ongoing soft correction in the market appears to be nearing an end, with many locations starting to show signs of bottoming out, as we have previously reported. In fact, during the first six months of 2017, just seven of the 32 sub-markets we track in the emirate registered price falls, with all other locations seeing no change in value. The weakest performing market was Motor City ($245), where villa values receded by 8.2% over the same period, leaving them 12.6% lower than a year ago.

Rounding off the top five weakest performing markets during H1 2017 were Jumeirah Islands (-6.3%), Hattan Villas at Arabian Ranches (-5.6%), the Burj Khalifa (-5.6%) and villas on the Palm Jumeirah (-4%). Aside from Motor City, where values average $245 psf, and Jumeirah Islands ($327 psf), prices in the remaining weakest sub-markets average $435-653 psf, putting them well above the average for the city as a whole.

Affordability Issues Still Unresolved
Affordability remains a challenge for Dubai’s residential market. With household incomes strained by rising living costs, underpinned by inflation levels of over 2% and the looming new VAT regime, as in Abu Dhabi the dream of home ownership continues to drift further away for many. Average incomes remain at around $55,000 per annum for expat households across the UAE, based on the Ministry of Economy’s last income survey. With an average mortgage multiplier of three to four times annual income, most households would be hard pressed to purchase a family home for $163,350 to $218,000 anywhere in the emirate.

The number of affordable housing districts in the city remains primarily limited to well-known areas such as International City and Discovery Gardens, which together house some 120,000 residents spread across circa 48,000 units. The limited supply in the affordable segment of the market, coupled with steady but robust demand, has helped hold values relatively steady over the last 12 to 18 months.

Dwindling New Home Launches, While Supply Pipeline Remains Strong
Elsewhere, while the housing supply pipeline remains robust, the vast majority of stock being brought to the market does not fall under the affordable bracket. This threatens to undermine Dubai’s ability to continue attracting workers of all skill and earnings levels, while also putting the city on a potential path to experiencing the affordability emergencies faced in well established, mature global cities such as London and New York.

As it stands, some 12,500 units should be handed over this year, rising to over 21,400 in 2018 and a further 26,000 units in 2019.

Meanwhile, the subdued residential market conditions have curbed developers’ appetite for bringing forward new schemes, with just over 1,600 units announced so far this year according to our estimates, against a little over 34,000 last year.

The danger of such a sharp slowdown in new unit launches could potentially drive a price spike in the medium to long term, given the population and jobs growth predictions in the lead-up to Expo 2020 and beyond.

In fact, Standard Chartered expects 300,000 new jobs to materialise between 2018 and 2021, directly as a result of Expo 2020. By the end of 2017, some $3bn worth of construction and infrastructure contracts will have been awarded in the city. This will help drive up demand for residential and commercial property in the next six to nine months, suggesting that the bottom of the current market cycle may finally be on the horizon.

Meanwhile, Dubai Municipality predicts that the emirate’s population will nearly double from 2.8 million today to five million by 2030, effectively suggesting the need for a doubling in the city’s housing stock in order to accommodate the expected growth.

The fact that over 58,000 units are scheduled to enter the market between 2019 and 2020 may offset any population surge linked to Expo 2020; however, as with most project-linked jobs, the vast majority will be in the lower to middle income bracket. There is little evidence to suggest this demographic is being catered for in any meaningful way, meaning house price spikes in more affordable communities are almost inevitable in the medium to long term.

2018 Likely to be a Year of Stability and Marginal Growth
The support provided to house prices as a result of the dynamics outlined above continues to influence our forecasts for the market, with stability likely to bed in more widely across the city’s residential investment areas before the year is out.

However, it is still our view that values will end the year 4-5% down on 2016, on average. 2018 is likely to see values showing their first positive – albeit weak – growth in over three years, as the Expo effect starts to influence demand levels and overall sentiment.

14 Nov 2017

Perkins+Will’s Dubai studio MD on his designs for growth

Middle East Consultant talks to Roger Wilson about his appointment as managing director of Perkins+Will’s Dubai studio and his plans for the architecture and design firm.

Perkins+Will (P+W) has been working in the Middle East for over 40 years and has accumulated substantial experience across multiple sectors such as hospitality, healthcare, commercial, education and culture. The global architecture and design firm opened its Dubai studio in Dubai Marina in 2010 and today employs more than 100 professionals including architects, interior designers, urban planners and landscape architects.

In early October 2017, P+W Dubai announced that then managing director Steven Charlton was moving to the firm’s London studio, to lead the business there. Roger Wilson, a veteran of the construction industry with experience in aviation, large-scale retail and mixed-use commercial projects across the Middle East, Europe and the Far East, was announced as his successor.

“Although I only recently moved to Dubai for my role with P+W, I’ve worked on many master planning projects over the years in both Abu Dhabi and Dubai. Most recently, I worked with Perkins+Will on a regional aviation project – I was brought in as a retail master planner and design consultant. That’s the most recent active experience I have in Dubai, and P+W is still very much part of that particular project,” explains Wilson.

Asked what drove him to join P+W and move to Dubai after so many years working in the region on a project basis, Wilson notes, “One of the main reasons I came out here was because things work at a much faster pace, maybe necessarily so. I think there’s a lot of vigour and excitement in the market. There’s a can-do approach which I like, but beyond that I also like this part of the world.”

With regard to his role and focus going forward, Wilson is very clear. “My role is to run the business, and that’s very much based around client engagement. Part of what I’m going to do is take stock of the market with a fresh pair of eyes. I’m going to listen to people, of course, so I’m already very much on receive mode rather than transmit. Ultimately, I’ll make my own informed decisions about what I’ve seen and how I see the market shaping up in the future.”

On his involvement in design strategy within the firm, Wilson confidently asserts, “I’ll be less focused on design because I’ve got Diane Thorsen and Firas Hnoosh, the two key principals who lead interiors and architecture respectively. Design is in very safe hands with them.

“I’m looking at how to grow the business, which sectors to push, and I’m looking at potential new markets which will be run from Dubai. Perhaps most importantly, I’m also looking at a much more collaborative approach with our London office, where Steven Charlton, my predecessor, is now based. I having experience of London and the European market, and he having experience of this market, we think there are some areas where we can leverage experience and skill sets for the business of Perkins+Will.”

Business Goals 
Wilson – who has been with P+W for less than a month when Middle East Consultant interviews him – already has his first quarter planned. Part of his focus going forward is to further establish his company as a regional leader in two main areas.

“We want to be more prominent in the architectural field, as well as in the corporate interiors market, where we are already doing quite well. I think we have a very good architectural principal in Firas Hnoosh, together with another key hire from another company in the region in the mixed-use architectural sector. We’re looking to really push that, but above all else P+W stands for quality of design, and we’re not going to dilute that in any way. We want to bring our design ethos forward and build on the architectural work that we’ve already done.”

Beyond Dubai and the Middle East, Wilson is keen on expanding. “We’re looking east from here, and I think that will potentially cover a number of countries. I’m confident that there are opportunities to work in central Europe, particularly in teaming up with our London office. Over-arching all of this is our ability to tap into some of the skill sets and experience that we have in the United States from what is the main bulk of the Perkins+Will offices.”

Wilson is also confident that the P+W team in Dubai has the necessary skills and bandwidth to grow without turning to recruitment. “We are pretty comfortable here in terms of the skill set that we have. We want to get more market share of architecture, and although we are already quite busy, we’ve got the capacity to do a little bit more. The key to all of this will be maintaining our status as a preeminent designer. We always want to improve and show our clients that we are the best in this part of the world.

“On a personal level, I want to bring to P+W my style of working with clients, which comes from a fairly broad corporate background in Chapman Taylor. P+W has grown from a small company into what is a significant player in the market, and I want to tap into that – the ethos that is P+W – but equally I’ll bring to it what I believe are some very well developed professional approaches to how one engages with clients. Everyone has their own start, and I will endeavour to make my mark gently.”

14 Nov 2017

Union Properties posts Dh116m revenue in Q3

Real estate developer Union Properties reported on Tuesday revenues of Dh116 million fort he third quarter of 2017, compared with Dh253 million for the same 2016 period.

While the third quarter saw Union Properties diversify its operations with two new subsidiaries, its operating expenses in the same period fell to Dh161million, compared with Dh221 million in the same 2016 quarter.

In a statement, the company said the decrease in both revenues and operating expenses was primarily in relation to the managed wind down of Thermo LLC, a subsidiary of Union Properties that undertakes contracting work.

The company reported a net loss of Dh45 million for the three months ending September 30, compared with a net profit of Dh32 million in the corresponding period of last year. Nasser Butti Omair bin Yousef, Chairman, Union Properties, said the third quarter of has seen Union Properties continue to take the steps required to achieve sustained growth over the long-term.

“With our operations now refocused around the company’s new strategic direction, we are moving forward as a stronger and more efficient company with the capabilities to seize new opportunities both in the UAE and internationally,” said Yousef.

The third quarter of 2017 saw Union Properties unveil a new masterplan for its flagship MotorCity development in Dubai with a completed value of more than Dh8 billion. It will comprise of 44 new high and low rise buildings, more than 150 villas, and a wide range of residential, commercial, entertainment and hospitality facilities, Union Properties said.

Union Malls, one of the two new fully-owned subsidiary companies launched by Union Properties in third quarter, provides retail and leisure options in Union Properties developments. Its inaugural mall will be “The Central,” a 100,000sqm complex located in MotorCity spread over four floors offering shopping retail, dining and a wide range of leisure options, the statement said.

The developer said the second subsidiary, Al Etihad Hotel Management, would develop and manage luxury hotels and furnished residences in Dubai. It is expected to provide hospitality services and facilities management for approximately 3,000 serviced apartments and 3,500 hotel rooms throughout MotorCity, before expanding its business to the rest of Dubai and beyond. It launches with a pipeline of three hotel projects in MotorCity under development.

14 Nov 2017

Dubizzle acquires two Dubai-based companies

Classified ads website Dubizzle has announced its first-ever acquisition of two Dubai-based companies.

The first company, Masterkey, offers software that automates the day-to-day tasks of property management, brokerage and real estate development companies, managing their information in real time.

The second company, Airlist – which was built by Masterkey – seeks to connect real estate professionals around the world, and is designed for small and midsize companies to add, organise and publishing listing data in property portals across the region.

No value was disclosed for the acquisitions.

“We are excited to announce this collaboration with dubizzle, bringing together the immense knowledge and experience of all three companies to deliver an unrivalled property service to the UAE. The mission of Masterkey has always been to equip the industry with technology that unlocks the real estate potential in the market,” said Daniel Hart, CEO at Masterkey and founder of Airlist.

“This partnership will allow our teams to continue to grow our innovative solutions which our clients have trusted for over 14 years, now secured by the backing of the largest property platform in the UAE,” he added.

Samer Abdin, general manager of dubizzle Property, called Masterkey and Airlist “world class products”.

“We are proud to invest in their people, technology and future,” he added. “These acquisitions are a testament to our drive to be the number one property platform in the UAE and puts us at the forefront of market innovation.”

Dubizzle’s acquisition of the two companies took effect on November 1, with the new product expected to be developed over the coming three months.

13 Nov 2017

Making sense of a slow market

As sales prices and rents continued to feel a downward pressure in the third quarter, the bright spot in an otherwise languid market has been the increasing sales activity in the primary segment, with off-plan projects still managing to attract good prospects. “Strong demand was felt during Cityscape Global [in September] where developers were allowed to transact on the stands for the first time in many years,” says Mario Volpi, chief sales officer of Kensington Exclusive Properties. “This proved very popular as many phases of new launches sold out.”

As homebuyers and tenants taking advantage of the slow market drive the rise in transactions, John Stevens, managing director of Asteco, says the market remained flat, with “some areas showing more pronounced drops particularly year-on-year”. The price softening was far more pronounced in the residential rent segment as both apartment and villa communities in some areas recorded a double-digit decline year-on-year.

Apartment rents over the quarter fell 4 per cent, while year-on-year rates showed a marked drop of 12 per cent, according to Asteco.

Villa rental rates echoed this, with a 3 per cent quarter-on-quarter and a 10 per cent year-on-year drop. On the sales front, although the price movement in both the apartment and villa segments was stable on quarter-on-quarter basis, prices plunged by 4 per cent and 3 per cent respectively in yearly terms.

Stevens says the most challenging asset class this year has been commercial real estate. “Office sales prices and rental rates remained flat in the third quarter compared with the second quarter, with a year-on-year decline of 6 per cent for sales and a marginal drop of 2 per cent for rentals,” says Stevens.

Hit by weak market sentiment due to internal and external factors, including low oil price, regional uncertainty and subdued global economic outlook, Dubai’s property market was further bogged down by new supply entering the market over the last nine months.

Volpi says sales and rental prices will further soften due to the wide array of choices available. “We will not see a return to equilibrium of the market for another six to 12 months,” he says.

Retail rents have also softened due to higher vacancy rates, says Volpi, as landlords prefer to negotiate with existing tenants. In light of these challenges, developers are responding by offering more attractive and flexible terms to both tenants and purchasers.

“This strategy is aimed at maintaining headline rents and prices, while at the same time offering reductions in the real price and rents,” says Craig Plumb, head of research at JLL Middle East and North Africa (Mena).
As the market continues to favour tenants and buyers, the gap between asking prices and effective prices is likely to widen, says Plumb.

Residential

Dubai Marina posted the highest decline in rental rates at 19 per cent in the third quarter compared with the same period last year, followed by Downtown Dubai (18 per cent), Dubai Sports City (16 per cent) and Bur Dubai (16 per cent), according to Asteco.

In the villa segment, The Springs showed the highest decline in rental rates at 18 per cent, followed by Arabian Ranches (15 per cent), the Palm Jumeirah (15 per cent), Dubai Sports City (14 per cent) and Jumeirah Village (14 per cent).

However, sales prices within the apartment segment varied significantly from community to community. “Dubai Silicon Oasis declined 9 per cent to Dh829 per square foot, whereas The Greens witnessed a growth of 13 per cent to Dh1,352 per square foot, by far the best-performing area in the third quarter,” says Ivana Gazivoda Vucinic, head of advisory and research at Chestertons Mena.

Dubai Marina also witnessed an increase of 2 per cent in average sales prices to Dh1,470 per square foot, according to Chestertons. Business Bay saw a 1 per cent increase in prices, rounding out the areas witnessing positive results.
“Villa sales prices have been more resilient due to the higher level of corrections during the previous quarters,” says Vucinic. “The Meadows and The Springs were the worst-affected areas, both recording a 7 per cent decline.”

The increasing new supply into the market has put further pressure on the already-weakening sales and rental prices, which, if industry experts are to be believed, are heading for further correction in the coming quarters.
“We expect further correction in both the villa and apartment markets for at least the next three to four quarters,” says Vucinic.

According to Asteco, more than 10,200 apartments were delivered in the first three quarters of the year and a further 3,500 units are due for completion before the end of the year. Last year, the total supply was only 8,750 apartments.

Office

While average office rents declined by 3 per cent year-on-year, Taimur Khan, senior analyst at Knight Frank, says this an improvement over the previous quarter as there was a 4.5 per cent year-on-year decline during the second quarter. Khan adds that prime rental performance has performed well both on a quarterly and annual basis, rising 1 per cent and 2 per cent respectively, because of “high demand for office space in this sector and limited new supply underpinning price growth”.

According to JLL, the third quarter saw around 35,000 sq m of gross leasable area (GLA) across Dubai, with an additional 110,000 sq m due for completion by year end.

Despite the new supply, an oversupply in prime commercial office space is unlikely in core locations such as Dubai International Financial Centre and Tecom as occupancy remains high and demand strong, according to Matthew Dadd, head of commercial agency and leasing at Knight Frank. Furthermore, the vacancy rates within commercial business districts have been largely stable over the past quarter at around 8 per cent.

“However, in secondary markets, we continue to witness higher vacancy rates and, therefore, additional supply could impact the market,” says Dadd. “In the long term, we do see increased supply in the prime sector, which will need to be phased accordingly to allow the market to absorb before impacting headline rents.”

On the retail front, the market also remains subdued with super-regional and regional malls recording quarter-on-quarter declines of 3-5 per cent in headline rents, according to JLL. Smaller neighbourhood and community malls have generally recorded greater declines than the larger ones.

With a current supply of 3.4 million sq m, retail real estate in Dubai has seen vacancy levels increase over the past year. This trend has continued during the third quarter to reach 12 per cent.

Hospitality

Although Dubai remains one of the best-performing hospitality markets in the world, the emirate’s hotel industry remained under pressure, according to JLL, with year-to-date revenue per available room (RevPAR) of Dh503 in August the lowest in the past decade. The average daily rate (ADR) registered a 4 per cent drop to Dh665.

However, Dubai continues to see a strong occupancy rate at 75 per cent since the beginning of the year despite 1,800 keys added to the market in the third quarter, bringing the total stock of quality hotel rooms to almost 82,200 keys. “[The] hotel and retail sectors are experiencing softening market conditions and can be expected to see performance decline further over the next 12 months,” says Plumb.

Primary vs secondary market

Ostensibly, the current trend suggests that residential demand is gradually shifting from the secondary to the primary market or off-plan projects, as most developers are offering financing options with attractive payment terms and lower down payments. This has resulted in a massive growth in off-plan sales during the third quarter, accounting for 65 per cent of all transactions so far this year, according to JLL.

“The off-plan sales have really taken off mainly due to the relaxing of developer payment plans and lower start pricing points, coupled with long post-handover payments,” says Volpi.

Alexander von-Sayn Wittgenstein, luxury sales director of Luxhabitat, says there is also growing demand for off-plan options in the prime residential market, although he cites a variety of factors driving this, including homeowners looking for better homes. “It really depends on the area and the supply due to arrive,” says Wittgenstein.

He explains that the prices in prime areas will remain relatively inflexible for secondary-market property as they are established locations with little room for off-plan. Examples of such locations include Downtown Dubai. “The off-plan properties in the established areas will be released at the market rate, however, with more flexible payment plans,” says Wittgenstein. “As an investor, it’s more appealing than buying a secondary-market property that might be tired.”

For off-plan and ready-made units, industry experts explain there are two types of buyers when considering the risk profile: those looking at ready-made units are more risk averse, while off-plan buyers are more willing to take risks with an eye on capital appreciation.

The determining factor, according to Vucinic, has been a buyer’s ability to pay the minimum down payment. “The inability to pay at least 25 per cent of the unit value has forced certain buyers to choose off-plan property,” says Vucinic. “Our research has indicated that the total number of off-plan transactions in the third quarter increased by a massive 86 per cent from the previous quarter, while the value of off-plan transactions was up by 118 per cent to Dh4.04 billion.”

Wittgenstein says investors are looking at both apartments and villas in areas such as Dubai Creek Harbour, Downtown Dubai and smaller units such as Maple in Dubai Hills Estate. “The best-performing area was Dubai Marina with Dh363 million, and the worst-performing was Jumeirah Islands at Dh26.6 million in secondary-market sales,” he says.

Volpi points out that the secondary market has been sluggish, with the uptake of off-plan sales acting like a sponge, “soaking up all the interest despite secondary market prices reducing”. Furthermore, he says individual sellers are asking prices considered still too high. “This logjam will only start to move once prices are further reduced,” he says. “It is still a very strong buyers’ market.”

Outlook

With additional stock entering the market, most industry experts PW spoke to agree that the market is heading for further correction, and the reversal of the current trend can only be anticipated late next year.

“In the fourth quarter we expect to see further corrections in sales prices and rents,” says Vucinic. “A slight pickup of completed unit transactions is expected. This will, however, have a negative impact on off-plan sales transactions, which we expect to decline and then stabilise.”

Stevens agrees that the sheer volume of properties announced and anticipated for delivery over the next few years will continue to put further pressure on rental rates. “At this point it is difficult to gauge when the market will rebound as it depends on a number of internal and external factors,” says Stevens. “We do not expect a recovery in the real estate market in the short term until economic conditions and market sentiment improve.”

15 Nov 2017

Only in Dubai: The ‘ultimate guarantee’ from real estate developers

Some developers in Dubai are giving 100 per cent construction guarantee, which is the “ultimate guarantee” that any developer can give, Real Estate Regulatory Agency Chief Executive Officer told Emirates 24|7.

“There are developers who have given 100 per cent construction guarantee and this is the ultimate guarantee,” said Marwan bin Ghalita without giving names of the developers.

He revealed that Dh29 billion are being held escrow accounts which reflects confidence of developers and investors’ in the market.

It is compulsory for every developer in Dubai to open an escrow account under Law No. (8) of 2007 concerning escrow accounts for real estate development. All the payment received from investors has to be deposited in it. Money is released by Rera after it assesses the project’s construction having met the required percentage.

Rera chief said they were no longer afraid of projects being stalled, as developers were launching projects to build them than mere selling them.

“Developers want to complete their projects with many of them wanting to start selling only after the project nears completion. This shows that the industry has matured over the time.”

Among the guarantees sought is 100 per cent of the land cost to be paid by the developer, a minimum of 20 per cent of the construction cost to be deposited with Rera with contractors having to pay another 10 per cent of the construction cost.

In the first quarter 2016, 38 new projects were launched in Dubai. In 2015, 46 projects were completed.

The Dubai Land Department has reported Dh55 billion worth of property transactions across all categories in the first quarter 2016.

Ghalita said investors had become very smart and were asking questions on materials used, sustainability, finishes and service charges, which was not previously the case.

We reported earlier that Rera chief wanted developers to cut down on service charges by allocating some portion of the built-up area in their projects to generate revenue.

“My advice to developer is to allocate some of the built-up area for revenue generation. Start with 50 per cent of the service charge going up to 70 per cent of the service charge to be covered from this asset and not from the investor. Hence, the investor will be paying only 30 per cent,” Ghalita had said on sidelines of the Dubai International Government Achievements Exhibition (DIGAE 2016).

26 Apr 2016

Emaar third quarter net profit soars 32%, beats analysts’ forecasts

Emaar Properties, the UAE’s largest real estate developer that built Dubai’s Burj Khalifa, posted a 32 per cent increase in third quarter net profit on Sunday, beating analysts’ forecasts, thanks to an uptick in Dubai residential property sales.

Net profit for the three months ending September 30 reached Dh1.51 billion compared with Dh1.14bn for the same period last year, the company said in a statement.

Bahrain-based investment bank Sico had forecast a third quarter net profit of Dh1.36bn, according to a Reuters poll.

A Bloomberg survey quoted an analyst forecasting a third quarter net profit of Dh1.25bn.

The company’s profit beat expectations “largely due to stronge-than-expected performance of the UAE property development business,” said Ayub Ansari, a senior analyst at Sico. “Revenues from Emaar’s hospitality and lease segment business were largely in line.”

For the full year, Sico is projecting an 11 per cent increase in earnings to Dh5.8bn.

Third quarter revenue for the company surged 45 per cent to Dh5.58bn from Dh3.84bn.

Nine-month sales of residential property in Dubai hit Dh15.36bn, 32 per cent higher than a year earlier. Emaar now has a domestic sale backlog of Dh40.8bn, and an expected net cash flow of Dh18bn, the company said.

“The impressive growth in sales of our Dubai residential property launches this year puts us in a strong position to generate strong cash flows for the company of the coming years,” said Mohamed Alabbar, chairman of Emaar Properties.

“The sustained demand for projects in Dubai is a strong indicator of the investor trust in Dubai, which is today one of the fastest-growing hubs for business and leisure.”

Emaar Development, the company’s real estate development business currently undergoing an IPO process, posted a 32 per cent rise in nine-month net profit to Dh2.1bn from a year earlie, with itsnine-month revenue soaring 48 per cent to Dh6.5bn.

Emaar is selling a 20 per cent stake in the subsidiary, which is expected to raise as much as Dh5.52 billion ($1.5bn), with shares due to list on the Dubai Financial Market. It will be Emaar’s third subsidiary-listing after Emaar Malls in Dubai and Emaar Misr, its Egyptian unit in Cairo.

“The partial listing of Emaar Development and the proposed special dividends to be distributed from its proceeds highlight the continued value that we bring to our shareholders,” Mr Alabbar said.

Emaar’s shopping malls, hospitality and leisure businesses recorded flat revenue of Dh4.44bn in the first nine months of this year.

Revenue from the International property development unit rose 51 per cent to Dh2.55bn from Dh1.69bn, representing 19 per cent of total revenue.

Emaar’s total property sales including international operations in the first nine months this year stood at Dh17.63bn, with a total backlog of Dh50.54bn.

The company, which has delivered over 34,500 residential units in Dubai since 2002, has sold around 80 per cent of over 24,000 units currenlty under construction across eight projects.

Earlier this month, Emaar Malls, the retail business majority-owned by Emaar Properties that operates Dubai Mall, posted an 11 per cent increase in third quarter net profit to Dh485 million, beating an analyst’s forecast. The company benefited from its $151m acquisition of a 51 per cent stake in online retailer Namshi.

Emaar Properties shares rose 1.03 per cent to Dh7.88 in Dubai ahead of Sunday’s earnings announcement.

12 Nov 2017

Latest News


Abu Dhabi Q3 residential market review

Housing demand in Abu Dhabi is primarily a factor of job growth and the resulting population growth, particularly of the white-collar labour force. According to the latest available data from the Statistics Centre Abu Dhabi, the total population for the emirate was 2.9m in 2016, rising by nearly 9% since 2014, the last residential market peak.

In comparison, the white-collar population declined by 2% over the same period to 1.4m in 2016, and the percentage contribution of the white-collar workforce in the total population declined from 53% in 2014 to 48% in 2016.

The oil & gas sector remains a primary source of revenues for the economy, and housing demand in Abu Dhabi is closely linked to job creation in this sector. Analysis of price performance among key freehold communities within the emirate against oil price movement bears out this correlation. Housing budget readjustments and job losses in this and other key sectors, such as banking and aviation, have affected rents and occupancy levels across Abu Dhabi.

An infrastructure push from the government through bond issuance and other measures is expected to drive investment into the emirate and potentially improve housing demand. However, further consolidation in sectors such as banking and real estate could lead to job losses. These are expected to affect senior executives more and hence could have an impact on larger units such as villas/townhouses rather than smaller units.

Price Performance
Over the last 12 months in Abu Dhabi, marginal price declines have continued, averaging 1.5% for apartments and 1.9% for villas/townhouses. According to the Property Monitor Index, Saadiyat Beach Residences and villas in Al Raha Gardens have experienced 12-month declines of more than 2% on average, based on Q3 2017.

There is limited transaction activity in the secondary market in freehold locations throughout Abu Dhabi, as expatriates appear to be biding their time, waiting to purchase a property at its lowest price. Many are opting for off-plan units, as although they are smaller in unit size, they are more affordable and tend to have higher specifications.

Off-plan sales activity remains high in comparison to the secondary market, mainly due to developers introducing attractive payment plans, especially catering to buyers who would otherwise be priced out of the market.

Meanwhile, deals between UAE nationals have continued, predominantly for private villas/townhouses throughout Abu Dhabi and buildings on the islands. While GCC and Arab investors remain the largest segment of buyers in the Abu Dhabi real estate market, there is increasing activity from end users/occupiers looking to move up the property ladder. The ticket prices of some newly launched projects, along with the attractive payment plans and mortgage options offered by banks, are increasing activity from this buyer segment.

Rent Performance
Rent averages have declined by 3.1% for apartments and 4.3% for villas/townhouses over the past 12 months in Abu Dhabi investment zones. These declines are more pronounced in Al Raha Gardens and Al Reef villas. In these locations, units exhibit 12-month declines of 4% or more.

Rental declines have continued as summer draws to an end and the last group of expatriates leave the UAE, with fewer new families arriving. The many vacant apartments and villas/townhouses in freehold areas such as Reem Island have left landlords facing long vacancy periods on their assets. This downward trend is expected to continue over the next quarter.

Communities that have existing social infrastructure such as schools are expected to fare better, with price and rent levels remaining relatively stable. Within new master developments, getting schools into the mix early on can help to drive end user/occupier interest, as well as interest from sub-developers looking to build within that community.

Residential Supply
Approximately 1,700 residential units have been handed over across Abu Dhabi investment zones this year. As of September, approximately 6,274 units are scheduled for handover for the remainder of the year, though actual completions may vary significantly. The key locations for upcoming supply this year are Reem Island and Yas Island, which have more than 1,500 units each scheduled for completion this year.

Among the new launches this quarter was Aldar’s Water’s Edge project on Yas Island, expected to have 2,255 residential units, with the majority (42%) being one-bedroom. In terms of pricing, the new launch is targeting the mid-income buyer, with starting prices at $131,000 for a studio.

Meanwhile, at the luxury end of the market there was the launch of 44-storey Reem Tower by National Bonds Corporation (NBC). The luxury tower is to be designed by Japanese architectural firm Nikken Sekkei and is expected to have 335 apartments.

14 Nov 2017

From humble abra steps to sky-high icons

One of the first international engineering firms to take up residence in Dubai, Atkins’ influence on the built environment has evolved over the last half century from behind-the-scenes infrastructure consultancy to a high-profile portfolio of iconic structures.

“This year we are celebrating 50 years in the region,” says Tom Hasker, managing director — property at Atkins. “Originally, Atkins was largely recognised as an engineering and infrastructure brand, but over time we also developed our architectural business.”

Atkins’ UK expertise was first exported to the region in 1967 when a small team of engineers was sent to Kuwait to work on the country’s utilities infrastructure and road design. In 1979, client project demand saw the firm plant its feet permanently on Dubai ground with a new office and involvement in key infrastructure projects such as the dredging of Dubai Creek.

Says Hasker: “In the early days the region already had tremendous aspirations, but there wasn’t the supply of on-the-ground quality engineers, architects and contractors needed to realise the vision of the rulers.

“The people who worked here at the time always reminisce about the immense pressure they were under to make projects happen. However, in a lot of ways it was easier to deliver the big jobs back then as there were less of them, whereas these days everyone’s job is big and important, but just one of many.”

One of Atkins’ first transformational Dubai projects was, quite literally, a step change for the company, as Hasker explains: “In the early 80s the Dubai Municipality commissioned Atkins to design a reinforced concrete edge along the Deira bank of the creek to make passenger access on and off abra water taxis less of a challenge, and this resulted in the creation of the now familiar abra steps.”

In 1985, the team took on its first residential architectural commission, for the design and construction of a private villa on Al Wasl Road, and this led the way for more and more project wins, including the city’s original Standard Chartered Bank building, Dubai Police College and the Taj Palace Hotel.

Atkins’ turn to truly shine came in 1994 when it was engaged to design the city’s original hospitality icon, the Burj Al Arab, with the Jumeirah Beach Hotel and Wild Wadi Water Park also representing milestone project wins for the company.

Moving into the new millennium, the company continued to build bigger, taller and more complex structures with the Shaikh Zayed Road area home to a raft of Atkins-designed and engineered landmarks, including the first Address Hotel, The Address Downtown Dubai, along with the Princess Tower, 21st Century Tower, Chelsea Tower (now rebranded as the Al Salam Hotel Suites) and the Millennium Tower.

Its most recent high-profile accomplishment is the Dubai Opera, with Atkins managing the project from drawing board to delivery.

But its contribution to the city’s urban fabric isn’t always so immediately apparent, as Hasker explains: “Our involvement with Dubai Municipality spans years from creekside development to the Metro and in defining the areas that will promote Dubai’s growth and development. The Dubai Metro, with the Red Line the world’s longest driverless single metro line, was another hugely successful project for which we provided full multidisciplinary design and management of the civil works.

“We are also heavily involved with master planning for Al Maktoum International Airport in Dubai South.”
Urban rejuvenation is another area where Atkins is making its mark. “We see a lot more thought now going into development, rather than a desire to simply have trophy buildings, which don’t reflect the true urban fabric,” says Hasker.

“And there’s real interest in urban rejuvenation projects such as what Meraas has done with La Mer to bring new life and sensible development to existing areas,” Hasker adds. “Atkins is also lead consultant for the mixed-use waterfront Marsa Al Seef development on Dubai Creek, which is reactivating the real ‘old Dubai’.”
At the opposite end of the design spectrum, but also sited on the banks of the historic creek, Atkins’ work on the master plan for Emaar’s Dubai Creek Harbour community, in collaboration with RTKL, has a strong focus on digital innovation.

“Dubai is ahead of the curve compared to more established markets when it comes to digital infrastructure development, and that’s because a lot of the infrastructure here is so young,” says Hasker. “So, whereas not many established cities have the ability to master plan scaled communities such as Dubai Creek Harbour from scratch, we have the opportunity to leapfrog ahead. We have the view that within the next five years our business landscape, as well as Dubai’s physical landscape, will be dramatically different.

“The way that we deliver our services will reflect the massive shift towards digital engagement — or generative design — with technology that allows us to produce more efficient designs more quickly. And Dubai is embracing this far more quickly than other markets.”

15 Nov 2017

Union Properties posts Dh45m loss as construction revenue slumps

Union Properties, the developer primarily known for its projects in Dubai’s Motor City, posted a Dh45 million loss for the third quarter, as construction revenues dropped by more than a half.

The loss, reported on the Dubai stock exchange, was an improvement on the Dh2.3 billion loss posted in the previous quarter, but down from a Dh32m profit for the third quarter of 2016.

Revenues from contracting and other operating activities – the company’s largest revenue generator – fell 56 per cent year-on-year to Dh82m. Property management and sales revenue declined 15 per cent year-on-year to Dh18m.

Union Properties announced in August a Dh2.8bn write-down of the value of its assets by a new management team in its second-quarter results, leading to its worst ever quarterly loss for the three months to the end of June.

A new chairman and vice-chairman were appointed in May after an impromptu board reshuffle saw the resignation of three directors, including the chairman Khalid bin Kalban. A new chief executive, Ahmed Khouri, was appointed in July.

The Union Properties chairman Nasser bin Yousef described the actions taken in the second quarter as “a one-time charge for the accounting irregularity by the previous management.”

The company’s shares opened 1 per cent lower in early Tuesday trading.

14 Nov 2017

163,000 properties to be delivered over next five years in Dubai

Dubai: If all goes as per developers’ plans, Dubai will see a further 163,840 properties being built over the next five years from 387 projects. Next year could account for the highest number of these handovers, at 27,360 units, based on broad estimates put out by fam Properties. The year after could see 19,850 units and 17,754 further homes in 2020.

So far in 2017, Dubai has seen the launch of 90 projects consisting of 36,556 units. “We took this initiative because we want our investors and buyers to have a more accurate picture of the Dubai property market by being able to analyse facts and figures in a new way,” said Firas Al Msaddi, CEO of f?m Properties. “This is something they’re eager for because it will help to make buying decisions based on facts and figures and is ultimately more profitable.”

The online tool also provides comparisons on the change of rent over time. Investors or end users keen to assess rental yield potential can take advantage of a rental range index which pinpoints rates over 10 years.

Although rental rates for the same category of apartments in the same area have varied greatly based on size and location over 10 years — a major factor in the buying decision — the gap has closed significantly in the last two to three years. Two-bed apartment rentals in Downtown Dubai ranged from Dh150,000-Dh260,000 in 2009 and reached a low of Dh95,000-Dh120,000 in 2012. In December 2016, rates were at Dh160,000-Dh180,000.

13 Nov 2017

Dubai property market in perspective

Values across Dubai’s residential investment areas continued to moderate during Q2 2017, dipping by an average of 1.5%. This leaves the annual rate of change at -5.8% and marks the 12th consecutive quarter of price declines, during which time prices have moderated by 14%. The latest change means that average house prices stand at $350 psf, nearly 30% below the Q3 2008 market peak.

Apartments continue to fare better than villas, with prices decreasing by an average of 1% during Q2, compared to a 2.2% drop in villa values. Interestingly, however, since the last market peak in Q3 2008, there are only two villa submarkets where prices have recovered to within touching distance of their previous highs. Jumeirah Village and villas at Motor City are 2.6% and 3.6% down on their Q3 2008 market high respectively.

Meanwhile, villas on the Palm Jumeirah remain about a third cheaper than during the 2008 price boom. Apartments, on the other hand, remain well below the 2008 peak, averaging 20-71% lower. The Burj Khalifa has had the smallest price recovery over the last nine years, with prices down 70.6% to $613 psf, compared to nearly $2,368 in Q3 2008.

Despite the seemingly slow climb in values compared to 2008 levels, the market has demonstrated characteristics of maturity, even though it is just 15 years since Dubai opened up its property market to international (non-GCC) investors. This is reflected in the fact that price drops have averaged 1% per quarter over the last 12 quarters.

Clearly improved regulation around off-plan resales, the introduction of federal mortgage caps, the doubling of property registration fees, more stringent controls around developer financing and the protection of investors’ funds through the mandatory requirement of escrow accounts have all contributed to the market’s stabilising growth profile in recent years.

The ongoing soft correction in the market appears to be nearing an end, with many locations starting to show signs of bottoming out, as we have previously reported. In fact, during the first six months of 2017, just seven of the 32 sub-markets we track in the emirate registered price falls, with all other locations seeing no change in value. The weakest performing market was Motor City ($245), where villa values receded by 8.2% over the same period, leaving them 12.6% lower than a year ago.

Rounding off the top five weakest performing markets during H1 2017 were Jumeirah Islands (-6.3%), Hattan Villas at Arabian Ranches (-5.6%), the Burj Khalifa (-5.6%) and villas on the Palm Jumeirah (-4%). Aside from Motor City, where values average $245 psf, and Jumeirah Islands ($327 psf), prices in the remaining weakest sub-markets average $435-653 psf, putting them well above the average for the city as a whole.

Affordability Issues Still Unresolved
Affordability remains a challenge for Dubai’s residential market. With household incomes strained by rising living costs, underpinned by inflation levels of over 2% and the looming new VAT regime, as in Abu Dhabi the dream of home ownership continues to drift further away for many. Average incomes remain at around $55,000 per annum for expat households across the UAE, based on the Ministry of Economy’s last income survey. With an average mortgage multiplier of three to four times annual income, most households would be hard pressed to purchase a family home for $163,350 to $218,000 anywhere in the emirate.

The number of affordable housing districts in the city remains primarily limited to well-known areas such as International City and Discovery Gardens, which together house some 120,000 residents spread across circa 48,000 units. The limited supply in the affordable segment of the market, coupled with steady but robust demand, has helped hold values relatively steady over the last 12 to 18 months.

Dwindling New Home Launches, While Supply Pipeline Remains Strong
Elsewhere, while the housing supply pipeline remains robust, the vast majority of stock being brought to the market does not fall under the affordable bracket. This threatens to undermine Dubai’s ability to continue attracting workers of all skill and earnings levels, while also putting the city on a potential path to experiencing the affordability emergencies faced in well established, mature global cities such as London and New York.

As it stands, some 12,500 units should be handed over this year, rising to over 21,400 in 2018 and a further 26,000 units in 2019.

Meanwhile, the subdued residential market conditions have curbed developers’ appetite for bringing forward new schemes, with just over 1,600 units announced so far this year according to our estimates, against a little over 34,000 last year.

The danger of such a sharp slowdown in new unit launches could potentially drive a price spike in the medium to long term, given the population and jobs growth predictions in the lead-up to Expo 2020 and beyond.

In fact, Standard Chartered expects 300,000 new jobs to materialise between 2018 and 2021, directly as a result of Expo 2020. By the end of 2017, some $3bn worth of construction and infrastructure contracts will have been awarded in the city. This will help drive up demand for residential and commercial property in the next six to nine months, suggesting that the bottom of the current market cycle may finally be on the horizon.

Meanwhile, Dubai Municipality predicts that the emirate’s population will nearly double from 2.8 million today to five million by 2030, effectively suggesting the need for a doubling in the city’s housing stock in order to accommodate the expected growth.

The fact that over 58,000 units are scheduled to enter the market between 2019 and 2020 may offset any population surge linked to Expo 2020; however, as with most project-linked jobs, the vast majority will be in the lower to middle income bracket. There is little evidence to suggest this demographic is being catered for in any meaningful way, meaning house price spikes in more affordable communities are almost inevitable in the medium to long term.

2018 Likely to be a Year of Stability and Marginal Growth
The support provided to house prices as a result of the dynamics outlined above continues to influence our forecasts for the market, with stability likely to bed in more widely across the city’s residential investment areas before the year is out.

However, it is still our view that values will end the year 4-5% down on 2016, on average. 2018 is likely to see values showing their first positive – albeit weak – growth in over three years, as the Expo effect starts to influence demand levels and overall sentiment.

14 Nov 2017

Perkins+Will’s Dubai studio MD on his designs for growth

Middle East Consultant talks to Roger Wilson about his appointment as managing director of Perkins+Will’s Dubai studio and his plans for the architecture and design firm.

Perkins+Will (P+W) has been working in the Middle East for over 40 years and has accumulated substantial experience across multiple sectors such as hospitality, healthcare, commercial, education and culture. The global architecture and design firm opened its Dubai studio in Dubai Marina in 2010 and today employs more than 100 professionals including architects, interior designers, urban planners and landscape architects.

In early October 2017, P+W Dubai announced that then managing director Steven Charlton was moving to the firm’s London studio, to lead the business there. Roger Wilson, a veteran of the construction industry with experience in aviation, large-scale retail and mixed-use commercial projects across the Middle East, Europe and the Far East, was announced as his successor.

“Although I only recently moved to Dubai for my role with P+W, I’ve worked on many master planning projects over the years in both Abu Dhabi and Dubai. Most recently, I worked with Perkins+Will on a regional aviation project – I was brought in as a retail master planner and design consultant. That’s the most recent active experience I have in Dubai, and P+W is still very much part of that particular project,” explains Wilson.

Asked what drove him to join P+W and move to Dubai after so many years working in the region on a project basis, Wilson notes, “One of the main reasons I came out here was because things work at a much faster pace, maybe necessarily so. I think there’s a lot of vigour and excitement in the market. There’s a can-do approach which I like, but beyond that I also like this part of the world.”

With regard to his role and focus going forward, Wilson is very clear. “My role is to run the business, and that’s very much based around client engagement. Part of what I’m going to do is take stock of the market with a fresh pair of eyes. I’m going to listen to people, of course, so I’m already very much on receive mode rather than transmit. Ultimately, I’ll make my own informed decisions about what I’ve seen and how I see the market shaping up in the future.”

On his involvement in design strategy within the firm, Wilson confidently asserts, “I’ll be less focused on design because I’ve got Diane Thorsen and Firas Hnoosh, the two key principals who lead interiors and architecture respectively. Design is in very safe hands with them.

“I’m looking at how to grow the business, which sectors to push, and I’m looking at potential new markets which will be run from Dubai. Perhaps most importantly, I’m also looking at a much more collaborative approach with our London office, where Steven Charlton, my predecessor, is now based. I having experience of London and the European market, and he having experience of this market, we think there are some areas where we can leverage experience and skill sets for the business of Perkins+Will.”

Business Goals 
Wilson – who has been with P+W for less than a month when Middle East Consultant interviews him – already has his first quarter planned. Part of his focus going forward is to further establish his company as a regional leader in two main areas.

“We want to be more prominent in the architectural field, as well as in the corporate interiors market, where we are already doing quite well. I think we have a very good architectural principal in Firas Hnoosh, together with another key hire from another company in the region in the mixed-use architectural sector. We’re looking to really push that, but above all else P+W stands for quality of design, and we’re not going to dilute that in any way. We want to bring our design ethos forward and build on the architectural work that we’ve already done.”

Beyond Dubai and the Middle East, Wilson is keen on expanding. “We’re looking east from here, and I think that will potentially cover a number of countries. I’m confident that there are opportunities to work in central Europe, particularly in teaming up with our London office. Over-arching all of this is our ability to tap into some of the skill sets and experience that we have in the United States from what is the main bulk of the Perkins+Will offices.”

Wilson is also confident that the P+W team in Dubai has the necessary skills and bandwidth to grow without turning to recruitment. “We are pretty comfortable here in terms of the skill set that we have. We want to get more market share of architecture, and although we are already quite busy, we’ve got the capacity to do a little bit more. The key to all of this will be maintaining our status as a preeminent designer. We always want to improve and show our clients that we are the best in this part of the world.

“On a personal level, I want to bring to P+W my style of working with clients, which comes from a fairly broad corporate background in Chapman Taylor. P+W has grown from a small company into what is a significant player in the market, and I want to tap into that – the ethos that is P+W – but equally I’ll bring to it what I believe are some very well developed professional approaches to how one engages with clients. Everyone has their own start, and I will endeavour to make my mark gently.”

14 Nov 2017

Union Properties posts Dh116m revenue in Q3

Real estate developer Union Properties reported on Tuesday revenues of Dh116 million fort he third quarter of 2017, compared with Dh253 million for the same 2016 period.

While the third quarter saw Union Properties diversify its operations with two new subsidiaries, its operating expenses in the same period fell to Dh161million, compared with Dh221 million in the same 2016 quarter.

In a statement, the company said the decrease in both revenues and operating expenses was primarily in relation to the managed wind down of Thermo LLC, a subsidiary of Union Properties that undertakes contracting work.

The company reported a net loss of Dh45 million for the three months ending September 30, compared with a net profit of Dh32 million in the corresponding period of last year. Nasser Butti Omair bin Yousef, Chairman, Union Properties, said the third quarter of has seen Union Properties continue to take the steps required to achieve sustained growth over the long-term.

“With our operations now refocused around the company’s new strategic direction, we are moving forward as a stronger and more efficient company with the capabilities to seize new opportunities both in the UAE and internationally,” said Yousef.

The third quarter of 2017 saw Union Properties unveil a new masterplan for its flagship MotorCity development in Dubai with a completed value of more than Dh8 billion. It will comprise of 44 new high and low rise buildings, more than 150 villas, and a wide range of residential, commercial, entertainment and hospitality facilities, Union Properties said.

Union Malls, one of the two new fully-owned subsidiary companies launched by Union Properties in third quarter, provides retail and leisure options in Union Properties developments. Its inaugural mall will be “The Central,” a 100,000sqm complex located in MotorCity spread over four floors offering shopping retail, dining and a wide range of leisure options, the statement said.

The developer said the second subsidiary, Al Etihad Hotel Management, would develop and manage luxury hotels and furnished residences in Dubai. It is expected to provide hospitality services and facilities management for approximately 3,000 serviced apartments and 3,500 hotel rooms throughout MotorCity, before expanding its business to the rest of Dubai and beyond. It launches with a pipeline of three hotel projects in MotorCity under development.

14 Nov 2017

The affordability angle: a consumer’s view

Globally, decision makers usually view affordable housing development from a developer’s viewpoint. As the accepted thinking goes, if developers are sufficiently incentivised then they will build good-quality affordable housing projects. Sometimes this includes the government zoning and land rights approach among other well-known financing interventions.
However, as we dive into the human approach, affordability resides at the heart of the monthly income management for average households.

Let us look at four household income bands in the UAE and connect that to affordability of a property purchase. Everyone will agree that it is fair to look at the primary household income as a key driver of affordability-related housing discussions.
In our analysis we have taken household income brackets starting from Dh10,000 to Dh35,000. We have analysed the value of property each income bracket could afford to purchase. This takes in certain assumptions, most importantly that affordability implies 30 per cent of total household income being paid towards housing. Other important caveats are that the analysis is based on 3.99 per cent interest rate and 25 per cent down payment or 75 per cent loan-to-value ratio. These will vary based on mortgage lender and one’s personal credit history.
The tenure of loan repayment is another major area of debate for affordability. A higher tenure means lower monthly repayment, but also a longer wait to fully own the property. Lower tenures result in higher repayment each month, however, it decreases the total interest paid to the lender and you will own your property earlier. Our approach is a conservative one, given this analysis relates to middle-income households, having taken a 240-month, long-term exposure on the tenure.

It is also important to be aware that the down payment requirement varies as per UAE Central Bank regulations. And the Dubai Land Department fees and agency commissions are separate amounts for the actual core property value discussion. However, we have included these to highlight the minimum upfront amount required for a household to enter the property ladder.
We observe that even at the lowest starting point of Dh10,000, should a loan be made available, the household can look at a maximum property value of Dh650,000. This will require more than Dh200,000 to be able to enter the transaction.
In the highest band of Dh35,000 per month income bracket, the household can at best look at a house priced at Dh2.3 million. Conservatively, they will be paying up to Dh750,000 in interest to the bank over a 20-year period. They would ideally need to have saved an equal amount to invest in their first property, including government fees and commissions.

So, even at the highest band, which is a bit higher than most affordable discussions will allow, we still see that the maximum they would be able to afford is a relatively modest apartment in only specific communities.
Overlaying this information on data from Property Monitor we can safely say that 14 per cent of properties transacted in Dubai this year are not within reach of anyone earning below Dh35,000. In the lowest band of Dh10,000, the household would be unable to participate on 74 per cent of properties transacted in Dubai.

This is a significant part of the market that is currently not in reach of a majority of the population that earns modest incomes. Perhaps the best solution for middle-income earners to enter the market is to crowdfund real estate assets. More on that in another article.re
on that in another article.

15 Nov 2017

163,840 new properties set for handover in Dubai by 2021

A total of 163,840 new properties are likely to be delivered across Dubai, through 387 real estate projects over the next five years, according to UAE-based fäm Properties.

A real time analysis of the market by fäm Properties shows that a total of 24 residential and commercial developments will likely to deliver 7,336 units for handover before the end of this year, followed by 63 (27,360) in 2018, 36 (19,850) in 2019, 12 (17,754) in 2020 and one (114) in 2021.

Another 251 projects (91,430 units) are either currently short of 100 per cent completion or pending final inspection, with the developers having a 12-month grace period to deliver, said one of Dubai’s largest real estate brokerages in its report.

So far this year, Dubai has seen the launch of 90 new projects consisting of 36,556 units, while out of a total of 8,529 units delivered to date this year, 5,939 of these were handed over on schedule, it added.

Overall, out of the 105 developments (29,158 units) originally scheduled to have been completed by now this year, 43 (7,878 units) have so far been delivered, meaning the average unit delivery rate is 27 per cent and the average project delivery rate is 41 per cent, said fäm Properties in its report.

Meanwhile, 59 projects offering 16,993 units have completed over 80 per cent construction to date, it added.

The company says the new Oracle-powered tool it has developed, providing extensive insights into Dubai property market activity and conditions in real time, will help real estate investors and home buyers make more rational decisions.

Firas Al Msaddi, the chief executive of fäm Properties, said: “We took this initiative because we want our investors and buyers to have a more accurate picture of the Dubai property market by being able to analyse facts and figures in a new way.”

“This is something they’re eager for because it will help to make buying decisions based on facts and figures and is ultimately more profitable,” he noted.

The fäm online tool also provides comparisons on the change of rent over time in Dubai for properties from studio apartments up to 5 bed units. Investors or end users keen to assess rental yield potential can take advantage of a rental range index which pinpoints rates over ten years, explained Al Msaddi.

Although rental rates for the same category of apartments in the same area have varied greatly based on size and location over ten years – a major factor in the buying decision – the gap has closed significantly in the last two to three years, he noted.

While two bed apartment rentals in Downtown Dubai ranged from Dh260,000-150,000 annually in 2009, reaching a low of Dh120,000-95,000 in 2012, December 2016 rates were at Dh180,000-160,000.

Over the same period, two beds in Dubai Marina started off at Dh180,000-150,000 and returned to Dh180,000-140,000 at the end of last year after falling to a low of Dh100,000-65,000 in December 2011, which is largely due to an increase in population in that area (23,649 in 2011 to 45,395 in 2016).

14 Nov 2017

Dubizzle acquires two Dubai-based companies

Classified ads website Dubizzle has announced its first-ever acquisition of two Dubai-based companies.

The first company, Masterkey, offers software that automates the day-to-day tasks of property management, brokerage and real estate development companies, managing their information in real time.

The second company, Airlist – which was built by Masterkey – seeks to connect real estate professionals around the world, and is designed for small and midsize companies to add, organise and publishing listing data in property portals across the region.

No value was disclosed for the acquisitions.

“We are excited to announce this collaboration with dubizzle, bringing together the immense knowledge and experience of all three companies to deliver an unrivalled property service to the UAE. The mission of Masterkey has always been to equip the industry with technology that unlocks the real estate potential in the market,” said Daniel Hart, CEO at Masterkey and founder of Airlist.

“This partnership will allow our teams to continue to grow our innovative solutions which our clients have trusted for over 14 years, now secured by the backing of the largest property platform in the UAE,” he added.

Samer Abdin, general manager of dubizzle Property, called Masterkey and Airlist “world class products”.

“We are proud to invest in their people, technology and future,” he added. “These acquisitions are a testament to our drive to be the number one property platform in the UAE and puts us at the forefront of market innovation.”

Dubizzle’s acquisition of the two companies took effect on November 1, with the new product expected to be developed over the coming three months.

13 Nov 2017

Making sense of a slow market

As sales prices and rents continued to feel a downward pressure in the third quarter, the bright spot in an otherwise languid market has been the increasing sales activity in the primary segment, with off-plan projects still managing to attract good prospects. “Strong demand was felt during Cityscape Global [in September] where developers were allowed to transact on the stands for the first time in many years,” says Mario Volpi, chief sales officer of Kensington Exclusive Properties. “This proved very popular as many phases of new launches sold out.”

As homebuyers and tenants taking advantage of the slow market drive the rise in transactions, John Stevens, managing director of Asteco, says the market remained flat, with “some areas showing more pronounced drops particularly year-on-year”. The price softening was far more pronounced in the residential rent segment as both apartment and villa communities in some areas recorded a double-digit decline year-on-year.

Apartment rents over the quarter fell 4 per cent, while year-on-year rates showed a marked drop of 12 per cent, according to Asteco.

Villa rental rates echoed this, with a 3 per cent quarter-on-quarter and a 10 per cent year-on-year drop. On the sales front, although the price movement in both the apartment and villa segments was stable on quarter-on-quarter basis, prices plunged by 4 per cent and 3 per cent respectively in yearly terms.

Stevens says the most challenging asset class this year has been commercial real estate. “Office sales prices and rental rates remained flat in the third quarter compared with the second quarter, with a year-on-year decline of 6 per cent for sales and a marginal drop of 2 per cent for rentals,” says Stevens.

Hit by weak market sentiment due to internal and external factors, including low oil price, regional uncertainty and subdued global economic outlook, Dubai’s property market was further bogged down by new supply entering the market over the last nine months.

Volpi says sales and rental prices will further soften due to the wide array of choices available. “We will not see a return to equilibrium of the market for another six to 12 months,” he says.

Retail rents have also softened due to higher vacancy rates, says Volpi, as landlords prefer to negotiate with existing tenants. In light of these challenges, developers are responding by offering more attractive and flexible terms to both tenants and purchasers.

“This strategy is aimed at maintaining headline rents and prices, while at the same time offering reductions in the real price and rents,” says Craig Plumb, head of research at JLL Middle East and North Africa (Mena).
As the market continues to favour tenants and buyers, the gap between asking prices and effective prices is likely to widen, says Plumb.

Residential

Dubai Marina posted the highest decline in rental rates at 19 per cent in the third quarter compared with the same period last year, followed by Downtown Dubai (18 per cent), Dubai Sports City (16 per cent) and Bur Dubai (16 per cent), according to Asteco.

In the villa segment, The Springs showed the highest decline in rental rates at 18 per cent, followed by Arabian Ranches (15 per cent), the Palm Jumeirah (15 per cent), Dubai Sports City (14 per cent) and Jumeirah Village (14 per cent).

However, sales prices within the apartment segment varied significantly from community to community. “Dubai Silicon Oasis declined 9 per cent to Dh829 per square foot, whereas The Greens witnessed a growth of 13 per cent to Dh1,352 per square foot, by far the best-performing area in the third quarter,” says Ivana Gazivoda Vucinic, head of advisory and research at Chestertons Mena.

Dubai Marina also witnessed an increase of 2 per cent in average sales prices to Dh1,470 per square foot, according to Chestertons. Business Bay saw a 1 per cent increase in prices, rounding out the areas witnessing positive results.
“Villa sales prices have been more resilient due to the higher level of corrections during the previous quarters,” says Vucinic. “The Meadows and The Springs were the worst-affected areas, both recording a 7 per cent decline.”

The increasing new supply into the market has put further pressure on the already-weakening sales and rental prices, which, if industry experts are to be believed, are heading for further correction in the coming quarters.
“We expect further correction in both the villa and apartment markets for at least the next three to four quarters,” says Vucinic.

According to Asteco, more than 10,200 apartments were delivered in the first three quarters of the year and a further 3,500 units are due for completion before the end of the year. Last year, the total supply was only 8,750 apartments.

Office

While average office rents declined by 3 per cent year-on-year, Taimur Khan, senior analyst at Knight Frank, says this an improvement over the previous quarter as there was a 4.5 per cent year-on-year decline during the second quarter. Khan adds that prime rental performance has performed well both on a quarterly and annual basis, rising 1 per cent and 2 per cent respectively, because of “high demand for office space in this sector and limited new supply underpinning price growth”.

According to JLL, the third quarter saw around 35,000 sq m of gross leasable area (GLA) across Dubai, with an additional 110,000 sq m due for completion by year end.

Despite the new supply, an oversupply in prime commercial office space is unlikely in core locations such as Dubai International Financial Centre and Tecom as occupancy remains high and demand strong, according to Matthew Dadd, head of commercial agency and leasing at Knight Frank. Furthermore, the vacancy rates within commercial business districts have been largely stable over the past quarter at around 8 per cent.

“However, in secondary markets, we continue to witness higher vacancy rates and, therefore, additional supply could impact the market,” says Dadd. “In the long term, we do see increased supply in the prime sector, which will need to be phased accordingly to allow the market to absorb before impacting headline rents.”

On the retail front, the market also remains subdued with super-regional and regional malls recording quarter-on-quarter declines of 3-5 per cent in headline rents, according to JLL. Smaller neighbourhood and community malls have generally recorded greater declines than the larger ones.

With a current supply of 3.4 million sq m, retail real estate in Dubai has seen vacancy levels increase over the past year. This trend has continued during the third quarter to reach 12 per cent.

Hospitality

Although Dubai remains one of the best-performing hospitality markets in the world, the emirate’s hotel industry remained under pressure, according to JLL, with year-to-date revenue per available room (RevPAR) of Dh503 in August the lowest in the past decade. The average daily rate (ADR) registered a 4 per cent drop to Dh665.

However, Dubai continues to see a strong occupancy rate at 75 per cent since the beginning of the year despite 1,800 keys added to the market in the third quarter, bringing the total stock of quality hotel rooms to almost 82,200 keys. “[The] hotel and retail sectors are experiencing softening market conditions and can be expected to see performance decline further over the next 12 months,” says Plumb.

Primary vs secondary market

Ostensibly, the current trend suggests that residential demand is gradually shifting from the secondary to the primary market or off-plan projects, as most developers are offering financing options with attractive payment terms and lower down payments. This has resulted in a massive growth in off-plan sales during the third quarter, accounting for 65 per cent of all transactions so far this year, according to JLL.

“The off-plan sales have really taken off mainly due to the relaxing of developer payment plans and lower start pricing points, coupled with long post-handover payments,” says Volpi.

Alexander von-Sayn Wittgenstein, luxury sales director of Luxhabitat, says there is also growing demand for off-plan options in the prime residential market, although he cites a variety of factors driving this, including homeowners looking for better homes. “It really depends on the area and the supply due to arrive,” says Wittgenstein.

He explains that the prices in prime areas will remain relatively inflexible for secondary-market property as they are established locations with little room for off-plan. Examples of such locations include Downtown Dubai. “The off-plan properties in the established areas will be released at the market rate, however, with more flexible payment plans,” says Wittgenstein. “As an investor, it’s more appealing than buying a secondary-market property that might be tired.”

For off-plan and ready-made units, industry experts explain there are two types of buyers when considering the risk profile: those looking at ready-made units are more risk averse, while off-plan buyers are more willing to take risks with an eye on capital appreciation.

The determining factor, according to Vucinic, has been a buyer’s ability to pay the minimum down payment. “The inability to pay at least 25 per cent of the unit value has forced certain buyers to choose off-plan property,” says Vucinic. “Our research has indicated that the total number of off-plan transactions in the third quarter increased by a massive 86 per cent from the previous quarter, while the value of off-plan transactions was up by 118 per cent to Dh4.04 billion.”

Wittgenstein says investors are looking at both apartments and villas in areas such as Dubai Creek Harbour, Downtown Dubai and smaller units such as Maple in Dubai Hills Estate. “The best-performing area was Dubai Marina with Dh363 million, and the worst-performing was Jumeirah Islands at Dh26.6 million in secondary-market sales,” he says.

Volpi points out that the secondary market has been sluggish, with the uptake of off-plan sales acting like a sponge, “soaking up all the interest despite secondary market prices reducing”. Furthermore, he says individual sellers are asking prices considered still too high. “This logjam will only start to move once prices are further reduced,” he says. “It is still a very strong buyers’ market.”

Outlook

With additional stock entering the market, most industry experts PW spoke to agree that the market is heading for further correction, and the reversal of the current trend can only be anticipated late next year.

“In the fourth quarter we expect to see further corrections in sales prices and rents,” says Vucinic. “A slight pickup of completed unit transactions is expected. This will, however, have a negative impact on off-plan sales transactions, which we expect to decline and then stabilise.”

Stevens agrees that the sheer volume of properties announced and anticipated for delivery over the next few years will continue to put further pressure on rental rates. “At this point it is difficult to gauge when the market will rebound as it depends on a number of internal and external factors,” says Stevens. “We do not expect a recovery in the real estate market in the short term until economic conditions and market sentiment improve.”

15 Nov 2017

MIDEAST STOCKS-State funds support Saudi, GFH Financial boosts Dubai

* Saudi spends most of day lower, before buying in final hour

* Public Investment Fund-related banks continue to rise

* Alujain plunges as it resumes trading after suspension

* GFH Financial surges after describing business plan

* Emaar Properties rises after earnings

By Andrew Torchia

DUBAI, Nov 13 (Reuters) – Saudi Arabia’s stock market rose on Monday, apparently boosted by purchases of shares by state-linked funds, while a surge in GFH Financial lifted Dubai’s bourse.

Data released by the Saudi exchange showed local individual investors were net sellers of stocks by a margin of about 13 percent last week because of the government’s sweeping anti-corruption probe, which has raised fears that people detained in the crackdown could dump assets.

Foreign investors were net sellers by a bigger margin of 41 percent and Gulf investors were also net sellers. That left Saudi institutional investors net buyers by a large margin; most of them were government-linked funds deliberately supporting the market to avert a panic, many asset managers believe.

That pattern appeared to continue on Monday, when the market fell as much as 0.8 percent during the day but saw a burst of heavy buying in the final hour that caused the index to close 0.4 percent higher.

Banks performed well with National Commercial Bank gaining 1.7 percent and Samba Financial Group up 1.5 percent.

Both are part of the portfolio of the Public Investment Fund, which increased by almost $3 billion in value last week, Reuters calculations show, even as the market as a whole stagnated because of the probe – a sign of the PIF’s growing power and authority.

But the most heavily traded stock, real estate developer Dar Al Arkan, fell back 2.5 percent after surging 18 percent in the previous two days following strong quarterly earnings.

Petrochemical investor Alujain sank 9.7 percent in its heaviest trade this year as it resumed trading after being suspended since August because of a delay in reporting earnings. It said third-quarter net profit fell to 36.1 million riyals ($9.6 million) from 36.8 million riyals.

In Dubai, the index also rose 0.4 percent. GFH surged 6.3 percent to 1.53 dirhams after swinging between 1.35 and 1.55 dirhams in its heaviest trade since February.

The company said it had exited real estate portfolios in Bahrain and the United States worth $180 million, would invest in the education sector, and planned to acquire a financial institution in the six-nation Gulf Cooperation Council by year-end.

Emaar Properties was up 1.5 percent after posting a 32 percent rise in third-quarter net profit to 1.51 billion dirhams ($411.2 million), beating SICO Bahrain’s forecast of 1.36 billion dirhams.

HIGHLIGHTS

SAUDI ARABIA

* The index rose 0.4 percent to 6,962 points.

DUBAI

* The index rose 0.4 percent to 3,478 points.

ABU DHABI

* The index edged down 0.1 percent to 4,370 points.

QATAR

* The index fell 0.2 percent to 7,857 points.

EGYPT

* The index dropped 1.0 percent to 14,123 points.

KUWAIT

* The index climbed 1.2 percent to 6,251 points.

BAHRAIN

* The index edged down 0.1 percent to 1,263 points.

OMAN

* The index rises 0.3 percent to 5,084 points. (Editing by William Maclean)

13 Nov 2017

Articles

163,000 properties to be delivered over next five years in Dubai

Dubai: If all goes as per developers’ plans, Dubai will see a further 163,840 properties being built over the next five years from 387 projects. Next year could account for the highest number of these handovers, at 27,360 units, based on broad estimates put out by fam Properties. The year after could see 19,850 units and 17,754 further homes in 2020.

So far in 2017, Dubai has seen the launch of 90 projects consisting of 36,556 units. “We took this initiative because we want our investors and buyers to have a more accurate picture of the Dubai property market by being able to analyse facts and figures in a new way,” said Firas Al Msaddi, CEO of f?m Properties. “This is something they’re eager for because it will help to make buying decisions based on facts and figures and is ultimately more profitable.”

The online tool also provides comparisons on the change of rent over time. Investors or end users keen to assess rental yield potential can take advantage of a rental range index which pinpoints rates over 10 years.

Although rental rates for the same category of apartments in the same area have varied greatly based on size and location over 10 years — a major factor in the buying decision — the gap has closed significantly in the last two to three years. Two-bed apartment rentals in Downtown Dubai ranged from Dh150,000-Dh260,000 in 2009 and reached a low of Dh95,000-Dh120,000 in 2012. In December 2016, rates were at Dh160,000-Dh180,000.

13 Nov 2017

The affordability angle: a consumer’s view

Globally, decision makers usually view affordable housing development from a developer’s viewpoint. As the accepted thinking goes, if developers are sufficiently incentivised then they will build good-quality affordable housing projects. Sometimes this includes the government zoning and land rights approach among other well-known financing interventions.
However, as we dive into the human approach, affordability resides at the heart of the monthly income management for average households.

Let us look at four household income bands in the UAE and connect that to affordability of a property purchase. Everyone will agree that it is fair to look at the primary household income as a key driver of affordability-related housing discussions.
In our analysis we have taken household income brackets starting from Dh10,000 to Dh35,000. We have analysed the value of property each income bracket could afford to purchase. This takes in certain assumptions, most importantly that affordability implies 30 per cent of total household income being paid towards housing. Other important caveats are that the analysis is based on 3.99 per cent interest rate and 25 per cent down payment or 75 per cent loan-to-value ratio. These will vary based on mortgage lender and one’s personal credit history.
The tenure of loan repayment is another major area of debate for affordability. A higher tenure means lower monthly repayment, but also a longer wait to fully own the property. Lower tenures result in higher repayment each month, however, it decreases the total interest paid to the lender and you will own your property earlier. Our approach is a conservative one, given this analysis relates to middle-income households, having taken a 240-month, long-term exposure on the tenure.

It is also important to be aware that the down payment requirement varies as per UAE Central Bank regulations. And the Dubai Land Department fees and agency commissions are separate amounts for the actual core property value discussion. However, we have included these to highlight the minimum upfront amount required for a household to enter the property ladder.
We observe that even at the lowest starting point of Dh10,000, should a loan be made available, the household can look at a maximum property value of Dh650,000. This will require more than Dh200,000 to be able to enter the transaction.
In the highest band of Dh35,000 per month income bracket, the household can at best look at a house priced at Dh2.3 million. Conservatively, they will be paying up to Dh750,000 in interest to the bank over a 20-year period. They would ideally need to have saved an equal amount to invest in their first property, including government fees and commissions.

So, even at the highest band, which is a bit higher than most affordable discussions will allow, we still see that the maximum they would be able to afford is a relatively modest apartment in only specific communities.
Overlaying this information on data from Property Monitor we can safely say that 14 per cent of properties transacted in Dubai this year are not within reach of anyone earning below Dh35,000. In the lowest band of Dh10,000, the household would be unable to participate on 74 per cent of properties transacted in Dubai.

This is a significant part of the market that is currently not in reach of a majority of the population that earns modest incomes. Perhaps the best solution for middle-income earners to enter the market is to crowdfund real estate assets. More on that in another article.re
on that in another article.

15 Nov 2017

MIDEAST STOCKS-State funds support Saudi, GFH Financial boosts Dubai

* Saudi spends most of day lower, before buying in final hour

* Public Investment Fund-related banks continue to rise

* Alujain plunges as it resumes trading after suspension

* GFH Financial surges after describing business plan

* Emaar Properties rises after earnings

By Andrew Torchia

DUBAI, Nov 13 (Reuters) – Saudi Arabia’s stock market rose on Monday, apparently boosted by purchases of shares by state-linked funds, while a surge in GFH Financial lifted Dubai’s bourse.

Data released by the Saudi exchange showed local individual investors were net sellers of stocks by a margin of about 13 percent last week because of the government’s sweeping anti-corruption probe, which has raised fears that people detained in the crackdown could dump assets.

Foreign investors were net sellers by a bigger margin of 41 percent and Gulf investors were also net sellers. That left Saudi institutional investors net buyers by a large margin; most of them were government-linked funds deliberately supporting the market to avert a panic, many asset managers believe.

That pattern appeared to continue on Monday, when the market fell as much as 0.8 percent during the day but saw a burst of heavy buying in the final hour that caused the index to close 0.4 percent higher.

Banks performed well with National Commercial Bank gaining 1.7 percent and Samba Financial Group up 1.5 percent.

Both are part of the portfolio of the Public Investment Fund, which increased by almost $3 billion in value last week, Reuters calculations show, even as the market as a whole stagnated because of the probe – a sign of the PIF’s growing power and authority.

But the most heavily traded stock, real estate developer Dar Al Arkan, fell back 2.5 percent after surging 18 percent in the previous two days following strong quarterly earnings.

Petrochemical investor Alujain sank 9.7 percent in its heaviest trade this year as it resumed trading after being suspended since August because of a delay in reporting earnings. It said third-quarter net profit fell to 36.1 million riyals ($9.6 million) from 36.8 million riyals.

In Dubai, the index also rose 0.4 percent. GFH surged 6.3 percent to 1.53 dirhams after swinging between 1.35 and 1.55 dirhams in its heaviest trade since February.

The company said it had exited real estate portfolios in Bahrain and the United States worth $180 million, would invest in the education sector, and planned to acquire a financial institution in the six-nation Gulf Cooperation Council by year-end.

Emaar Properties was up 1.5 percent after posting a 32 percent rise in third-quarter net profit to 1.51 billion dirhams ($411.2 million), beating SICO Bahrain’s forecast of 1.36 billion dirhams.

HIGHLIGHTS

SAUDI ARABIA

* The index rose 0.4 percent to 6,962 points.

DUBAI

* The index rose 0.4 percent to 3,478 points.

ABU DHABI

* The index edged down 0.1 percent to 4,370 points.

QATAR

* The index fell 0.2 percent to 7,857 points.

EGYPT

* The index dropped 1.0 percent to 14,123 points.

KUWAIT

* The index climbed 1.2 percent to 6,251 points.

BAHRAIN

* The index edged down 0.1 percent to 1,263 points.

OMAN

* The index rises 0.3 percent to 5,084 points. (Editing by William Maclean)

13 Nov 2017

Mapping the UAE’s transformation

The World Economic Forum (Wef) has provided public access to its “Transformation Maps”, which are dynamic, digital knowledge tools which show which key factors are shaping countries, industries and issues such as Climate Change and how they interact with each other.

This has been timed to coincide with its summit in the UAE this weekend; the Annual Meeting of the Global Future Councils 2017 being held in Dubai. Seven hundred leading experts from around the world are participating under the theme The Globalization of Knowledge in a Fractured World, and will seek solutions and develop ideas to foster international cooperation and shared responses to global challenges, the Wef said.

Sheikh Mohammed bin Rashid, Vice President and Ruler of Dubai, said that the UAE had become a centre for exploring the potential impact of the Fourth Industrial Revolution and pioneer in shaping this future of technological advancement including the development of artificial intelligence.

Work on the transformation maps began in 2015, but the idea for harnessing the flow of information in an increasingly digital world has been in the mind of the Wef for almost 15 years.

This map of the transformation of the UAE is part of this overall effort says Jeremy Jurgens, the Wef’s head of knowledge and digital engagement and the architect of this initiative.

“This knowledge was drawn from our experts in the UAE and via workshops over two years,” he says.

Here are they key factors driving the transformation of the UAE:

Environmental Sustainability and Resource Security

The UAE is seeking to mitigate the effects of climate change with renewable energy sources. The de-carbonization of infrastructure and energy projects, and helping neighbouring countries to grapple with climate change, are also key parts of the UAE government’s strategy.

Diagram
Environmental Sustainability and Resource Security / WEF

Human Capital Development

The UAE is developing talent among its citizenry, especially in the private sector. Here education, the balance of the labour market and behavioural science all come into play.

diagram
Human Capital Development / WEF

The Innovation Imperative

The UAE is planning a future economy that does not rely on natural resources. The oil & gas industry, education, technology and entrepreneurship are some of the critical areas which converge when it comes to innovation as the UAE seeks to shift away from oil dependence.

diagram
The Innovation Imperative / WEF

Regional and Geopolitical Positioning

The UAE is seeking peace through economic development and good governance. Humanitarian action is one of the important factors here as UAE develops a response to violent extremism that goes beyond military intervention.

diagram
Regional and Geopolitical Positioning / WEF

Economic Diversification

Construction and manufacturing can help diversify the UAE’s oil-dependent economy. Economic diversification is a key element of the Vision 2021 programme and new laws for competitiveness, investment in infrastructure and telecommunications have important roles in reaching this goal.

Diagram
Economic Diversification / WEF

Investing in Infrastructure

The UAE’s infrastructure could be the foundation for a bright future especially regarding the development of the digital economy and its impact on transport. The country has pointed the way forward for the broader Middle East and North Africa region.

diagram
Investing in Infrastructure / WEF

10 Nov 2017

Winning the corporate banking battle

Corporate banks across the world are facing tough competition due to declining revenues, rising regulatory costs and increased capital requirements. The UAE is no different. With more than 40 banks operating in the market, these financial institutions – which service companies, as opposed to individuals – must find new ways to differentiate themselves. So how can they stand out? And what will the winning bank of the future look like?

Corporate banks have traditionally been slower than their retail counterparts to adopt new technologies and processes. That is now changing as more corporate banks realise they must adapt in order to cater to their clients’ requirements.

“Banking has Vivek-Uberoievolved a lot in the past two decades in this region,” says Vivek Uberoi, Senior Vice-President, Corporate & Investment Banking Group at Mashreq (pictured right). “Post-crisis we have a new era of banking and customer demands. Some banks have come a long way. Others are in the process. There are no quick answers, but there are a few inevitables.”

Specialisation is the future

Specialisation is one of the inevitables. He says corporate banks can no longer offer a bit of everything. They must now specialise in order to offer customers more value. “Corporate clients nowadays are increasingly sophisticated and require customised offerings.”

Mashreq pioneered this approach long ago by having the Contracting finance and Real Estate divisions. “The banking industry has acknowledged Mashreq’s expertise in these areas,” says Uberoi. “In 2015, we embarked upon a drive towards a specialist approach, making our relationship managers experts in their line of businesses. It’s been a success and Mashreq has been the first in the region.”

dubai metro

Mashreq’s specialised contracting finance team enabled some of Dubai’s well-known landmarks


Specialisation helps relationship managers gain a better understanding of a customer’s business and banking requirements to offer bespoke solutions, says Uberoi. These RM’s have industry knowledge and better understanding of the changing trends in the market. This also helps in effective risk assessment for the bank, he adds. “That is what is going to give Mashreq the edge. Going forward, our relationship managers will be advisers rather than just account managers. And this will distinguish the more successful banks from the others.”

Going digital

As technology evolves, customers’ expectations about how they interact with the bank are changing. To meet demands, digitisation is another critically important area for corporate banks, say experts.

The effects of digitisation are far-reaching, affecting everything from how a bank interacts with its customers, to the way it processes things in the back end, and how it complies with the regulator, says Dr Saeeda Jaffar, Managing Director at Alvarez & Marsal in Dubai.

financial-chart

Digitisation is another critically important area for corporate banks


Banks that digitise efficiently and quickly will probably be the ones that will be able to outperform and get a much larger part of the pie, she says. “Others that don’t move as fast as they could have and should have will probably be left behind.”

Mashreq, which is celebrating its 50th anniversary this year, is one of the most active lenders in the UAE. It sees technology as a key area of innovation and is making huge investments in the field to differentiate itself.

“The new model emerging for the industry is being lean and mobile,” says Uberoi. “Our aim is to be a connected bank — integral to customers’ everyday lives and be the key financial services provider in their digital ecosystems.”

Staying relevant

There is a dark side to digitisation. A new set of competitors have emerged as technology allows financial technology companies (fintechs) to tap into the most lucrative part of the value chain in corporate banking — origination and sales.

The services corporate banks offer are now becoming faster; thanks to new and streamlined processes. Transactions that used to take days and weeks are now completed in a matter of hours, says Dr Jaffar.

It is only going to improve going forward. Uberoi adds, “It’s going to be cheaper and it’s going to be far more convenient.”

Data mining

One of the most essential ingredients to understanding customer needs and behavior is data. “Investment in data mining can open up new revenue streams for banks, helping them measure risk better, identify sales or cost-saving opportunities — and build new services,” says Uberoi.

UAE outlook

Despite the challenges, the future for corporate banking looks good. Non-oil activity, including government spending on infrastructure in the UAE, and robust trade and financial services, is expected to support growth. The construction of major projects in Dubai in preparation for the 2020 World Expo is likely to contribute further.

expo location

Construction activity for Expo is expected to offer opportunities for corporate banks


“The UAE economy is expected to grow by 3.4 per cent in 2018 and 3.5 per cent thereafter, providing plenty of room for corporate banking business to grow,” adds Uberoi.

Speed of execution

In conclusion, it is agility that will help the business survive and thrive in turbulent times, says Uberoi.

“In the new world, size is not the only factor to determine the winner – speed and agility can make even a smaller player win the race,” he adds.

13 Nov 2017

Financial literacy secrets through real estate

DUBAI: An early Christmas event was held in Dubai on Friday evening wherein approximately 2,000 Filipinos and non-Filipinos alike were given nine raffle tickets each for the chance to win a house-and-lot worth Php1 million (Dhs71,400.00) from one of the most established diversified conglomerates in Metro Manila.

The grand raffle draw will be held in January next year, wherein entries from the Nov. 17 “Filinvestors Christmas Family Fun Day” in Abu Dhabi and other previously held similar affairs across the region will be combined, according to Filinvest International (FI)-Middle East & Europe vice president Maynard Portugal.

Separately interviewed, FI executive vice president Emilia Cudiamat-Lim and FI subsidiary Freedom Cares Corp. president Elixir Sese told The Gulf Today that confidence levels on the Duterte Administration is continually on the rise.

Consequently, even foreigners have been buying not only condominium units but condominium buildings “by the bulk” for personal as well as business purposes in the Philippines.

Among the leading foreign buyers are Singaporeans, Japanese, Americans and Europeans.

“The Condominium Act of the Philippines allows foreigners to acquire condominium units and shares in a condominium corporation up to not more than 40 per cent of the total and outstanding capital stock or a Filipino-owned or controlled corporation.”

Sese said the following are the profiles of the overseas Filipinos (OFs) who have been into real estate property investments back home: UAE (professionals and household service workers-HSWs), Kuwait (HSWs), US (medical doctors, nurses and businessmen), Australia (professionals), Europe (HSWs and food & beverage personnel).

Specifically from Scandinavia are professionals in Norway and HSWs in both Denmark and Sweden.

Sese and Lim expressed hope that more Filipinos—both in the Philippines and across the world—grab the opportunity to acquire properties “now” while the current national leadership is concentrating on the massive upgrade of all infrastructure and logistics across the country.

Lim cited as an example the turtle bumper-to-bumper traffic from the southern Metro Manila cities of Muntinglupa and Pasay, particularly from the posh Alabang district in Muntinglupa to the Mall of Asia in Pasay, have been eased to about 15 minutes due to “new road networks.”

“Now is the time to invest,” said Lim who gave her five financial literacy secrets that include changed mindset, discipline as well as assets/real estate versus liabilities/signature goods before the audience.

She shared her 1997 to 2012 OF experience in Italy just so the wealthy family of her former Filipino-Chinese fiancé and now husband Terence Lim would not spite her despite her being a colegiala graduate.

Lim was grateful to her then fiancé Terence who followed her to Italy, served as her financial counselor amid her debt-ridden lifestyle. Both began their real estate buying sprees in the Philippines from the first investment of a 900-square meter lot in 2003.

Sese, a banker in Spain for several years, implied of a stiff competition between the foreigners and Filipinos: “We must buy now or else there may be more foreigners owning condominiums than us.”

It was at the Sept. 13, 2017 “Global Economic Outlook Presentation” in Dubai that Shan Saeed, chief economist of the leading international property investment company, Iqi Global, had pointed out: “President Duterte has put the Philippines in the global map for investors.”

 

Saeed mentioned of Duterte’s discipline, strictness and toughness that encourage confidence among global players to invest in a country.

13 Nov 2017
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