DUBAI: S&P Global, the ratings agency, painted a grim picture for the real estate sector in Dubai, with a meaningful recovery in property prices expected only after 2022.
At a presentation to journalists in the Dubai International Financial Center, S&P analyst Sapna Jagtiani said that under the firm’s “base case scenario,” the Dubai real estate market would fall by between 5 and 10 percent this year, roughly the same as the fall in 2018, which would bring property prices to the levels seen at the bottom of the last cycle in 2010, in the aftermath of the global financial crisis.
“On the real estate side we continue to have a very grim view of the market. While we expect prices to broadly stabilize in 2020, we don’t see a meaningful recovery in 2021. Relative to the previous recovery cycle, we believe it will take longer time for prices to display a meaningful recovery,” she said.
S&P’s verdict adds to several recent pessimistic assessments of the Dubai real estate market. Jagtiani said that conditions in the other big UAE property market, in Abu Dhabi, were not as negative, because “Abu Dhabi never did ramp up as much in 2014 and 2015 as Dubai.” S&P does not rate developers in the capital.
She added that a “stress scenario” could arise if government and royal family related developers — such as Emaar Properties, Meraas, Dubai Properties and Nakheel — which have attractive land banks and economies of scale, continue to launch new developments.
“In such a scenario, we think residential real estate prices could decline by 10-15 percent in 2019 and a further 5-10 percent in 2020. In this case, we expect no upside for Dubai residential real estate prices in 2021, as we expect it will take a while for the market to absorb oversupply,” she said.
S&P recently downgraded Damac, one of the biggest Dubai-based developers, to BB- rating, on weak market prospects.
However, Jagtiani said that, despite the “significant oversupply” from existing projects, several factors should held stabilize the market: Few, if any, major product launches; improved affordability and “bargain hunting” by bulk buyers; and a resurgence of Asian, especially Chinese, investor interest in the market.
Jagtiani also said that government measures such as new ownership and visa regulations and reduction in government fees could help prevent prices falling more sharply, as well as “increased economic activity related to Dubai Expo 2020, which is expected to attract about 25 million visitors to the emirate.”
The outlook on property was part of a challenging assessment of the credit-worthiness of the emirate. “In our view, credit conditions deteriorated in Dubai in 2018, reducing the government’s ability to provide extraordinary financial support to its government related entities (GREs) if needed,” S&P said in a report. “The negative outlook on Dubai Electricity and Water
Authority (DEWA) partly reflects our concern that a real estate downturn beyond our base case could out increased pressure on government finances,” the report said.
It pointed out that about 70 percent of government revenues come from non-tax sources, including land transfer and mortgage registration fees, as well as charges for housing and municipality liabilities, as well as dividends from real estate developers it controls, like Emaar and Nakheel.
S&P was generally comfortable with the credit ratings of the emirate’s banking system, which has an estimated 20 percent exposure to real estate. “Banks in the UAE tend to generally display a good level of profitability and capitalization, giving them a good margin to absorb a moderate increase in risks,” the report said.
Dubai real estate market recovery to be seen as of 2022: S&P
Dubai real estate market recovery to be seen as of 2022: S&P
- The outlook on property was part of a challenging assessment of the credit-worthiness of the emirate
- S&P was generally comfortable with the credit ratings of the emirate’s banking system
Saudi e-commerce thrives as sales using Mada cards reach $3.76bn in February
RIYADH: Saudi e-commerce sales using Mada cards reached SR14.11 billion ($3.76 billion) in February – an annual increase of 25 percent, the Kingdom’s central bank has revealed.
This figure includes transactions through online shopping, in-app purchases and e-wallets, and excludes transactions by Visa, MasterCard and other credit cards.
The number of e-commerce transactions also increased by 44 percent on a year-on-year basis to reach more than 84 million in February.
The shift in consumer behavior post-COVID-19, supported by regulatory reforms, robust internet infrastructure, and the continuous advancement of sophisticated e-commerce businesses, has been key drivers of the shift away from cash.
In the past three years, online sales in Saudi Arabia surged by almost 60 percent across various categories, with significant growth seen in media products, apparel, and footwear segments, according to the American International Trade Administration in a January commercial guide.
Additionally, the average spend per e-commerce user in the Kingdom rose by over 50 percent.
The organization anticipates continuous growth, projecting Saudi Arabia to reach 33.6 million e-commerce users by 2024, marking a 42 percent increase from 2019.
Factors contributing to this growth include the country’s 97 percent smartphone penetration rate, high mobile broadband subscriptions, and ranking as the 10th country globally for internet speed.
Moreover, 72 percent of Saudis over the age of 15 possess bank accounts highlighting the readiness of the population for digital transactions and online commerce.
The organization emphasized the prevalence of local platforms and the introduction of new entrants like Amazon Prime, which debuted in January 2021.
Other contributing factors include the government’s initiatives to enhance the sector’s regulatory framework, aimed at bolstering confidence among Saudis and encouraging the use of its platforms, with a focus on protecting consumers and businesses alike.
However, the organization also highlighted challenges for this sector, particularly the need to strengthen cyber-security measures to counter malicious emailing, which poses risks such as phishing scams exposing sensitive information like passwords, financial details, and personal data.
The shift to online shopping became apparent in the wake of the COVID-19 pandemic, significantly altering consumer behavior and impacting traditional retail outlets. The rise of e-commerce has proven essential, providing digital access to products and enabling businesses to adapt to changing market trends and consumer preferences.
This trend is reflected in data from the Kingdom’s central bank, also known as SAMA, showing a remarkable surge in e-commerce sales. In 2020, at the onset of the pandemic, sales increased by 279 percent, soaring from SR10.25 billion in 2019 to nearly SR39 billion.
This momentum continued in 2021 with a further annual rise of approximately 91 percent, reaching SR74 billion, and a subsequent increase of 65 percent in 2022 to SR123 billion. By the end of 2023, e-commerce sales through Mada cards had reached SR157 billion, underscoring the sector’s robust growth.
According to data from the German e-commerce database website, the top five online retailers in Saudi Arabia’s e-commerce sector for 2023 are jarir.com, nahdionline.com, amazon.sa, extra.com, and namshi.com.
Jarir.com leads the market with revenues of $452.8 million in 2023, followed by nahdionline.com with $330.1 million in sales, and amazon.sa with $328.5 million.
These top three online retailers collectively account for a market share of 38.7 percent among the top 100 stores in the Kingdom’s e-commerce market, as reported by the database.
The ranking is based on the top stores by net sales in the market for the year 2023.
According to a 2023 Deloitte Digital report, these companies are utilizing data and analytics to gain deeper insights into their customer base, tailoring their offerings to better meet their needs.
The Kingdom has come a long way from a population initially lacking trust in online retailers, limited payment options, and product diversity, to now holding the potential to become a thriving e-commerce market, according to the firm.
This transformation is particularly supported by the Saudi government’s implementation of various initiatives aimed at boosting the digital economy’s contribution to the Kingdom’s gross domestic product.
The adaptability of the regulatory framework and its adjustments to market dynamics have created an environment conducive to the growth of e-commerce and the flourishing of innovative technologies.
As the industry evolves, new payment methods are emerging, prompting the central bank to establish a sandbox for testing and regulating these innovations. This serves as a crucial platform for the industry to experiment with and adopt new technologies.
Additionally, the Communications, Space, and Technology Commission introduced a dedicated sandbox for delivery applications, streamlining operations and enhancing efficiency for e-commerce businesses.
Regulatory initiatives have facilitated the entry of major players like STC, and partnerships such as Aramco’s collaboration with Google Cloud have further supported and provided infrastructure for all participants in the e-commerce ecosystem, Deloitte added.
Furthermore, the establishment of free zones has played a pivotal role in simplifying logistics and expediting the movement of goods, thus bolstering Saudi Arabia’s e-commerce landscape.
Deloitte forecasts a remarkable surge in the sector, with a projected market volume of $23.46 billion by 2027. Additionally, the number of e-commerce users in the Kingdom is expected to reach 34.5 million by 2025, with user penetration increasing from 66.7 percent in 2023 to 74.7 percent by 2027.
Oil Updates — Crude rises more than $1 a barrel on tighter supply outlook
NEW YORK: Oil prices jumped more than $1 a barrel on Thursday, closing out the month higher on the prospect of OPEC+ staying the course on production cuts, ongoing attacks on Russia’s energy infrastructure and a falling US rig count tightening crude supplies, according to Reuters.
Brent crude futures for May settled at $87.48 a barrel, its highest level since Oct. 27, after gaining $1.39, or 1.6 percent. The more actively traded June contract settled at $87 a barrel, rising $1.58, with the May contract expiring on Thursday.
US West Texas Intermediate crude futures for May delivery settled at $83.17 a barrel, rising $1.82, or 2.2 percent.
On the week, Brent rose 2.4 percent and WTI gained about 3.2 percent. Both benchmarks finished higher for a third consecutive month.
In the prior session, oil prices had come under pressure from last week’s unexpected rise in US crude oil and gasoline inventories, driven by an increase in crude imports and sluggish gasoline demand, according to Energy Information Administration data.
However, the crude stock increase was smaller than the build projected by the American Petroleum Institute, and analysts noted the increase was lower than expected for the time of year.
“We ... expect US inventories to rise less than normal in reflection of a global oil market in a slight deficit,” SEB analyst Bjarne Schieldrop said. “This will likely hand support to the Brent crude oil price going forward.”
US refinery utilization rates, which rose 0.9 percentage point last week, also supported prices.
The oil and gas rig count, an early indicator of future output, also fell by three to 621 in the week to March 28, according to energy services firm Baker Hughes.
The US economy, meanwhile, grew faster than previously estimated in the fourth quarter. Gross domestic product increased at a 3.4 percent annualized rate from the previously reported 3.2 percent pace, the Commerce Department’s Bureau of Economic Analysis said.
“The strength in the stock market suggests strong forward earnings that are, in turn, hinting at a surprisingly strong US economy conducive toward better than expected energy product demand,” said Jim Ritterbusch of energy consultancy Ritterbusch and Associates.
Inflation data also affirmed the case for the US Federal Reserve to hold off on cutting its short-term interest rate target, a Fed governor said on Wednesday, but he did not rule out trimming rates later in the year.
“The market is converging on a June start to cuts for both the Fed and the European Central Bank,” JPMorgan analysts said in a note. Lower interest rates typically support oil demand.
Investors will watch for cues from a meeting next week of the Joint Monitoring Ministerial Committee of producer group the Organization of Petroleum Exporting Countries.
Increased geopolitical risk has raised expectations of possible supply disruption, but OPEC+ is unlikely to make any oil output policy changes until a full ministerial gathering in June.
Attacks by Ukraine on Russian energy infrastructure have also boosted the sentiment around global crude supplies tightening and helped to support oil prices, said Again Capital LLC partner John Kilduff.
“It’s a prime target, and they appear to have not heeded the ask by the Biden administration to not attack Russian energy infrastructure,” Kilduff said.
UAE, Saudi Arabia ranked as leading global entrepreneurial ecosystems
RIYADH: The UAE and Saudi Arabia have been ranked first and third respectively in the Global Entrepreneurship Monitor report for 2023-2024.
The report, which assesses the entrepreneurial ecosystems of countries worldwide, is highly regarded by international bodies such as the World Bank, International Monetary Fund and various UN organizations,
Saudi Arabia showed significant progress in its entrepreneurial environment, with its National Entrepreneurship Context Index score increasing from 5.0 in 2019 to 6.3 in both 2022 and 2023.
This reflected the country’s successful efforts to diversify its economy and foster a supportive climate for entrepreneurship, said the report. A notable highlight was increased female entrepreneurship, with eight women starting new businesses for every 10 men in 2023.
The country also has the highest proportion of adults who know an entrepreneur, perceive ease in starting a business, recognize good business opportunities, and believe they possess the necessary skills and experience to start a business.
However, despite high acknowledgment of opportunities and capabilities, there remains a considerable fear of failure, the report concluded.
Additionally, a significant percentage of Saudi entrepreneurs are expected to leverage digital technologies and focus on minimizing environmental impacts and maximizing social impacts, indicating a readiness for future challenges.
Meanwhile, the UAE set a record with its National Entrepreneurship Context Index score of 7.7, the highest in the report’s history.
The report also positioned the UAE as the best environment in the world for starting and conducting new business ventures, surpassing many advanced economies. It also ranked third globally in terms of physical infrastructure.
Significant strides have been made in entrepreneurship education within schools, emphasizing skills like creative thinking, problem solving, opportunity recognition and risk assessment. The country ranked among the top five out of 49 in this aspect.
Saudi Arabia, Azerbaijan discuss climate action cooperation ahead of COP29
- Two ministers discussed opportunities for work and cooperation between their two countries in the field of climate change
JEDDAH: Saudi Arabia’s Minister of Energy Prince Abdulaziz bin Salman met with Azerbaijan’s Minister of Environment and Natural Resources Mukhtar Babayev on Thursday.
Babayev has also been appointed president of the UN COP29 climate talks which will be held in Baku in November.
During the meeting, the two ministers 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.
They reviewed the Kingdom’s efforts and initiatives in dealing with the effects of climate change, such as exploiting renewable energy sources, and managing, reducing and eliminating emissions through the Saudi and Middle East green initiatives.
In addition, the ministers discussed implementing the circular carbon economy approach and its technologies, which was developed by the Kingdom during its G20 presidency and endorsed by leaders, along with other national and regional programs and initiatives.
Saudi Arabia unveils Green Finance Framework in sustainability push
RIYADH: Public and private participation in climate financing in Saudi Arabia is poised to receive a boost with the introduction of the Green Finance Framework.
This initiative, launched by the Ministry of Finance, is aimed at propelling the nation toward its sustainability goals and achieving net-zero emissions by 2060, Saudi Press Agency reported.
The framework is expected to contribute to the efforts aimed at reducing emissions through a circular carbon economy approach, along with positioning Saudi Arabia as a regional leader in sustainable finance.
It was in October 2021 that Saudi Arabia announced its ambitious goal to achieve net-zero emissions by 2060.
With this framework, the Kingdom aims to significantly reduce greenhouse gas emissions by 278 million tonnes annually by 2030, aligning with the commitments under the Paris Agreement.
The Paris Agreement is an international treaty on climate change that was produced in 2015 and compels signatories to work toward limiting the global temperature increase to 1.5 °C above pre-industrial levels.
The Kingdom has been spearheading several initiatives including the Saudi Green Initiative to combat the adverse effects of climate change over the past few years.
On March 27, the Kingdom celebrated its first Saudi Green Initiative Day highlighting the importance of fostering a sustainable legacy for future generations.
The celebration was organized under the theme “For Our Today and Their Tomorrow: KSA Together for a Greener Future” and it highlighted the collaboration of more than 80 public and private sector projects that are part of the SGI.
To date, Saudi Arabia has deployed 2.8 gigawatts of renewable energy to the national grid, powering more than 520,000 homes, with additional projects underway to increase capacity.
Moreover, more than 49 million trees and shrubs have been planted throughout the Kingdom since 2021, and extensive land rehabilitation efforts have been undertaken.
Additionally, energy giant Saudi Aramco, in collaboration with the Kingdom’s Ministry of Energy is building a carbon capture and storage hub in Jubail, which will have 9 million tonnes annual storage capacity upon its completion in 2027.