LONDON: It is that time of year when the Gulf’s plethora of real estate pundits look into their crystal balls to see what the future might hold.
Last year was a particularly difficult for the region as it contended with weak oil prices, political tensions and volatile investor sentiment. The introduction of value-added tax in Saudi Arabia and the UAE from 2018 will inject yet more short-term uncertainty into the market, some commentators have said.
However, as the global price of crude picks up, the economic growth prospects of the region’s oil-exporting countries are projected to improve in 2018.
The latest IMF forecast for 2018 expects Gulf gross domestic product (GDP) growth to rebound to 3.3 percent, largely driven by a turnaround in the UAE, Saudi Arabia and Kuwait.
But whether this new economic confidence filters into the real estate market remains to be seen — with further declines forecast in the UAE’s two main property markets, Abu Dhabi and Dubai. Arab News takes a look at how the two markets are looking this year.
Dubai: A mixed bag with hopes of a “bottoming out” in 2018
According to a report by property consultancy Cluttons, the three years up until winter 2017 were “very challenging” for Dubai’s residential market, with capital values dropping by 16.6 percent. Residential values were estimated to end 2017 down 5 to 7 percent on 2016 numbers, the consultancy said.
“The introduction of Federal Mortgage Caps and the collapse in oil prices during 2014 have been key catalysts in shaping the market over the last 36 months, alongside the deteriorating global geopolitical backdrop, which also spooked investors,” Cluttons said in a report.
Around 40,000 more residential units will be completed in Dubai in 2018, according to the Property Monitor Supply Tracker. This may put further pressure on rent and sales prices, in particular the secondary market, analysts have said.
According to Cluttons, 2018 still has the potential for values to start “bottoming out” in the second half of the year, but much will depend on the yet-to-materialize “Expo 2020 effect,” the strength of the US dollar and a slowing in both the rate of delivery and type of new residential schemes announced, with “affordable” housing being key to helping the market stabilize.
“On balance, we expect values to decline by an average of 3 percent to 5 percent (in 2018),” Cluttons said. “The rental market is expected to mirror the performance of capital values in 2018.”
According to Cluttons, low-end apartments and villas encompassing the city’s most affordable locations such as International City, IMPZ, Discovery Gardens, Jumeirah, Sports City and JLT, collectively registered no change in average rents in the third quarter of 2017, highlighting “the potential depth of demand for more affordable rental accommodation going into 2018.”
Syed Wajih, a property consultant at Better Homes Dubai, told Arab News: “This is a temporary dip and it’s the best time to buy. The prices are low because of the oil price, VAT uncertainty and uncertain sentiment, but there is a lot of movement now because of the low prices.”
Abu Dhabi: Gloomy market with falling property prices
According to JLL, Abu Dhabi residential rents and sales prices dipped in the third quarter of 2017 as vacancies increased in response to subdued demand and increased supply. Rental demand has been negatively impacted by job losses and cuts in housing allowances while suppressed sentiment has resulted in fewer sale transactions, the consultancy said.
JLL said apartment rents declined by around 13 percent on a year-on-year basis in the third quarter due to the “continued increase in vacancy rates, resulting new supply completions during a period of job losses and cuts in housing allowances.”
Residential vacancies are expected to increase further in 2018, causing further rental declines, the property firm predicted.
Residential prices have also continued to fall, with average prices for prime villas declining 8 percent in the third quarter, down 13 percent year-on-year, said JLL.
“Declining sentiment and reduced transaction volumes have driven these falls with average prices expected to decline further during 2018,” it said.
The latest Abu Dhabi property report from Cluttons noted: “Weaker economic growth has taken its toll on the hydrocarbon sector in particular, which has been a key driver of demand in the residential and commercial markets in the emirate historically.”
Cluttons added: “(2018) is likely to see rents slipping further, with newly completed buy-to-let stock becoming a particular challenge in some of the city’s newer neighborhoods.”
The firm predicts that Abu Dhabi rents are likely to drop by 5 percent to 7 percent in 2018, “unless there is a notable rebounding in economic growth.”
No New Year cheer for UAE property market
No New Year cheer for UAE property market
Pakistan hopes to get new IMF loan by early July, says finance minister
- Pakistan’s current $3 billion financial arrangement with IMF expires in late April
- Islamabad is seeking “bigger,” long-term loan to ensure macroeconomic stability
Pakistan is hoping to reach a staff-level agreement with the International Monetary Fund by June or early July, its finance minister said on Tuesday.
The country’s current $3 billion arrangement with the fund runs out in late-April, which it secured last summer to avert a sovereign default.
Islamabad is seeking a long-term bigger loan to help bring permanence to macroeconomic stability as well as an umbrella under which the country can execute structural reforms.
“We are still hoping that we get a staff-level agreement by June or early July,” Finance Minister Muhammad Aurangzeb told a conference in Islamabad.
He returned from Washington last week after leading a team to attend the IMF and World Bank’s spring meetings. “We had very good discussions in Washington,” he said.
He said he did not know at this stage the volume and tenure of the longer program.
Riyadh prepares to host special meeting of World Economic Forum
- The aim of the gathering is to find solutions to global challenges relating to humanitarian issues, the climate and the economy
RIYADH: Final preparations are taking place this week in the Saudi capital, Riyadh, for a special meeting of the World Economic Forum in the city on April 28 and 29.
Heads of state and senior executives from the public and private sectors are expected to be among the participants, who will discuss a range of global economic issues and developments under the theme “Global Collaboration, Growth and Energy for Development.”
The aim of the meeting is to find solutions to a host of global challenges relating to humanitarian issues, the climate and the economy. On the sidelines of the main event, the Kingdom will host exhibitions and other events to highlight the latest developments and trends in areas such as sustainability, innovation and culture.
The selection of Riyadh as host of the special meeting reflects the extensive partnership between Saudi Arabia and the WEF, officials said.
It builds upon the Kingdom’s active participation and contributions to the WEF’s Annual Meetings in Davos.
The agenda is designed to rekindle the spirit of cooperation and collaboration with various panel discussions, workshops, and networking opportunities. It represents a significant gathering of global leaders and experts dedicated to forging a path toward a more resilient, sustainable, and equitable world.
ACWA Power inks deal to drive renewable energy development in Azerbaijan
RIYADH: Saudi energy giant ACWA Power is signing a new agreement to accelerate the development of renewable projects in Azerbaijan.
The private water desalination company, known for its extensive green hydrogen storage capacity, announced it has now finalized an agreement with SOCAR, the State Oil Company of the Azerbaijan Republic.
This development follows an initial cooperation understanding signed in February 2023.
This deal focuses on the joint evaluation of the “Low-Carbon/Green Fertilizer” project, in which the two bodies will collaborate on assessing the production of green hydrogen to support the decarbonization of SOCAR downstream assets.
Marco Arcelli, CEO of ACWA Power, said in a statement, “I am proud to announce our collaboration with SOCAR to ignite a new era of renewable energy development in Azerbaijan. With our shared vision and commitment to sustainability, this partnership will not only drive innovation but also pave the way for a cleaner and brighter future for this country.”
The primary directive of the agreement will be to enhance SOCAR’s carbamide fertilizer facility, striving toward more value-added low-carbon products.
As part of the project, SOCAR and ACWA Power will conduct feasibility studies to assess the potential production and sale of green fertilizers, aligning with Azerbaijan’s vision of achieving a clean environment.
ACWA Power will take a role in driving the project’s renewable energy and green hydrogen production aspects, bringing their expertise to bear on this initiative.
For his part, Anar Mammadov, vice president of SOCAR, said, “Azerbaijan is committed to building a sustainable future, and our partnership with ACWA Power underscores our shared dedication to driving renewable energy development in the region. Together, we will work towards realizing our vision of a cleaner, greener Azerbaijan.”
He added: “The cooperation with ACWA Power represents a significant step forward in Azerbaijan’s transition towards a low-carbon economy and underscores the commitment of both organizations to sustainable development practices.”
Preceding this announcement, the two nations posed their intent to collaborate on renewables as Saudi Arabia’s Minister of Energy Prince Abdulaziz bin Salman met with Azerbaijan’s Minister of Environment and Natural Resources Mukhtar Babayev in March.
During the meeting, the counterparts discussed opportunities for work and cooperation between their two countries in the field of climate change.
They also talked about joint efforts to achieve the goals of the UN Framework Convention on Climate Change and the Paris Agreement, the Kingdom’s ministry said in a statement at the time.
Closing Bell: TASI edges down to close at 12,509 points
RIYADH: Saudi Arabia’s Tadawul All Share Index closed at 12,508.93 points on Monday, losing 9.29 points or 0.07 percent.
The parallel market, Nomu, also shed 343.96 points or 1.28 percent to end the day’s trading at 26,596.22.
Concurrently, the MSCI Tadawul 30 Index fell 3.95 points or 0.25 percent to finish at 1,567.16.
The main index posted a trading value of SR8.8 billion ($2.3 billion), with 74 stocks advancing and 148 declining. On the other hand, Nomu reported a trade volume of SR37.7 million.
Al-Rajhi Company for Cooperative Insurance was the top performer on TASI as its share price surged 9.93 percent to SR126.20. LIVA Insurance Co. followed next with its share price jumping 9.92 percent to close at SR21.50.
Gulf General Cooperative Insurance Co. also performed well, climbing 9.16 percent to SR16.44. Raydan Food Co. and Fitaihi Holding Group increased 8.14 and 8.11 percent to SR28.55 and SR4.40, respectively.
Conversely, Saudi Cable Co. recorded the most significant dip, declining 4.94 percent to SR75.
Alkhaleej Training and Education Co. and Ash-Sharqiyah Development Co. also experienced setbacks, with their shares dropping to SR31.50 and SR23.40, reflecting declines of 4.83 and 4.10 percent, respectively.
Nomu’s top performer was Dar Almarkabah for Renting Cars Co., which saw a 9.73 percent jump to SR44. Mayar Holding Co. and Alqemam for Computer Systems Co. also recorded notable gains, with their shares closing at SR4.27 and SR89.80, marking an increase of 7.02 and 5.03 percent, respectively. Arabian International Healthcare Holding Co. and Foods Gate Trading Co. also fared well.
On Nomu, Raoom Trading Co. was the worst performer, declining by 7.28 percent to SR135. Other underperformers included Natural Gas Distribution Co. and National Environmental Recycling Co., whose share prices dropped 5.58 percent and 5.23 percent to SR42.30 and SR12.32, respectively.
Watani Iron Steel Co. and Future Care Trading Co. declined during the day to settle at SR2.81 and SR8.70, respectively.
Saudi Aramco in talks to acquire 10% stake in China’s Hengli Petrochemical
RIYADH: Energy giant Saudi Aramco held talks with Chinese Hengli Group Co. to acquire a 10 percent stake in its subsidiary, subject to due diligence and required regulatory clearances.
Aramco and Hengli Petrochemical Co. signed a memorandum of understanding for the proposed deal. The agreement supports the former’s strategy to increase its presence in key downstream markets, enhance its liquids-to-chemicals initiative, and ensure long-term crude oil supply agreements.
Last year, Aramco signed two multibillion-dollar agreements for liquids to chemicals investments in China.
In March 2023, a deal was signed between China’s Norinco Group and Panjin Xincheng Industrial Group to establish a joint venture to build a refinery and petrochemical complex in China’s Liaoning province. The initiative cost stands at approximately $12 billion.
The second agreement, signed in July, is an acquisition of a 10 percent stake in China-based firm Rongsheng Petrochemical Co. for $3.4 billion.
“This MoU supports our efforts to grow our global downstream footprint. We continue to explore new opportunities in important markets as we seek to progress in our liquids-to-chemicals strategy,” Mohammed Al-Qahtani, Aramco’s downstream president, said in a press release.
He continued: “We look forward to forging new partnerships and are excited by the prospect of expanding our presence in the important Chinese market.”
Hengli Petrochemical, a controlled subsidiary of Hengli Group, owns and operates a 400,000-barrel-per-day refinery and integrated chemicals complex in Liaoning province, and several plants and production facilities in Jiangsu and Guangdong provinces.
Speaking at a development forum held in March 2023 in Beijing, Amin Nasser, president and CEO of Aramco, highlighted substantial opportunities for cooperation between Saudi Aramco and Chinese partners in sectors aimed at reducing emissions.
“China has distinct strengths in renewables and critical materials, while Aramco and Saudi Arabia have a clear interest in solar, wind, hydrogen, and electrofuels. These areas have great long-term potential, and combining our strengths could match our ambitions,” he noted.
Saudi Arabia and China are working together to strengthen their already well-established strategic ties.
In September, the Kingdom’s minister of industry and mineral resources held meetings with key Chinese officials in Beijing. Bandar Alkhorayef also toured various companies and factories in different Chinese cities as part of his trip.
He held talks with China’s Vice Minister of Commerce Wang Shouwen, during which they discussed ways to boost economic collaboration and trade ties, the Saudi Press Agency reported.
The top officials also discussed investment opportunities in several economic sectors, including mining. At the time, the Saudi minister highlighted the Kingdom’s progress in the field of industries and mining.
