Jeddah property outlook ‘positive’ despite fall in prices

While Jeddah has a relatively low level of home ownership due to ‘affordability constraints,’ the trend is shifting. (Shutterstock)
Updated 15 April 2019
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Jeddah property outlook ‘positive’ despite fall in prices

  • The Saudi city is expected to receive an additional supply of around 20,000 residential units in 2019–2020
  • Jeddah’s hospitality market is likely to witness the delivery of more than 4,000 hotel keys in the coming two or three years

LONDON: The long-term outlook for Jeddah’s property market is “positive” despite a 6 to 8 percent drop in sale prices last year, according to a report by KPMG.
The Saudi city is expected to receive an additional supply of around 20,000 residential units in 2019–2020, an addition of 2.5 percent to the current stock of about 810,000, the report found.
“Despite the current slowdown in the market and subdued performance during the last couple of years, the market drivers seem to be positive for the long term, backed by the favorable demographic, and government’s focus on the real estate sector as part of the diversification process,” said Firas Hassan, head of real estate at KPMG Al Fozan & Partners, the Saudi Arabia-based audit firm that prepared the report.
The report pointed to the Saudi government’s aim to increase home ownership from 47 percent to 70 percent by 2030.
While Jeddah has a relatively low level of home ownership due to “affordability constraints,” the trend is shifting, the report found.
“The market is witnessing a shift in the trend as a proportion of the middle-income housing units are significantly increasing in the forthcoming supply. Most of these developments are located toward the northern side of the city,” said Hassan.
The most expensive apartments for sale are located toward the western side, with prices between SR5,000 ($1,333) and SR6,500 per square meter, the report said.
“While the demand for apartments and small-sized villas/duplexes is expected to remain high, the residential community concept (semi-gated complexes) is getting market acceptance,” it added.
In the retail property sector, KPMG said there were “signs of stability” last year after a period of “subdued performance.”
“Jeddah’s retail market is benefiting from a high population base, elevated disposable income, and changing lifestyle. We expect demand for quality retail space to continue rising,” the report found.
“However, retail operators need to implement new methods that combine shopping with entertainment to attract more footfalls to their space.”
Jeddah’s hospitality market is likely to witness the delivery of more than 4,000 hotel keys in the coming two or three years, which will increase the current hotel stock by 35 percent, the report added.


Microsoft tops $1 trillion as it predicts more cloud growth

Updated 25 April 2019
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Microsoft tops $1 trillion as it predicts more cloud growth

BENGALURU/SAN FRANCISCO: Microsoft Corp. on Wednesday briefly topped $1 trillion in value for the first time after executives predicted continued growth for its cloud computing business.
The Redmond, Washington-based company beat Wall Street estimates for quarterly profit and revenue, powered by an unexpected boost in Windows revenue and brisk growth in its cloud business which has reached tens of billions of dollars in sales.
Microsoft shares rose 4.4% to $130.54 in late trading after the forecast issued on a conference call with investors, pushing the company ahead of Apple Inc’s $980 billion market capitalization. The companies and Amazon.com Inc. have taken turns in recent months to rank as the world’s most valuable US-listed company.
Microsoft’s stock has gained about 23% gain so far this year, after hitting a record high of $125.85 during regular trading hours.
Under Chief Executive Satya Nadella, the company has spent the past five years shifting from reliance on its once-dominant Windows operating system to selling cloud-based services.
Azure, Microsoft’s flagship cloud product, competes with market leader Amazon Web Services (AWS) to provide computing power to businesses.
Growth in that unit slowed to 73% in the third quarter ended March 31 from 76% in the second quarter. Mike Spencer, Microsoft’s head of investor relations, said the decline was roughly in line with the company’s estimate.
Christopher Eberle, a senior equity analyst with Nomura, said that with Azure, “one should assume a slower rate of growth as we move forward, simply due to the law of large numbers.” Still, Azure will bring in $13.5 billion in sales in fiscal 2019 with an overall growth rate of 75%, he estimated. “I can’t name another company of that scale growing at these rates.”
Microsoft tops tech rivals such as Amazon in market capitalization on some days despite having less revenue, partly because most of its sales is to businesses, which tend to be steadier customers than consumers. A growing proportion of Microsoft’s software sales are billed as recurring subscription purchases, which are more reliable than one-time purchases.
Microsoft’s earnings per share of $1.14 beat expectations of $1 according to IBES data from Refinitiv.
Windows licensing revenue from computer makers grew 9% year over year, beating expectations after a 5% decline in the previous quarter. Spencer said a shortage of Intel Corp. processor chips for PCs that many analysts expected to last into this summer had been resolved earlier than expected, allowing PC makers to ship more machines.
Microsoft’s “commercial cloud” revenue — which includes business use of Azure, Office 365 and LinkedIn — was $9.6 billion this quarter, up 41% from the previous year but down slightly from the 48% growth rate the previous quarter.
Microsoft’s so-called “intelligent cloud” unit, which contains its Azure services, posted revenue of $9.65 billion, above Wall Street estimates of $9.28 billion, according to IBES data from Refinitiv. Chief Financial Officer Amy Hood said that unit could reach $11.05 billion in revenue in the fiscal fourth quarter.
The “productivity and business process” unit that includes both Office as well as social network LinkedIn had $10.2 billion revenue versus expectations of $10.05 billion.
Microsoft’s latest results contained two weak spots.
Its gaming revenue was up only 5% versus 8% the quarter before, which Spencer attributed to less revenue from third-party game developers and the fact that many gamers are delaying purchases of Microsoft’s Xbox console because a new model is expected soon.
Sales of the company’s Surface hardware grew 21% versus 39% the quarter before, also because customers waited for updated hardware they expected to be released soon.
Total revenue rose 14% to $30.57 billion, beating analysts’ average estimate of $29.84 billion according to IBES data from Refinitiv.
Net income rose to $8.81 billion, or $1.15 per share, from $7.42 billion, or 96 cents per share, a year earlier.