NEWS BRIEF 26 - asteco.com · why world's rich are splurging money on dubai real estate? dubai...

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IN THE MIDDLE EAST FOR 30 YEARS

ASSET MANAGEMENT SALES LEASING

VALUATION & ADVISORY SALES MANAGEMENT OWNER ASSOCIATION

RESEARCH DEPARTMENT

NEWS BRIEF 26 SUNDAY 28 June 2015





REAL ESTATE NEWS UAE

BRIGHT YOUNG THINGS GIVE MAYFAIR A MIDDLE EAST SPARKLE

UAE PREPARED FOR PROPERTY PRICE CORRECTION OF UP TO 20 PER CENT THIS YEAR, SAYS RATINGS AGENCY S&P

SALE AND LEASEBACK TRANSACTIONS GAINING POPULARITY IN THE MIDDLE EAST

MIDDLE EAST BUYERS SET TO ACCOUNT FOR UP TO 30% OF LONDON HOME PURCHASES

OPPORTUNITIES FOR CONTRACTORS CONTINUE TO BUILD IN GULF MARKETS

DUBAI

DUBAI OFF-PLAN PROPERTIES 20% CHEAPER THAN SECONDARY MARKET CHINA STATE WINS $67M CONTRACT TO LINK DUBAI BOLLYWOOD AND

LEGOLAND RESORTS SITE DUBAI INFLATION HITS SIX-YEAR HIGH AMID SHARP RISE IN HOUSING

AND UTILITY COSTS WARNING OVER OPENING INDIAN PROPERTY MARKET TO FOREIGNERS EMIRATES REIT EXPECTS DECENT RETURNS FROM INDEX TOWER FIT-OUTS

VISA-FREE TRAVEL FOR EMIRATIS PREDICTED TO LEAD TO PROPERTY INVESTMENT BOOM

AMLAK IN TALKS OVER PARTNERSHIP WITH EMAAR DUBAI DEVELOPERS EXAMINE OPTIONS IN OFFICE SPACE

EMAAR MISR SHARES TRANCHE FOR RETAIL INVESTORS 36 TIMES OVERSUBSCRIBED

PALM JUMEIRAH VILLA HAS ECHOES OF ANDALUCIA AND PRICE TAG OF DH56M

OPPORTUNITIES FOR CONTRACTORS CONTINUE TO BUILD IN GULF MARKETS

THE RETURNS ON BUY-TO-LET PROPERTY ‘NO LONGER ADD UP’ DAMAC LAUNCHES PARAMOUNT RESIDENCES ON SHEIKH ZAYED ROAD

WHY WORLD'S RICH ARE SPLURGING MONEY ON DUBAI REAL ESTATE? DUBAI PROPERTY REGISTRATION DEADLINE EXTENDED TO OCTOBER 31 DUBAI OFF-PLAN PROPERTIES 20% CHEAPER THAN SECONDARY MARKET

ABU DHABI

AGILITY UNIT TO INVEST $225M INTO REEM MALL ABU DHABI SET FAIR AFTER VICTORY AT VOLVO OCEAN RACE

ETIHAD PARTNERS WITH MSC MUSICA OPERATOR TO BOOST ABU DHABI CRUISE TOURISM





QATAR QATAR RAIL GETS FLOODED TUNNELLING MACHINE RUNNING

ARCADIS LANDS CONTRACT TO DESIGN STATIONS FOR DOHA METRO’S GOLD LINE

AL AIN

HAZZA BIN ZAYED STADIUM IN AL AIN SHORTLISTED FOR WORLD BUILDING OF THE YEAR





CHINA STATE WINS $67M CONTRACT

TO LINK DUBAI BOLLYWOOD AND

LEGOLAND RESORTS SITE

SUNDAY 21 JUNE 2015

The regional unit of China State Construction Engineering Corporation (CSCEC) has won a US$67 million

contract to build access roads to the forthcoming Dubai Parks and Resorts site.

The contract from the Dubai Roads and Transport Authority (RTA) will involve the construction of two

new ramps to provide access to the site from Sheikh Zayed Road as well as at-grade intersections from

the link road between Sheikh Zayed Road and Mohammed bin Rashid Road.

The work will take about 14 months to complete and will be carried out by the company’s civil and

infrastructure arm.

It will provide all signage, lighting, pavement markings, drainage and landscaping, as well as diverting

existing ¬services.

The project’s main consultant is Parsons. CSCEC Middle East is already carrying out phase two of the

Dubai Canal project for the RTA under a Dh384m contract.

This involves the construction of new bridges across Al Wasl Road and Jumeirah Road to allow yachts to

pass underneath. It will be completed by the end of next year. “The award of this project is proof of the

company’s good reputation as well as its capacity to win trust from the client, and it marks the

company’s solid foundation in the infrastructure market in the UAE,” CSCEC said.

Dubai Parks and Resorts is set to open in October 2016. The Dh10.8 billion resort will contain three

separate theme parks and one water park, including the first Legoland theme park in the Middle East,

Bollywood Parks Dubai and Motiongate Dubai.

Source: The National

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DUBAI INFLATION HITS SIX-YEAR HIGH

AMID SHARP RISE IN HOUSING AND

UTILITY COSTS

SUNDAY 21 JUNE 2015

Dubai residents are feeling the effects of rising prices.

Dubai’s consumer price index rose 4.6 per cent annually last month, the highest since 2009, amid a

surge in housing and utility costs.

The Dubai Statistics Center said the consumer price index increased 0.6 per cent month-on-month.

Meanwhile, housing and utility costs, which make up about 44 per cent of consumer expenses, soared

7.8 per cent year-on-year and 0.7 per cent from April, the agency said.

The cost of food and beverages, which make up 11 per cent of the price index basket, increased 1.6 per

cent from May 2014 while gaining 3 per cent from the previous month.

There is some hope however, economists say, that the UAE may have already gone through the worst of

the price rises this year, as retailers typically raise prices ahead of Ramadan.

“Domestic inflation in Dubai is mainly driven by rising rents,” said Alp Eke, a senior economist at

National Bank of Abu Dhabi. “With lower oil prices, foreign-origin inflation is expected to decline. The

most recent housing sales and rental data indicates that rents are declining as well.”

“In my opinion, after the artificial price increase during Ramadan, inflation will be in a declining trend,”

he said. “The downtrend, which is expected in the next few months, can be attributed to the

appreciation of the US dollar against other currencies, the decline in oil prices and softening of property

sales prices. Similarly, with lower global food costs, the contribution of food to foreign inflation will be

lower.”

Dubai joins Abu Dhabi in reporting higher inflation. The capital registered a five-year high in price

increases in April, but in May CPI inflation rose just 0.2 per cent from the previous month, suggesting to

economists a steadying in rental prices.

Year-on-year, the Abu Dhabi inflation figure for last month was more or less unchanged at 5.2 per cent.

Housing rents in Abu Dhabi alone rose by 12 per cent last year and another 2 per cent in the first

quarter of this year despite the crude oil retreat since last June, according to data from the property

broker CBRE.

The rise in school fees is also causing frustration among residents.

Dubai’s Knowledge and Human Development Authority said last week that fees at Dubai’s 117 private

schools could be raised by between 2.9 and 5. per cent.

Fees are among the highest in the region. A study last year showed that fees for top British-curriculum

schools in Dubai were up to US$23,100 a year, the highest in the GCC.

Dubai and Abu Dhabi are also the most expensive cities in the Middle East for expatriates, according to

the most recent survey by the cost of living experts Mercer.





Abu Dhabi and Dubai are the 33rd and 23rd most-expensive cities in the world, respectively, in large

part because of a steep rise in rents for expatriates.

Abu Dhabi has moved up 35 places from last year’s Cost of Living survey by Mercer. The cost of living in

Dubai has also risen – the city was 67th last year.

Economists estimate that the inflation figure is between three and six months behind current

developments in the property market.


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WARNING OVER OPENING INDIAN

PROPERTY MARKET TO FOREIGNERS

SUNDAY 21 JUNE 2015

Opening the Indian property market to foreigners could widen the gulf between supply and demand in

the country, making properties unaffordable to nationals.

Although there has been some liberalisation of foreign domestic investment rules since the prime

minister Narendra Modi came to power last year, this has largely been limited to corporate buyers and

the market remains closed to individuals.

Sunil Jaiswal, the president of Sumansa Exhibitions, which organises the Indian Property Show in Dubai,

said that this was a good thing.

“If they did [liberalise], we would see a skyrocketing of prices, and it would not be good for the

economy,” Mr Jaiswal said. “I think India has a shortfall right now of about 20 million housing units. You

do not really want other people coming in because there is enough domestic demand.”

India has a population of close to 1.3 billion people, which is predicted to rise to 1.6 billion by 2050. Its

housing shortfall is likely to widen to 100 million by 2030, according to the developer Xrbia Group, which

recently unveiled plans to try to meet 1 per cent of this need by building one million new homes in 100

proposed new cities.

Its founder Rahul Nahar says: “It has been predicted that by 2030, our cities will be home to 800 million

people. Which means 70 per cent of India’s total population will live in cities.”

Xrbia builds large townships with integrated infrastructure connections and community facilities such as

schools, hospitals and entertainment units.

It can build quickly, with four-storey buildings typically being turned around in 90 days, and cheaply –

prices start from 1.3 million rupees (Dh75,000) for an apartment to 4.3m rupees.

The value of properties at the most recent edition of Dubai’s bi-annual India Property Show this month

varied massively in range, with Xrbia’s budget units displayed alongside Mumbai penthouses costing

500m rupees from The Wadhwa Group and Lodha Developers.

“And the thing about India is they could be almost next door to each other,” said Mr Jaiswal.

Figures from JLL forecast that India’s property market will be worth $180 billion by 2020, while a survey

of 15,000 show visitors by Sumansa Exhibitions into favoured locations placed Mumbai (cited by 33 per

cent), Bangalore (26 per cent) and Pune (16 per cent) in the top three.

CBRE reported that the volume of residential sales fell by 30 per cent last year and the number of new

homes fell by 25 per cent, with buyers concerned that prices are already too high. New Delhi, Bangalore

and Chennai were the markets registering the most significant declines.

“Regardless of its speed of growth, the fact remains that the Indian real estate sector is dynamic, and

long-term investments into it will pay off very well as long as the investment decision is sound,” said

Ashwinder Raj Singh, JLL’s India’s residential services chief executive.

Those manning the stalls at the show were hoping that the rupee’s recent devaluation against the

dirham – Dh1 will now get you 17.5 rupees, compared to 14 rupees last year and 12 rupees five years

ago – would encourage non-resident Indians in Dubai to spend big. Lodha Developers was exhibiting its





World Towers project, with apartments designed by Armani Casa selling for 500m rupees and a Jade

Jagger for Yoo-designed apartment scheme called Lodha Fiorenza, where typical units cost about 50m

rupees, according to the assistant general manager Praytush Kumar.

It was also promoting a Mumbai project – its first in the Thane district for three years, which will

comprise 3,000 apartments. Its worldwide launch is due to take place on Saturday.

“Most of the investors want to buy off-plan because they want capital appreciation,” said Arjun Nayar,

assistant general manager of international sales at Kalpataru, which has an office in Dubai’s Jumeirah

Lakes Towers. “Property in Dubai will not give you that, but it will give good rental yield.”

Yet Mr Jaiswal urged caution against thinking currency movements were a one-way bet.

“If it went the other way, properties would maybe be 25 per cent more expensive than they are. So I

always encourage people to look at that exchange rate and be very careful about making long-term

decisions based on what the rate is today.

“Can you still afford to make those payments each month? Because if you cannot, you are going to be

put under stress.”

He added that NRIs will take a longer-term view – either because they are buying investments to hold, a

home for the future, or both.

“If you are looking at five or 10 years, it is very unlikely that things are not going to work out.”


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EMIRATES REIT EXPECTS DECENT

RETURNS FROM INDEX TOWER FIT-

OUTS

SUNDAY 21 JUNE 2015

Emirates Reit has let a quarter of its first fully fitted-out floor at Index Tower in Dubai International

Financial Centre.

The Sharia-compliant real estate investment trust has bought 17 out of 25 of the building’s office floors,

1,404 car parking spaces and all of its retail units. These were acquired through a series of transactions

with Index Tower’s developer, Union Properties, last year.

The trust has completed the 10th floor, which contains 12 offices ranging from 1,279 to 1,588 square

feet. The leasable space on the floor is 17,533 sq ft, 25 per cent of which Emirates Reit has managed to

let. The company expects to lease the rest soon.

Sylvain Vieujot, Emirates Reit’s executive deputy chairman, said tenants only tend to sign up for fitted-

out space once the work is done, and that the offices it has rented out have all been signed “within the

past seven to 10 days”.

Fit-outs for a further three floors are now under way, but the company is also letting others as

unfinished (shell and core) space.

The next floor to be fitted out will be the fifth floor. It will contain 22 units of about 593 sq ft each and is

due to be completed next month. The remaining two floors under fit-out will be completed “by the end

of this year, probably in the next quarter”, he added.

He said that he was not sure how many of the floors would end up being fitted out and how many would

be rented as shell and core.

“I don’t know if it would be 30 per cent, 40 per cent or even 70 per cent – maybe it would be

somewhere in the middle. Both I think will do well.”

However, he added that the valuations so far on fitted out space have made it a worthwhile endeavour.

“When you look at valuations for a building of this quality, the net yield is usually below 10 per cent. We

think we can achieve rents in excess of 10 per cent.

“If you buy an asset with the quality of Index Tower in London or Paris, the net yield is closer to 3 per

cent. This is not the case in Dubai, of course, but I think the quality of the building is very high.”

In its latest Dubai office report for the first half of this year, Knight Frank said that rent levels for fitted

out space in DIFC remained steady at Dh2,530 per sq metre, compared to Dh1,991 per sq metre in

Downtown Dubai and Dh1,615 for offices fronting Sheikh Zayed Road or in Dubai Internet City


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QATAR RAIL GETS FLOODED

TUNNELLING MACHINE RUNNING

MONDAY 22 JUNE 2015

A tunnel-boring machine that was damaged because of flooding on the Doha Metro is up and running

after three months of repairs, and the project remains on track.

Qatar Rail, the company overseeing the construction of the country’s railway network, said the machine

was operating at the Corniche station on the Red Line when a gate closure mechanism failed, causing

water to flood into the machine and damaging the equipment. The flood did not cause any injuries or

environmental damage, it added.

Gerhard Cordes, the Red Line project manager for Qatar Rail, said: “We reacted immediately to the

incident by discharging water through pumping. Dewatering wells were installed and surface dewatering

commenced in early March.”

Mr Cordes said that the company then started an “intense repair period”, with more than 80 per cent of

the machine’s parts replaced and the remainder cleaned and repaired, before work started earlier this

month.

Saad Al Muhannadi, the chief executive of Qatar Rail, said that such repairs usually take between six

and 18 months to complete, but that its prompt action meant the project remains on track, as it was

running five months ahead of schedule.

“We are very aware that such a complex tunnelling project is prone to incidents of this sort [and] we are

proud of the team who handled the incident.”

To date, more than 30 kilometres of tunnels on the Doha Metro have been completed – up from 20km in

April. In total, the first phase will have 113km of tunnels.

Qatar Rail has 21 tunnel-boring machines in use for construction of the Doha Metro. It expects the

tunnelling aspects of the project to complete by the second quarter of 2017.

Overall project completion for phase one is expected by October 2019.


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VISA-FREE TRAVEL FOR EMIRATIS

PREDICTED TO LEAD TO PROPERTY

INVESTMENT BOOM

MONDAY 22 JUNE 2015

Summer in Europe, particularly in London, has long been attractive to Emiratis with means.

But this summer, there is an added incentive to encourage Emiratis to travel to the continent and to

consider investing more of their money into certain of the trading bloc’s hottest property markets.

Last month, visa restrictions were lifted on Emiratis travelling to the European countries that make up

the Schengen area. Visitors now receive a visa on arrival, which allows them to stay for 90 days in any

180-day period.

This means Europe now has reciprocal visa arrangements with the UAE, something that has been in

negotiation between governments for many years.

The United Kingdom, which is outside the Schengen area, has also relaxed its visa restrictions for

Emiratis. Since the beginning of 2014, the UK has operated an electronic visa waiver system for

Emiratis.

Almost 50,000 Emiratis used the service last year, which simply requires them to register online up to

48 hours before departure to the UK. They can then stay in the British Isles for up to six months.

Faisal Durrani, an international research manager at Cluttons, a British estate agent, believes the

relaxation of visa restrictions will lead to a boom in cross-border property investment.

“There is no doubt that visa free travel to the Schengen area for Emiratis has unlocked the door for a

significant potential upturn in cross border property investment. The added benefit of the weakness of

the euro means that dirham buyers are now about 23 per cent richer than this time last year, in euro

terms. This clearly makes an EU-based property investment particularly attractive.”

“Of course it’s not just Emirati buyers that are in this position. With most GCC states maintaining a

fixed peg to the US dollar, they are all well positioned to leverage this tremendous currency advantage

that does not look set to weaken in the short term, especially as the Greek financial saga lingers.”

Other factors are also encouraging, not least that there are about 500 flights a week from the UAE to

Europe. And if Europe is suddenly more attractive to Arabian Gulf investors, that can only help to

increase the known attractions of London – which is Europe’s safest and most liquid property market,

according to IPD, a property analyst.

While it is almost impossible to track residential investments from GCC investors because most are

private deals, it is clear from the patterns seen in the commercial property sector that the UK continues

to have a strong appeal for Emirati investors.

Mr Durrani says there is an upturn in dollar-based funds looking at commercial assets in the UK. From

January to March this year there was a 150 per cent increase in foreign purchases of office buildings,

shopping centres and the like. About 40 per cent of that money is believed to come from Middle East

buyers.





London remains the prime destination for Middle East money coming into the region.

Such investors are not really interested in receiving income from properties they buy and are investing

primarily for capital growth.

Frequently they “buy to leave” – in other words buy a property that they live in for three to four months

a year and then leave empty at other times.

In Chelsea, Belgravia and Knightsbridge – three of London’s most expensive areas – Mr Durrani says

there are a lot of value driven investors coming into the market. They are buying property they can

improve and add value to.

Raed Hanna, the managing director of Mutual Finance, believes that the relaxation of the rules on visas

will be welcomed by Middle East investors.

“A large number of Middle East families and companies are looking to diversify their investments, due to

present situation and uncertainty in [parts of] the Middle East,” says Mr Hanna. “The UK is considered a

safe haven, even though the returns are lower than in their home countries.

“Any changes that make it more efficient for people to come here and invest are welcome, families want

to be on the ground and feel exposed when dealing with matters at arm’s length or via intermediaries,”

adds Mr Hanna, who has been assisting Middle East investors with the procurement of suitable

properties throughout the UK for 35 years.

Inward investment from the Middle East into the UK is now five times what it was in 2013, says Mr

Hanna, who expects it to continue growing for the foreseeable future.

Besides visa relaxations, the relative weakness of sterling and the euro, the other major factor pushing

more Middle East investors into UK property markets is the Conservative victory in last month’s general

election. Investors rushed into the market in the wake of the election as the threat of the so-called

“mansion tax”, rental caps and the scrapping of “non-dom” status receded.

Chris Brett, the head of international capital markets at CBRE, agrees there has been a surge in interest

from GCC investors in London property, which has only increased since the decisive general election

result.

Private investors, in particular, he says, have been keen to explore investment angles. The UK’s

developing private rented sector is also appealing to Middle East investors.

Last month, the Bahrain-based Apache Capital Partners said it was funding a £1 billion (Dh5.83bn)

development in Manchester that will provide 458 new homes initially, for let to private tenants.

Silver Arrow, the Abu Dhabi Investment Authority fund, last year backed Fizzy Living, another British

developer, with £200 million of capital. The investment allowed Fizzy to make its first purchase for a

build-to-rent scheme in Finchley, north London.

CBRE research forecasts that Middle East investors will spend US$180bn in commercial real estate

markets outside their own region over the next decade.

Europe is the preferred target with 80 per cent of the $180bn, about $145bn, targeted for the region

over the next 10 years. Close to $85bn will flow into the UK, with $60bn directed at continental Europe,

CBRE says. France, Germany, Italy and Spain are among the key target markets on the mainland.

Beyond residential investment and commercial property deals, the relaxation of visa restrictions will also

be a boost to London’s most prestigious shopping streets. Retailers and restaurateurs in the heart of the

city have been campaigning hard for visa relaxations for high-spending tourists. The likes of Selfridges

on Oxford Street, one of the capital’s most stylish shops and always popular with visitors, expects to see

an increase in shoppers from the region. The world-famous Harrods store, which was acquired by Qatar

Holding from Mohamed Al Fayed five years ago for £1.5bn, and its Knightsbridge neighbour Harvey

Nichols, are also confident of more high-spending visitors passing through.





According to UK government figures, Middle East visitors spenta total £4.5 million a day when visiting

London in 2013. In total, £1.25bn was spent in the UK by families from the Middle East, with half that

figure spent in London.

Retailers will be hoping that they can capture even more than that in summer 2015.


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BRIGHT YOUNG THINGS GIVE MAYFAIR

A MIDDLE EAST SPARKLE

MONDAY 22 JUNE 2015

Sultan, a 20-year old student from Abu Dhabi, is typical of the new breed of Mayfair resident, as one of

London’s stuffiest neighbourhoods is being rediscovered by a younger crowd.

Sultan is renting a three-bedroom penthouse flat above a shop on Albermarle Street for about £1,400

(Dh8,176) a week, according to the UK’s Daily Telegraph.

The well-heeled student is one of a new breed of super-rich 20-somethings who are living and working

in Mayfair, home to many of London’s hedge funds, private-equity houses and property developers.

“Mayfair has become a global-oasis for young people, and a “twin” of destinations like New York,

Monaco, San Tropez and Miami, which are the other hubs where the world’s wealthy elite choose to

relax and enjoy their leisure time,” says Peter Wetherell, an estate agent who has been selling and

leasing properties in Mayfair for morethan 35 years.

According to the Who lives in Mayfair? report by Wetherell and Dataloft, 60 per cent of the

neigbourhood’s residents are now under 44 years old.

Between the 1950s and 1980s, Wetherell estimates that the average age range of owners in Mayfair was

55 to 75 and properties were often inherited rather than purchased.

Over the past 15 years the biggest rise has been residents born in continental Europe and the Middle

East. Wetherell highlights that Mayfair is now the “London address of choice” for wealthy residents from

Qatar, Saudi Arabia, Kuwait, Abu Dhabi, France, Germany, Italy, India Nigeria and Russia.

Residents tend to fall into two categories: first there are the “staycation residents”, people who typically

visit London two or three times a year and stay for anything from two to six weeks at a time. Middle

East residents who “buy to leave” fall into this category.

They consider their Mayfair property their holiday home and the neigbourhood as a “village-resort”

where they can enjoy luxury restaurants, clubs and shopping.

Then there are overseas residents, Anglophiles, who choose to make London their permanent home.

Wetherells reports that more than two-thirds of Mayfair residents typically eat out three to four times a

week and Middle East residents spend on average £1,900 per shopping trip, which puts them far ahead

of US shoppers who spend only £550 a time and Chinese shoppers who spend on average £1,688 per

shop.

As a result of these trends, the Mayfair economy has recovered strongly since the global recession.

The latest New West End Company Report shows that annual food and beverage sales are up 9.1 per

cent; over 80 new shops opened in the Mayfair area in 2014 and annual retail sales are up 3.8 per cent.

Not even major infrastructure works to build a new railway under central London, which has disrupted

many streets and squares, has deterred buyers and renters from the area.

Over the 12 months to the end of March the average value of Mayfair residential property reached

£2,300 per square foot, an increase of 7.4 per cent from 2013, according to Wetherell. While more than





nine out of 10 of all properties sold went for more than £1 million, 28 per cent commanded a sales price

of more than £5 million – up 17 per cent on the previous year.


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UAE PREPARED FOR PROPERTY PRICE

CORRECTION OF UP TO 20 PER CENT

THIS YEAR, SAYS RATINGS AGENCY

S&P

FRIDAY 22 MAY 2015

Dubai property prices could fall 10 to 20 per cent over the remainder of this year and early 2016,

according to the ratings agency Standard & Poor’s (S&P).

But developers are better placed to cope than in the 2008-09 crisis, according to the agency.

The decline in values is taking place “after three years of sharp price appreciation” and is due to an

increase in supply, S&P said.

It cited figures from the property data provider Reidin which anticipated 20,170 units to be delivered in

Dubai this year – compared to the three-year annual average of 11,600.

Although it expects domestic economic growth to “slow markedly” in 2015-16 as a result of lower oil

prices, it adds that the economy is more diverse than in 2009, when property sales were a key source of

revenue.

The population is growing at a rate of 5 to 6 per cent in Dubai and 7 to 8 per cent in Abu Dhabi.

Tourism numbers should also hold up, and regulations such as the federal mortgage cap introduced in

2013 and mandatory requirements for developers to use escrow accounts for off-plan sales have

reduced the risk of defaults.

S&P argues that the drop in demand is because of fewer non-residents buying properties.

“In early 2015, for instance, non-resident demand from Russia and other member countries of the Gulf

Cooperation Council was particularly subdued.”

Major players in the market, such as Aldar Properties, DIFC Investments, Damac Properties and Emaar

Properties, have managed to diversify revenue streams, as well as improve their own balance sheets

and cash generation over the past two years.

The ratio of their debt to Ebitda dropped to 1.9x at the end of 2014, compared to 3.3x at the end of

2008.

The S&P credit analyst Franck Delage said that the major developers had attracted more money from

rentals, which means that their income streams are more predictable.

“It gives good visibility on revenues. It gives a cushion of resources and helps to cover interest charges

on a more predictable basis,” he said.

He added that they were more flexible in terms of revenue mix, with many capable of adapting their

product range to produce more budget properties if required





“Since there has been a few years of strong price growth, demand could be more price-sensitive.”

A sensitivity analysis conducted by S&P for the report argued that even if the market performed much

worse than predicted, with average selling prices dropping 30 per cent and current interest rates

doubling, it would have little impact on the credit rating of major developers.


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AGILITY UNIT TO INVEST $225M INTO

REEM MALL

FRIDAY 22 JUNE 2015

A subsidiary of the Dubai-listed logistics company Agility yesterday said it would invest up to US$225

million over the next three years in a mall being built by National Real Estate Company (NREC) in Abu

Dhabi.

United Projects for Aviation Services Company (Upac) and NREC have signed an agreement to this

effect, according to the Dubai Financial Market website.

Agility did not provide any other details except that the financial impact for the investment would be

disclosed from time to time as required by the market regulator.

Agility and NREC are Kuwaiti companies.

Upac manages commercial space in Kuwait and real estate in Kuwait International Airport, according to

Agility’s website.

The 2 million-square-foot mall is being constructed on Reem Island and will have 450 stores, 85 food

and beverage outlets and “some of the largest hypermarket space in the region”.

NREC first announced plans for the project in 2008, but it has only made progress recently. The

developer said in January that construction would start this year and would be completed by 2018.

“The Reem Mall will become one of Abu Dhabi’s new major retail, leisure, dining and entertainment

destinations, serving the new heart of the capital,” Shane Eldstrom, NREC’s vice president for

development said last year. “Our modelling for Reem Mall was always based on developing the project

as Reem Island itself was building momentum as a residential centre.”


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SALE AND LEASEBACK TRANSACTIONS

GAINING POPULARITY IN THE MIDDLE

EAST

FRIDAY 22 JUNE 2015

An increasing number of large companies in the GCC are turning to property sale and leaseback deals to

free up cash for their businesses, according to JLL.

The consultancy points to a range of sale and leaseback deals in the region in recent years, including

school properties sold by Gems Education, supermarkets by the grocer Azizia Panda and bookstores by

the retailer Jarir.

Sale and leasebacks involve companies selling buildings to investors to generate cash, but then taking a

long leasehold on the properties to make sure they can continue to use them at a fixed cost for as long

as they need.

“From a western perspective, these transactions are very common,” said Gaurav Shivpuri, JLL Mena’s

head of capital markets.

“They’ve been done for many years – decades, even.”

He said attachment to individual pieces of real estate tends to be much lower in more mature markets.

“Here there are many companies that are still privately owned, where the owner or the principal has a

much stronger attachment to real estate.”

He explained that there are historical reasons for this. In the past, legal frameworks were not as strong

and lease agreements tended to be much shorter, so there was a tendency for tenents to worry about

big increases in rents or being asked to vacate a building once a lease expired.

“Investment in real estate was often seen as an alternative means to protect capital,” Mr Shivpuri said.

However, he said that heightened levels of investor interest meant that more deals were on the cards.

He said that this had initially come from asset managers, who like them because they do not involve a

lot of management.

The former owner tends to continue running the building themselves, and the returns are healthy –

especially as the assets tend to generate higher returns in the Middle East than in other parts of the

world.

For instance, the same global occupier would attract a yield of 7 to 8 per cent in Dubai, compared to 4

to 5 per cent in London.

Mr Shivpuri said that investors could make returns of about 10 per cent when capital appreciation was

factored in, which means the sector has attracted interest from a broader group of purchasers such as

institutional investors, regional sovereign wealth funds and private family groups, who appreciate the

income-generating aspects.

For the companies selling, sale and leasebacks let them put their cash to better use.





Gems Education sold two school campuses in Dubai to asset managers in November 2013 – the first to

Pinebridge Investments and the second to Emirates Reit.

After the announcement of the Emirates Reit sale, Gems Education’s chief financial officer Nicholas

Guest said it would “help fund our development and expansion plans within the UAE education ¬sector”.

Mr Shivpuri said that for fast-growing companies, buildings are just “a means to an end, not an end in

itself”.

“You could earn 2 to 2.5 times what you would otherwise be able to achieve if you were to continue to

own real estate.”

Yet sale and leasebacks have been financially disastrous for other companies – particularly if they

already carried high levels of bank debt.

In the United Kingdom, a number of companies including the private health care firm Southern Cross

found themselves unable to pay the higher annual rent bills after selling their properties in a push for

growth.


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AMLAK IN TALKS OVER PARTNERSHIP

WITH EMAAR

FRIDAY 22 JUNE 2015

Amlak Finance shares soared to new heights yesterday after the Islamic lender announced it was in

discussions with Emaar Properties about a partnership to develop land.

In an interview with the Arabic-language Al Khaleej newspaper posted yesterday morning on the Dubai

Financial Market’s website, the Amlak chief commercial officer Adnan Al Awadhi said the company was in

talks with Emaar, its largest shareholder, over working together to develop land in key locations, in

collaboration with Dubai Land Department.

Mr Al Awadhi said the lender and Emaar were working to find ways to restart a number of stalled

projects, and that agreement was close on one particular project.

The lender’s shares surged on the news, closing up 14.6 per cent at a new high of Dh2.58. A total of

321 million shares changed hands, its second-busiest day of trading since being restored three weeks

ago.

“News of this sort is a positive indicator for the shares’ main support block, namely UAE-based retail

investors,” commented Julian Bruce, the head of institutional trading at EFG Hermes in Dubai, a leading

Mena investment bank.

“However, given that Amlak is 45 per cent owned by Emaar, it shouldn’t come as a major surprise that

there would be a joint venture between the two.

“I don’t think it should be a reason to move the stock up again, as it shouldn’t come as a surprise.”

Mr Al Awadhi said Amlak owned 4.3 million square feet of land, together with 364 housing units across

areas of Dubai including Warqa, Mirdif, Khawaneej and Meydan.

The company has plans for four developments across its holdings and has already received the

necessary approvals to begin projects in Mirdif and Warqa.


Back to the top

Abu Dhabi’s Burj Mohammed bin Rashid named best tall building in Middle East and Africa

23 June 2015

The Council on Tall Buildings and Urban Habitat has named Mohammed bin Rashid Tower as the region’s

best tall building this year.

The 88-floor, 381 metre-high tower was built as part of the new World Trade Centre Abu Dhabi complex,

which was completed last year by Arabian Constuction Company for the developer Aldar Properties. It

was designed by the UK architects Foster + Partners.

It was named the 2015 winner in the Middle East and Africa category ahead of another Abu Dhabi tower

– the new Al Hilal Bank headquarters on Al Maryah Island.





The Abu Dhabi tower will now compete with New York’s One World Trade Center, Singapore’s

CapitaGreen and Milan’s Bosco Verticale tower complex when the group names its world winner in

November.

Mohammed bin Rashid Tower is one of two that has been built as part of the 400,000 square metre

World Trade Centre complex. It contains 474 apartments.

The regional winner “adds a beautiful form to the Abu Dhabi skyline, which can be seen from quite a

distance”, said the awards jury chairman Wong Mun Summ of the Singapore-based Woha Architects.

Talal Al Dhiyebi, the chief development officer at Aldar, said he was pleased that the tower had been

recognised. He added that the building was already 95 per cent occupied less than a year after its

opening, which he said demonstrated “the pent-up demand for premium quality living spaces in Abu

Dhabi”.


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ARCADIS LANDS CONTRACT TO

DESIGN STATIONS FOR DOHA METRO’S

GOLD LINE

SATURDAY 23 JUNE 2015

The construction consultancy Arcadis has been appointed by Qatar Rail to provide design and

consultancy services on the Doha Metro.

The company is delivering detailed designs and architectural finishing work for 10 of the 13 stations on

the Gold Line, as well as supervision during the construction phase. The contract is worth about €20

million (Dh82.5m). The design work is expected to take 12 months and the supervision a further two

years.

Arcadis said that the remaining three stations on the line have been tendered under a separate contract

package, which may be awarded to it at a later date.

Arcadis is delivering the work for the Alysj joint venture – a consortium of construction companies led by

the Greek contractor Ellaktor.

In April last year, it won a US$4.4 billion award to build the line, which is understood to be the most

technically challenging of the first phase.

The Gold Line runs from east to west across Doha and includes 32 kilometres of tunnels.

Arcadis started work on the project this month. The company is already carrying out similar work on

Doha Metro’s Red Line South.

“This award is a tribute to the team already working on a similar package on Red Line South metro in

Doha, as their excellent work has encouraged the ultimate client, Qatar Rail Company, to have

confidence in recommending a further package of work,” said Stephan Ritter, the Arcadis executive

board member for the UK, Europe and Middle East.

A new report by Samba Financial Group argues that Qatar’s continuing capital expenditure

commitments, worth about $200bn, are likely to continue despite the drop in hydrocarbon revenues and

uncertainty surrounding the hosting of the 2022 World Cup as a result of the corruption scandal

engulfing football’s governing body, Fifa.

“Despite maintaining our view that the tournament will go ahead in Qatar in 2022, we recognise that the

chances of a revote have increased significantly,” it said.

“It is therefore important to reiterate that the vast majority of the planned capital expenditure is

ancillary and planned independently of the World Cup.”

The proportion of spending directly linked to the World Cup is just 7.5 per cent of the total – $3bn for

the stadiums and $12.4bn for the accommodation.


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ABU DHABI SET FAIR AFTER VICTORY

AT VOLVO OCEAN RACE


When Azzam, Abu Dhabi Ocean Racing’s 65-foot carbon-fibre yacht, sailed into Sweden’s ancient port of

Gothenburg late on Monday, it was as the first winner of the Volvo Ocean Race to hail from the Arabian

Gulf.

Azzam had held an all but unassailable eight-point lead at the top of the seven-vessel standings and

only last place on the final Leg 9, and victory for Team Brunel and a two-point penalty could ruin the

party. However, the spoils of victory are not the only benefits of this race win.

“We added 30,000 extra hotel rooms in the three weekends that the ocean race stopped over here [in

Abu Dhabi],” says Faisal Al Sheikh, the director, at the events bureau for the Abu Dhabi Tourism and

Culture Authority.

“We have put Abu Dhabi in the forefront of people’s minds as a marine centre.

“The race is an international promotional campaign for Abu Dhabi. We want to be thought of as a

waterfront destination and what better way to do that than in a round-the-world ocean race?,” he says.

“When people think of yachts and maritime leisure, they think of exotic locations, glamour and

excitement – with our marine heritage that is Abu Dhabi.”

The race began 10 months ago, on October 11, in Alicante, Spain, and covered 38,739 nautical miles

across nine legs with stops including Cape Town, South Africa; Abu Dhabi; Sanya, China; Auckland, New

Zealand; Itajai, Brazil; Newport, US; Lisbon, Portugal; Lorient, France; The Hague, Netherlands; and

finally Sweden’s Gothenburg.

The gruelling race has been run every three years since 1973. Rather than allow money to dictate the

winner of the race, as often occurs in racing events on land and sea where success comes down to the

richest team, the Volvo organisers have ensured all boats are identical down to the last halyard.

Another element boosting sporting prowess sees each team having make it around the world using just

a single mainsail, a huge stretch of synthetic fabric covering 158 square metres – there is no such thing

as plain sailing in this event.

While the cost of each boat is not cheap, yachting seldom is, the approximate price of running the

yachts with crew and the crews that meet the boats at each stop over and to maintain, replenish and

repair the craft is about US$20 million, organisers say.

Other than the spectacle of watching identical craft pit a crew’s skill, yachtsmanship and navigational

nose against another’s, what are the benefits to the sponsors of the event? $20m is still a large chunk of

change.

“Firstly it is to do with visibility,” says Andrew Campbell, the managing director of Abu Dhabi’s Brand

Finance Middle East, a consultancy that performs valuations of brands and intangible assets.

“Just being in the race gives an excellent profile. Every port it stops in, with the crowds flocking to the

event villages, means it is one of the stars of the show and a global TV audience is an added bonus –

winning gives it extra kudos and exposure.





“To someone who has never heard of Abu Dhabi before it creates an emotional attachment that

resonates with adventure, azure blue waters and wealth,” he says.

“These are intangible assets and therefore not easily transferable to a brand. It could be argued that

$20m is cheap for the exposure and emotional attachment that is driven from this one event.”

Those intangible rewards are mixed with some very tangible promotion for hosting international sporting

competitions.

Doing so with events of worldwide prominence and with the solid Corinthian values that the sport carries

is a strategic decision in the marketing of a country, city or company

The lengths to which countries will go in pursuit of major sporting event sponsorship can be seen

whenever the venue for an Olympic Games or Fifa World Cup, for instance, is being awarded.

South Africa, which hosted the World Cup in 2010, continues to celebrate its legacy to the country’s

tourism industry with a 21 per cent year-on-year increase in US tourist arrivals in 2014, four years after

the tournament ended.

The fillip has been seen not because it hosted a World Cup but because it showed it was safe for

tourists, a hospitable and polite nation with infrastructure that allowed travel throughout.

“Branding is as much to do with emotion as it is with advertising and marketing,” says Mike English, the

director of Abu Dhabi-based Superbrands Middle East.

“Intangible forces are at work when anyone chooses a product over another product.

“Abu Dhabi hosts the Red Bull Air Race, it is very closely connected with Manchester City Football Club,

it has touch points in a variety of differing ways to a variety of different people,” says Mr English.

“Maybe a city will not be on a list of destination choices but an emotion can put it on the list.

“First the city has to be chosen, then that city has to host the hotel chain you want. All the emotional

decisions spin off from the first decision,” he says.

Regarding the Volvo Ocean Race, each stopover host city enjoys significant financial reward.

For example, for the previous race series, the total economic benefit for China’s Hainan Island, home to

the port city of Sanya, which hosted the Leg 3/4 stopover in 2013 as it did again this year, came to

735.4m yuan (Dh434.6m), according to a PwC/GfK survey.

To capitalise this time round, Abu Dhabi built a sprawling 35,000 square metre, purpose-built waterfront

site on the capital’s Corniche Breakwater, the port-of-call for 23 days of sports, entertainment and

leisure activity as part of Abu Dhabi’s hosting of race Leg 2.

It promoted a free-to-enter Village with a unique 440-metre “floating” Skyline Stage, which played host

to performances by stars such as the Lebanese singer Myriam Fares, the Argentinian guitar maestro

Dominic Miller and the Grammy nominee Kamal Massalam among many others.

Another aspect helping to promote brand Abu Dhabi were several activity areas in the village, including

themed zones, covering culture and heritage; adventure; family; exhibitions; and the environment as

well as five international pavilions covering China, Sweden, Spain, the Netherlands and Great Britain.

While the tangible rewards are myriad, it remains to be seen whether that promotion keeps working

race after race. Abu Dhabi first began its quest for victory in the Volvo Ocean Race in 2009, and it has

now fulfilled its wish but does that mean it will fight to retain its crown in the next installment three

years hence?

“We cannot say right now whether we will be there for the next race,” says Mr Al Sheikh.

“It is not until 2017-2018 and we do not have to make a decision for another eight to nine months.

“These decisions are not taken lightly and we will see whether we still have the desire for it.”





For now, that desire has been transformed into the sweet scent of victory – for the Abu Dhabi team and

for the capital.


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ETIHAD PARTNERS WITH MSC MUSICA

OPERATOR TO BOOST ABU DHABI

CRUISE TOURISM

WEDNESDAY 24 JUNE 2015

Etihad Airways has teamed up with Geneva-based MSC Cruises to boost tourism through the capital.

Passengers will be able to fly to Abu Dhabi from Europe this winter to travel on MSC Musica with airfare

is included in the cruise package.

The cruise packages are targeted at European countries such as Austria, Belgium, France, Germany,

Italy, the Netherlands, Spain, Switzerland and the United Kingdom.

As part of the deal, passengers can embark and disembark from Abu Dhabi for the seven-night cruise

that would take in Dubai, Abu Dhabi, Khor Fakkan, Khasab and Muscat.

But embarkation and disembarkation is available only at Dubai and Abu Dhabi, making the two cities

home ports for the liner.

Travellers can embark from Abu Dhabi the day after the ship sails from Dubai.

“The best thing that can happen with the Etihad Airways deal is that people would get aware about the

direct connection to Abu Dhabi from Europe,” said Rashmi Shenoy, the Dubai-based commercial

coordinator for MSC Cruises. “Earlier, Dubai was the only destination they knew from where they could

embark.”

The eal is also expected to increase tourism to Abu Dhabi and the UAE.MSC Musica can carry up to

3,000 passengers.

Services start from December 12 out of Dubai, while the last trip is scheduled for March 26.

“The weather is nice around that time and there would be more tourists from Europe to enjoy the sand

and the beaches,” she said.

The introductory price booked from the UAE starts at US$429 per person, valid until the end of the

month with surcharges for sailings for Christmas, New Year and Valentine’s Day.

During Abu Dhabi’s 2014-15 cruise season from October until May, 200,407 passengers visited the

capital from 94 ship calls. That was up from 189,709 passengers and 75 ship calls the previous season.

“By providing state-of-the-art facilities to cruise lines and industry partners, we are boosting Abu Dhabi’s

growth potential to be a regular port of call on the itineraries of leading tour operators from across the

world,” said Captain Mohamed Juma Al Shamisi, the chief executive of Abu Dhabi Ports.

The new cruise terminal at Mina Zayed is expected to open in December on schedule.

When complete, it will be able to handle three ships simultaneously.

That should be in time for the ambitions of Miami-based Royal Caribbean Cruises to make Abu Dhabi the

home port for one of its Celebrity Cruise vessels in the 2016-17 season.

The cruise industry is enjoying a revival as operators start to target younger passengers.





The billionaire Richard Branson yesterday said Virgin Cruises had ordered its first three ships, each

capable of carrying a complement of 4,200 passengers and crew.


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DUBAI DEVELOPERS EXAMINE OPTIONS

IN OFFICE SPACE


Dubai developers could switch focus from apartments to offices as an off-plan housing glut saps

demand, according to a new report.

The scenario outlined in the report from the property information company Reidin and the Unitas

Consultancy mirrors a similar change of direction by developers in the emirate in the run-up to the 2008

property crash.

Back then several towers were changed from residential to office use. That created a glut of office space

in the market that still persists despite increasing demand.

“Developers will begin to change course again towards the commercial segment in order to cater to the

pent-up demand,” said the report.

The report says a “flurry” of off-plan units have been launched since the market began its recovery in

2012, which initially depressed sales of completed homes 26 per cent year-on-year by sucking liquidity

out of the market.

Since then, however, as more off-plan launches have taken place this trend has reversed, and recent

off-plan sales have been conducted at a discount of about 20 per cent to completed homes in an

attempt to entice buyers.

Citing sales in Arabian Ranches as an example, the report’s author, Sameer Lakhani, who is managing

director of Global Capital Partners, said that when the master developer Emaar Properties launched its

Palma project in mid-2013 it did so at rates that were considerably higher than completed properties in

the area.

“Subsequent launches were at significant discounts to the secondary [completed homes] market,” he

said.

The report notes that just 4 per cent of the launches that have taken place over the past five years have

been for commercial property, and there is a “pent-up demand” for such space as a result.

The report also shows that office rents in Business Bay climbed by 19 per cent year-on-year to the first

quarter of this year, while residential rates dropped by two per cent. In Jumeirah Lakes Towers, office

rates increased 13 per cent, while residential rates were up 3 per cent.

Knight Frank’s first quarter Dubai Office Market report, which was published last week, said demand for

space had picked up during the fourth quarter of 2014 and into this year’s first quarter.

“Occupier activity in the shape of expansions, new start-ups, consolidations and renewals has continued

to reduce vacancy levels, especially within prime office developments,” it said. “The healthy level of

demand and low supply of prime office space has helped to exert continued upward pressure on rents.”

Yet the report also showed the amount of empty space in the market as a whole remains quite high – at

27 per cent of the total. Mr Lakhani argued that the growth in rents experienced in areas such as JLT

and Business Bay demonstrates that demand is outweighing supply.

“The conventional wisdom is that there was a large overhang of space from the last boom, but in the

last year or so rents have started to paint a different picture,” he said.





“When we look at rental rates, they are going up relatively sharply. We suspect that if the residential

market is going to remain soft, then developers are going to look at commercial options relatively

quickly.”

Not everyone is as bullish about the prospect of a city-wide bounceback, though. Craig Plumb, the head

of research at JLL Mena, said that “there has been little uplift in average rents [for Dubai offices] since

the market bottomed in 2011-12, due to the large volume of new supply being delivered to the market.

“While some office properties have been able to increase their rental rates, this has been largely a

reflection of local factors such as increased occupancy levels in the building or local infrastructure

improvements, rather than any market-wide improvement in conditions.”


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MIDDLE EAST BUYERS SET TO

ACCOUNT FOR UP TO 30% OF LONDON

HOME PURCHASES

THURSDAY 25 JUNE 2015

Buyers from the Middle East will soon be responsible for up to three out of 10 purchases of new prime

London properties, according to a new report.

The property consultancy CBRE has done an analysis of the city’s property market after the recent UK

election. Before the vote, buyers from the GCC accounted for almost 20 per cent of the newly built

homes in prime London districts.

The agency said that the number of enquiries from across the Arabian Gulf has risen since the election,

which took place early last month, and that it expected regional buyers to soon account for 25 to 30 per

cent of sales.

Safina Ahmad, CBRE’s head of GCC residential agency, said: “London continues to remain the

destination of choice for Middle Eastern investors because of its quality infrastructure, stable political

and legal framework, and quality of life. The city has always attracted institutional commitments from

the region, but we are now increasingly seeing many individual buyers purchasing residential property,

treating the city as a second home.”

CBRE’s report compared the cost of prime and super-prime properties in nine global cities. Hong Kong

(because of its restricted land mass) was the most expensive, with prime properties costing US$4,500

per square foot and super-prime $9,300. London was second, with prime rates of $3,020 and super-

prime of $7,500. Dubai was the most affordable of the global cities ranked by some distance, with prime

properties costing $615 per sq ft and super-prime $1,200.


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EMAAR MISR SHARES TRANCHE FOR

RETAIL INVESTORS 36 TIMES

OVERSUBSCRIBED


The tranche of shares of Emaar Misr allocated to retail investors last week was 36 times oversubscribed,

according to an adviser on the deal.

The Egyptian unit of Dubai listed developer Emaar Properties issued 600 million shares at 3.8 Egyptian

pounds (Dh1.83) per share, with a total value of 2.2 billion pounds of share capital.

This values the company at 17.5bn pounds, according to Ahmed Al Guindy, head of investment banking

at EFG Hermes, making Emaar Misr the fourth largest company on the Egyptian Stock Exchange by

market capitalisation.

Ninety million shares were allocated to retail investors, who placed orders for more than 3.2 billion

shares. The tranche of 510 million shares allocated to institutional investors was 11 times

oversubscribed last week.

The company currently has no plans to increase the allocation of shares to retail investors, said Mr Al

Guindy, who advised on the deal.

Emaar Properties plans to retain at least 87 per cent of the shares of its Egyptian arm, according to wire

reports.

Emaar Misr plans to increase its Egyptian land portfolio. It is bidding on two plots of land west of Cairo

with a combined area of 600 acres, according to local media.

In Dubai, Emaar Properties shares closed down 1.1 per cent


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HAZZA BIN ZAYED STADIUM IN AL AIN

SHORTLISTED FOR WORLD BUILDING

OF THE YEAR


The Hazza Bin Zayed Stadium in Al Ain has been shortlisted for the World Building of the Year award by

the World Architecture Festival.

The stadium, which was formally opened in May last year with a friendly match between home-side Al

Ain FC and Manchester City FC, has been nominated in the sport category for completed buildings.

It is a 25,000-seat stadium created by London-based Pattern Architects, which was founded in 2009. It

was designed for its desert climate, with an outer skin of thousands of individually shaped pieces

resembling a palm trunk that naturally cools the stadium. It has already won an award at the World

Stadium Congress awards in Qatar last month.

“We are obviously delighted,” said the Pattern Architects director Lindsay Johnston. “HBZ is the young

practice’s first completed building, and we have managed to get onto the shortlist with the world’s

leading architecture practices. We are also proud to have helped to achieve this for the UAE.”

Pattern Architects also designed the National Gymnastics Arena being used at the European Games 2015

in Baku, Azerbaijan, and in April it was announced as the designer for Al Rayyan stadium that is due to

be used during the 2022 Fifa World Cup in Qatar.

Maged Fares, the project director for the contractor that built the stadium, BAM International, said the

design represented “a new sustainability model” for stadiums around the world.

“The collaboration of teams was inspirational and the project team relationships were key to breaking

down barriers to make it happen”.

Other Arabian Gulf projects to be shortlisted included the Qatar Foundation’s Faculty of Islamic Studies,

built by Mangera Yvars Architects, which has been shortlisted in the religion and culture categories for

completed buildings.

In the categories for designs for future projects, the Atkins-designed Suites in the Skai hotel and

serviced apartments project in Dubai’s Jumeirah Village Circle has been shortlisted alongside the new

Qatar Courthouse by AGI Architects and the Al Maha Centre for Children and Young Adults in Doha by

HDR.

In the experimental category, a concept exploring structural construction against the Earth’s pull,

Gravity-Less, by the American University of Sharjah has also been nominated.

There are 338 total properties on the short list. The winners will be announced at the World Architecture

Festival, which takes place in Singapore from November 4 to 6.


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PALM JUMEIRAH VILLA HAS ECHOES OF

ANDALUCIA AND PRICE TAG OF DH56M


The Palm Jumeirah has many a beautiful villa offering incredible finishing, bespoke design and views of

the Dubai skyline.

This five-bedroom villa certainly takes its place in line with the sumptuous signature homes that adorn

Frond P on Dubai’s greatest icon. And it comes with the corresponding high price tag of Dh56 million.

With a European hacienda style front, from the outside one could be in Andulucia. However the views of

the Dubai Marina skyline from the inside leave no doubt as to where you are in the world.

The property may be on the pricey side but it comes fully furnished, has 24-hour security, enough

watery views to rival Venice and ample space for staff.

The villa has been extended from an original built up area of 7,000 square feet to approximately 8,000

sq ft on a 14,683 sq ft plot, a factor that has helped to push up its price.

“There is a premium built in to extended properties on the Palm - not just down to the extension - but

down to the bureaucracy and time it takes to get the No Objection Certificates (NOCs), approvals and

certifications needed,” says Gregory Lewis from Knight Frank, the agent marketing the property. “If

someone goes through that process then they have invested more than just money into the property.”

Inside, the entrance features a huge reception area with a glass lift alongside a marble staircase.

The modern and open-plan lounge is framed by seven picture windows flooding the area with natural

light and allowing the views of the metropolis to be enjoyed to the max. The lounge then flows into a

more informal living space and state of the art kitchen.

Alongside the kitchen and dining area, the garden has again been designed with the view in mind; a

huge firepit forms the centrepiece, with a private swimming pool on one side and seating areas on the

other. The first floor contains four large en suite bedrooms with built-in wardrobes.

And to ensure you don’t ignore those views, the kitchen comes with a breakfast bar overlooking the

outdoor terrace, which can be opened up via concertina glass doors.

Q&A

Gregory Lewis, senior negotiator Knight Frank, tells Andrew Scott more about the latest property

offering on Palm Jumeirah:

I’ve noticed several super prime properties are sold fully furnished, why is that?

Super prime properties are what Knight Frank categorise as homes from Dh40 million upwards. At that

level the furniture has often been bought specifically for the house and matched with colour scheme and

the environment it is set. Whereas sometimes the house is sold fully furnished having never been

occupied, this house has been lived in so all the furniture has been used.

Does selling a fully furnished house help the sale?

We always say to clients that it won’t necessarily increase the value but it increases the saleability of the

property. When you are dealing with such massive properties many buyers do not want the headache of

furnishing a new house. Obviously there are clients that will have their own ideas about home decor and





can decide to rip everything out but that is not usual. At this level of price buyers often have other

homes and will not be living in these villas exclusively so a fully furnished residence is a plus.

Analysts say the real estate market in the UAE is slow at the moment, is that the case for super prime?

No, it’s the opposite. If you take Emirates Hills as an example we usually sell one a month but for the

last four months we have been averaging two. The rich generally stay rich and properties like this on the

Palm do not become available too often. There is rarely a mortgage on them and no one has to save for

them so it is a brisk market right now.


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THE RETURNS ON BUY-TO-LET

PROPERTY ‘NO LONGER ADD UP’

FRIDAY 26 JUNE 2015

Residential property investment, as opposed to buying a home for your own use, no longer really stacks

up in my view. The rental yields are generally too low for the large amount of capital at risk, and many

hidden costs undermine your total rental return.

I am not just talking about UAE property here but generalising across the world, although I would not

doubt that somewhere out there you can find an exception to this rule. Basically it is a matter of the

price you pay, and if you can buy it cheaply then of course it still makes sense.

But you should probably sell immediately if you do, because holding this bargain will not be a good idea

as this article explains.

The global regime of low interest rates deliberately forced upon us by central banks in the wake of the

global financial crisis seven years ago has distorted investment returns in residential property the same

as everything else.

People have been prepared to gradually pay higher and higher prices for lower and lower returns, or at

least a rental income that has barely shifted over this period. At the same time many of the costs

associated with property ownership have not stayed static.

They have been rising, whether that be the agent’s fees or the cost of getting a boiler fixed in the middle

of the night. Indeed, sometimes it seems the agents are in league with the contractors pushing these

charges up.

My poor old mother in the UK used to get a nice supplement to her pension from a multi-room house let

out. But today when I look at the accounts it’s appalling how much goes on maintenance. The rent on

the units has just not kept up with these rising payments and that’s partly because the tenants’ income

has hardly budged.

True, the capital gain has been substantial over the past 15 years, and this is the profit that ought to be

realised while it is still there. Once current low interest rates go, and that is what the Federal Reserve is

planning for the world, even that will inevitably start to fall.

Buy-to-let investors really will get what I am saying today when house prices drop, and I don’t think

house prices and interest rates have ever gone up at the same time.

There are special local factors in the UAE residential property rental markets that also ought to be

considered. Dubai’s rent control system is very bad for property investors.

Eventually you are likely to get stuck with a tenant paying significantly less than the market rate that

you cannot either get to vacate your property even after a year’s notice, nor force them to pay the true

market value.

Who in their right mind would knowingly take on a liability like that? Investment yields on rental

property barely cover mortgage costs and you risk the problems of a sitting tenant on a lower rent. I

don’t think so.





Abu Dhabi has sensibly abandoned such controls and so should Dubai if it wishes to continue to attract

property investors in the tougher competition for this money that is coming in global markets. Sure

tenants should have their rights but not at the expense of a market return for the landlord.

Tenants should rent a property for an agreed period at an agreed rate and not acquire residency rights.

If you want that, you need to buy the place. It’s not only in Dubai that this has become an issue. Rent

control has ruined many property investment markets around the world. Dubai should watch out.

However, these factors aside, all investment markets are cyclical and rise and fall with the total return

that they can offer. Residential rental real estate is no different.

With property mortgage costs rising around the world, this cycle is about to turn down on the capital

side. That most likely means substantial capital losses for landlords across the board. And how long will

it be before mortgage rates are this low again?

Only when house prices have bottomed out and mortgage rates are at their highest will the rental

market really become a good place to invest again.

For then you will have the swing back in the other direction working to your advantage as house prices

rise in value as mortgage rates fall.

You don’t do it when property prices are stretched to the limit by artificially low interest rates – as they

are right now – and rates are on the way up, with rental returns held down by static incomes, surging

maintenance costs and in some markets such as Dubai, rent controls.


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OPPORTUNITIES FOR CONTRACTORS

CONTINUE TO BUILD IN GULF MARKETS


The construction industry in GCC countries will continue double-digit growth until the end of next year,

with a rise of 11.3 per cent lifting its worth to US$126.2 billion, according to a new study by Dubai-

based Alpen Capital.

It states that although sustained low oil prices may force governments to restrict or delay capital

spending, there are several growth drivers underpinning the sector, including a long-standing

requirement to invest in projects to diversify revenue. A growing population – at 2.8 per cent per year to

an expected 56.9 million by 2018 – will also place demands on infrastructure, health care, schools and

housing.

The construction industry’s contribution to the region’s overall GDP has edged up over the past five

years, to 5.7 per cent at the end of last year from 5.5 per cent in 2010.

The UAE had a 42.9 per cent share of the region’s $1.2 trillion overall project value last year, according

to Meed figures. Saudi Arabia had a 33.3 per cent share, Kuwait 10.1 per cent and Qatar 9.3 per cent.

Property, including Saudi Arabia’s four new economic cities, and transport projects made up about 74

per cent of the pipeline in terms of project value, with new affordable housing programmes also

identified as a major potential source of work.

“Higher budget allocation towards construction, as part of the strategic vision of the member nations,

lends an added push to the industry,” said Alpen Capital’s managing director, Sameena Ahmad.

Yet despite the opportunities, there also remain some significant challenges.

Rachid Mikati, the executive director of Arabian Construction, pointed to the growth of international

companies looking to move into the market – particularly in recession-hit markets.

This “will put pressure on margins and increase risk appetite of contractors who wish to maintain growth

of backlog, he said.

“Current contract conditions and payment cycles are also challenging for contractors,” he added. “These

will result in delayed project delivery and contention between clients and contractors.”

Ahmed Al Bassam, the chief executive of Al Rajhi Building Solutions Group, said firms in the industry

also face tight completion deadlines and pressure on available resources, which means there is potential

for cost inflation.

He also argued that construction standards could be improved through a stronger regulatory framework,

particularly when it comes to safety.

“Governments have to establish and enforce construction standards to create a level playing field for

safety-conscious contractors,” said Mr Al Bassam.


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DAMAC LAUNCHES PARAMOUNT

RESIDENCES ON SHEIKH ZAYED ROAD

SUNDAY 28 JUNE 2015

Damac Properties, Dubai-based developer, has launched a new project in collaboration with Paramount

Hotels & Resorts on Sheikh Zayed Road.

Paramount Residences at the Paramount Tower Hotel & Residences will be 64-storey tower with 826

hotel and hotel residences. It will have a sky lobby, a private Paramount Pictures screening room and a

rooftop infinity swimming pool.

Paramount Tower Hotel & Residences

Construction work on project is already underway, with completion scheduled for third quarter 2019.

Prices for the hotel residences, which will be located on the 36-64th floors, will start at Dh1,800 per

square feet.

"As the number of tourists to Dubai continues to outpace most of the world, there is a huge demand for

quality, stylish and luxury living experiences, both with hotels and the high-end hotel apartments

sectors,” said Ziad El Chaar, Managing Director, Damac Properties.

The company has a number of projects under construction with Paramount Hotels & Resorts across the

Middle East, including Damac Towers by Paramount Hotels & Resorts – a four tower project in the Burj

Area which is due to open in the last quarter of 2016; Damac Tower by Paramount Hotels & Resorts in

Riyadh, Saudi Arabia; Paramount Hotel Jumeirah Waterfront in Maritime City, Dubai and serviced villas

within the company's Akoya by Damac golf community.

Each fully furnished unit includes access to a film library of over 3,000 titles , the statement said.

As of March 31, 2015, the developer has delivered almost 14,000 homes and has a development

portfolio of over 37,000 units at various stages of progress and planning. Included are over 10,000 hotel

rooms and serviced hotel apartments under development, which will be managed by its hospitality arm,

Damac Hotels & Resorts.

Source: Emirates 24/7

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WHY WORLD'S RICH ARE SPLURGING

MONEY ON DUBAI REAL ESTATE?

FRIDAY 26 JUNE 2015

The cosmopolitan nature of Dubai coupled with a strong lifestyle consideration is making the emirate an

extremely attractive real estate market for the global super rich, according to Wealth-X and Sotheby’s

International Realty.

In a report, titled, “The Europe, Middle East and Africa luxury residential real estate report 2015”, the

companies reveal that the emirate has the potential to become fast-growing ultra high net worth

(UHNW) hub in the Europe, Middle East and Africa (EMEA) region in the coming years.

It puts the number of UHNW individuals (those with $30 million or above in assets) in Dubai at 495 with

34 billionaires.

Prices of luxury properties in Dubai are almost 40 per cent cheaper than London with the emirate having

8 percent of luxury residential properties listed above $1 million (Dh3.67 million), it revealing, stating

average listed price at $5.5 million, with average price per square foot being $834.

According to the report, Dubai is the modern oasis of extravagant luxury, home to the world’s tallest

building, Burj Khalifa, and the only seven star hotel in the world, the Burj Al Arab, and over 300 days of

sunshine a year.

“It is a prominent hub for finance, trade and tourism in the Middle East and has rapidly become home to

an array of luxury stores, grand hotels and a large array of fine dining and entertainment.

“It has more billionaires than any other city in the Middle East, and the wide range of activities on offer

encourages UHNW individuals from all over the world to visit Dubai,” it states.

However, the report says London remains the region's primary real estate hub and offers numerous

compelling reasons to be living such has its role as the center of finance, generous tax treatment of non-

domiciles, an array of cultural activities and world-class educational institutions for children of UHNW

individuals.


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DUBAI PROPERTY REGISTRATION

DEADLINE EXTENDED TO OCTOBER 31


The deadline for registration of all units sold in Dubai has been extended to October 31, 2015, from June

30, 2015, according to a circular issued by Dubai Land Department on Thursday.

Earlier story

With mere five days remaining for the deadline (June 30, 2015) for property owners in Dubai to register

their units with DLD), developers are making last efforts to get owners to comply with the new

regulation.

Real estate developers are reminding buyers through emails and public notices to register their

respective units (off-plan or completed) by paying 4 per cent of the unit’s sales value as registration fee.

Orra Real Estate Development, a Dubai-based developer, has issued a public notice, asking investors

and purchasers in its Corporate Tower in Jumeirah Lakes Towers to comply with the DLD directive.

“This is to inform you that DLD has implemented a new regulation that all registration charges of 4 per

cent are payable upfront by the end user against their respective units instead of the earlier provision of

payment on completion and has given the deadline of June 30, 2015, to complete the said payment,

failing which heavy penalties will be imposed by DLD on the end users,” it said.

“We kindly request you to make arrangements in compliance with the law and to proceed with the

payment of 4 per cent against your unit(s) to DLD to proceed and secure the registration of your unit(s)

to meet the deadline of June 30, 2015. It is advisable to complete the payment as soon as possible in

order to avoid last moment rush at the DLD registration counters,” the notice read.

The company further stated that any fee on the non-payment of 4 per cent fee and any penalties being

imposed would be the responsibility of the end user.

In April 2015, Emirates 24|7 had reported on the June 30 property registration deadline.

From October 2013, DLD has doubled the property registration fee to 4 per cent from 2 per cent of the

property value.

DLD rules out penalty - will apply law

In response to question by Emirates 24|7 on whether unit owners will have to pay 8 per cent in penalty,

DLD officials said there will be no penalties, but the laws and regulations of Executive Council Resolution

No. 30 of year 2013 will be applied.

Article (6) of the resolution states that “without prejudice to any severer penalty provided for by any

other law, anyone who commits any of the acts stipulated in Article (5) of this resolution shall be fined

with double the prescribed fees.

Article (5) reads that following actions shall be deemed as fees evasion: providing false data about the

value of the real estate transaction; using any trick or way of whatever kind or nature to evade the

payment of fees and doing any other act that would evade the payment of fees.

Property agents and unit owners, however, told Emirates 24|7 that owners, missing the deadline, will

have to pay 8 per cent registration fee.





“We went to the DLD office to inquire about the penalties and we were informed that owners who fail to

register within the deadline will have to pay 8 per cent fee,” claimed an investor who asked not to be

named.

A senior executive with a top real estate brokerage firm also said unit owners, failing to comply with the

regulation, will have to pay 8 per cent registration fee.


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DUBAI OFF-PLAN PROPERTIES 20%

CHEAPER THAN SECONDARY MARKET


A slew of off-plan project launches in Dubai over the last 12 months has driven prices of secondary

market properties down by 15 per cent, according to a new report.

“Initially, off-plan (project) launches were at systematically higher prices than what was prevailing in the

secondary market. This trend has reversed in the last 12 months where off-plan launches have been at

levels that have averaged 20 per cent below the secondary market rates.

“This has caused prices to soften in the secondary market by approximately 15 per cent on a city-wise

basis,” Unitas Consultancy and Reidin.com said in a report titled, ‘Killing them softly: The impact and

incidence of off plan’.

Dubailand has topped the list of maximum number of off-plan project launches followed by Dubai

Silicon Oasis, Jumeirah Village Circle and Downtown Dubai.

The report states that rise in off-plan project launches, since 2012, sucked out liquidity from the

secondary market, as investors and speculators rushed to the primary market to capitalise upon

payment plans, resulting in a 26 per cent year-on-year decline in secondary market activity.

Arabian Ranches

Citing the example of Arabian Ranches, the companies said new launches within the Ranches extension

showed an obvious decline of activity in the secondary market coinciding with exogenous factors such as

strengthening of the US dollar as well as the decline in oil prices.

A price analysis showed prices were trending downwards as new launches within the same vicinity

offered similar products at lower prices.

“Although there was locational differences, investors responded to the new lower priced launches by

‘switching’ from the ready to off-plan market, causing prices to start declining in third quarter of 2014,”

the report said.

Downtown Dubai

Another example cited was of Downtown Dubai, with the report mentioning transactional activity had

declined in the area due to a wide number of (off-plan) launches as prices in new launches were lower

than the secondary market.

Emirates 24|7 reported earlier this month that Dubai had seen launch of 14 projects in the first five

months of 2015, comprising 4,800 units. In 2014, 78 new projects were unveiled.

In April 2015, the Dubai Land Department said total real estate transactions had crossed Dh64 billion in

the first quarter 2015 compared to Dh61 billion in the same period last year.

Indians topped the list of expatriate property investors, buying properties worth Dh3.04 billion followed

by British nationals and Pakistanis who invested Dh1.89 billion and Dh1.392 billion, respectively, the

department said.

Earlier this year, Moody’s Investors Service, a global ratings agency, said it expects prices to fall 10 to

15 per cent this year, but the slowdown wasn’t a worry for long-term investors.





“We believe that the slowdown in Dubai's real estate market is positive in the long run, as it gives the

market time to absorb the existing supply pipeline, while also alleviating our concerns about the housing

market potentially overheating,” it had stated.


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With 30 years of Middle East experience, Asteco’s Valuation & Advisory Services

team brings together a group of the Gulf’s

leading real estate experts.

Asteco’s network of offices in Abu Dhabi, Al Ain,

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Our breadth of experience across all the main property sectors is underpinned by our sales, leasing and investment teams transacting in the market and

a wealth of research that supports our decision making.

John Allen BSc MRICS

Director, Valuation & Advisory

+971 4 403 7777

[email protected]

Julia Knibbs MSc

Manager – Research and Consultancy - UAE

+971 4 403 7789

[email protected]

VALUATION & ADVISORY

Our professional advisory services are conducted

by suitably qualified personnel all of whom have

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