Dubai property doldrums challenge post-crisis rout

The property industry in Dubai and the wider region remains hostage in part to macroeconomic forces greater than the push and pull of housing supply and demand. (Reuters)
Updated 08 July 2017
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Dubai property doldrums challenge post-crisis rout

DUBAI: Dubai property prices have capped a third year of decline as the market awaits a long-anticipated Expo rebound amid expatriate job losses. It means the current property bear market has lasted almost as long as the post-financial crisis rout, where prices fell by as much as half.
Dubai property prices peaked in September 2008, according to the Cluttons mid-range apartment index. The market was then in decline for about 43 months until March 2012, when it rose steadily until June 2014. Since then, prices have remained in the doldrums despite big developers doing a brisk trade in off-plan sales as buyers turn toward stage payment plans because of the large deposits now required for traditional mortgages.
Brokers hope that rising demand caused by the release of big construction orders ahead of Expo 2020 could jolt the market out of its three-year malaise. “Expo will undoubtedly have an impact,” said Faisal Durrani, head of research at Cluttons. “This year we are expecting something like 11 billion dirhams ($3 billion) worth of contracts linked to the Expo to be awarded.”
Research shows there is a lag of six to 12 months for the award of such contracts to translate into higher demand for commercial or residential property. “So we are expecting the market to show greater stability later this year in more locations, assuming all things stay equal and there are no more global economic shocks — which is a big ‘if,’” he said.
While there is no official data measuring the number of expatriate workers leaving and arriving in the emirate, removal companies said there has been a pickup in activity this summer — a traditionally busy time for the sector. “We have seen more oil- and gas-related inquiries for clients leaving the region,” said a spokesperson for Hong Kong-headquartered Crown Worldwide Group.
On a vast tract of empty land close to Dubai’s Palm Jumeirah, lorries towing 20-foot shipping containers from Maersk and Evergreen wait to load up with the furniture and belongings of expatriates. “Many people are leaving,” said a driver from the Pakistani city of Lahore who owns his own removals van. “When people are leaving it is good for us, and when they are coming also.”
The property industry in Dubai and the wider region remains hostage in part to macroeconomic forces greater than the push and pull of housing supply and demand, such as the strong dollar to which the dirham is pegged, making homes expensive for overseas investors.
A weak oil price has also hurt investor sentiment, while a political standoff between Qatar and some of its neighbors could be a further brake on the long-anticipated Expo-fueled rebound. Several major corporations including Emirates, Etihad and the Abu Dhabi National Oil Co. have shed thousands of jobs over the last year as the slowing economy has forced them to cut costs and trim benefits.
Despite efforts by the Organization of the Petroleum Exporting Countries (OPEC) and non-OPEC oil exporters to limit production, the price of crude has failed to rally as much as hoped, as shale oil production in North America keeps the market well supplied.
The current property trough coincides with the extended period of oil weakness that began in the summer of 2014. That has had a dramatic impact on regional economies, which have been forced to slash subsidies and embark on aggressive economic reform programs, in turn hurting property prices as banks pull back on lending and investor confidence weakens.
But as Dubai looks to Expo 2020, some analysts are hopeful that prices will be supported by demand from construction industry professionals and rising visitor numbers. Other changes simplifying visit visas could also boost confidence. Simon Townsend, head of strategic advisory valuation at CBRE in Dubai, believes the Expo may have a bigger impact on the global perception of the city than property values per se.
“Expo is going to help from a global PR perspective,” he said. “It will change the way Dubai is viewed, and in a good way — not just all about high-end tourism and footballers on the beach. There are other positive things happening like changes to visa rules especially for Asian visitors, which are really making a difference.”


Oil up on OPEC uncertainty regarding production levels

Updated 22 June 2018
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Oil up on OPEC uncertainty regarding production levels

  • Saudi Arabia and Russia are in favor of raising output. Other OPEC-members including Iran have opposed this, resulting in a flurry of backdoor diplomacy ahead of the meeting
  • Phillip Futures said in a note that it expected “an approximate 300,000–600,000 barrels per day (bpd) hike by Saudi Arabia and Russia collectively”

SINGAPORE: Oil prices rose by around 1 percent on Friday, lifted by uncertainty over whether OPEC would manage to agree a production increase at a meeting in Vienna later in the day.
Brent crude oil futures were at $73.78 per barrel at 0502 GMT, up 73 cents, or 1 percent, from their last close.
US West Texas Intermediate (WTI) crude futures were at $66.26 a barrel, up 72 cents, or 1.1 percent.
The Organization of the Petroleum Exporting Countries (OPEC), a producer group with top exporter Saudi Arabia as the de facto head, is meeting together with non-OPEC members including No.1 producer Russia at its headquarters in the Austrian capital to discuss output policy.
The group started withholding supply in 2017 to prop up prices. This year, amid strong demand, the market has tightened significantly, pushing up crude prices and triggering calls by consumers to increase supplies.
Saudi Arabia and Russia are in favor of raising output. Other OPEC-members including Iran have opposed this, resulting in a flurry of backdoor diplomacy ahead of the meeting.
“The actual decision by OPEC and its partners — which may not actually become apparent until Saturday — is the big one traders are watching,” said Greg McKenna, chief market strategist at futures brokerage AxiTrader.
Phillip Futures, another brokerage, said in a note that it expected “an approximate 300,000–600,000 barrels per day (bpd) hike by Saudi Arabia and Russia collectively.”
US investment bank Jefferies said an increase in “the range of 450-750,000 bpd seems the most likely outcome” of the meeting, driven largely by Russia and Gulf OPEC members Saudi Arabia, the United Arab Emirates and Kuwait.
Jefferies said these increases “would essentially offset Venezuelan declines and falling Iranian exports,” but the bank warned that global “spare capacity could fall globally to around 2 percent of demand – its lowest level since at least 1984.”
That would leave markets prone to supply shortages and price spikes in case of large, unforeseen disruptions.
The other big uncertainty is potential Chinese tariffs on US crude imports that Beijing may impose in an escalating trade dispute between the United States on one side and China, the European Union and India on the other.
Asian shares hit a six-month low on Friday as tariffs and the US-China trade battle start taking their economic toll.
Should the 25 percent duty on US crude imports be implemented by Beijing, American oil would become uncompetitive in China, forcing it to seek buyers elsewhere.
Chinese buyers are already starting to scale back orders, with a drop in supplies expected from September.
“If China’s import demand dries up, more than 300,000 bpd of US crude will have to find a new destination,” energy consultancy FGE said.
“This will certainly depress US Gulf Coast prices,” it said.