ABU DHABI // Counting the number of Ferraris on sale at a used car showroom may not be everyone's idea of an economic weather vane.
But soaring second-hand sales of prestige cars are the latest indicator that the global credit crunch has hit the UAE.
The region's high-fliers are scrambling to downsize from Ferraris and Lamborghinis to humbler vehicles as global economic uncertainty spreads to the Arabian Gulf.
The wealthy are ditching the lavish trappings of wealth as they count the cost of running high performance wheels.
"I have never seen anything like it," said Gary Peake, 34, from Reem Automobiles, a Dubai-based car dealership. "We are getting 100 times the amount of approaches from people trying to sell their premium cars. Instead of three or four people coming to us each day to sell their cars, we are getting up to 20 people; particularly premium cars like Bentleys, Ferraris and Porsches. It seems to be linked to the credit crunch. A lot of people say they are selling their cars quickly because they need the cash."
A victim of the credit squeeze who requested anonymity said he was forced to sell his Dh900,000 (US$245,000) Bentley GTC after being made redundant two weeks ago by property firm Better Homes.
"I was paying around Dh25,000 a month. When I lost my job I had to get rid of it. It was heartbreaking. It was a sweet ride, but only if you can afford it."
The jobless property consultant was one of around 200 Better Homes employees who lost their jobs due to the slump in property sales.
Internet trading website dubizzle.com said it had recorded a 115 per cent increase in the number of luxury cars offered for sale during the past month compared with June and July.
Mohammed Ali, the owner of the Deals on Wheels showroom in Dubai, said he was staggered by the increase in business in the second-hand luxury cars sector.
"People are keen to liquidate their assets because the economic climate is so tight. There is a lot of uncertainly out there about the future," he said.
JC Butler, the managing partner and co-founder of dubizzle.com, said the surge in luxury car sales was the latest sign that the credit crisis had hit the UAE.
"The pattern of sales tells us that everyone is bracing for an economic downturn," he said. "Companies here are cutting back and laying off staff because it is clear the economic climate is now more shaky. A lot of people have overextended themselves and are suddenly worried about making big payments for expensive cars. They are looking to cut unnecessary overheads and a big flashy car on the driveway is the first thing to go."
Mr Butler said the sudden increase in availability of second-hand sports cars had led to sellers slashing prices to woo buyers.
"More than ever we are seeing people keen to make quick sales. They want to get rid of their cars as soon as possible - before the next repayment," he added.
"This means people are selling premium cars well below the apparent market value."
Abbass Safadieh, the motors manager at souq.com another listing and sales website, echoed Mr Butler's views.
"We have seen a 48 per cent increase in trade in September and October in the luxury car market," compared to July to September, he said. "Some people have been spending around Dh10,000 a month on car payments, so if you are an estate agent or banker who is suffering because of the economic slowdown, the easiest way to reduce your overheads is by getting rid of your sports car. This means there are some real bargains out there for people who have the cash to buy."
Nabil Shennawi, the used car manager at Ali and Sons Audi and Porsche dealership in Abu Dhabi, said buyers should now haggle hard before to snap up bargains in the showrooms.
"There are some great deals available now. Traders are prepared to negotiate to make the sale. You can find them prepared to drop their profit margins from 10 per cent to seven per cent."
Andrew Hellyar, the Audi brand manager at the same dealership, said the slowdown in the luxury car market was more pronounced in Dubai, traditionally a more popular market for glitzy sports cars.
"The banks in Dubai have really cracked down on offering finance to people for car loans," he said. "It is much harder to secure finance for a car now and I have even heard of some banks stopping auto loans completely."
chamilton@thenational.ae
The specs
Engine: 2-litre or 3-litre 4Motion all-wheel-drive Power: 250Nm (2-litre); 340 (3-litre) Torque: 450Nm Transmission: 8-speed automatic Starting price: From Dh212,000 On sale: Now
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The Sky Is Pink
Director: Shonali Bose
Cast: Priyanka Chopra Jonas, Farhan Akhtar, Zaira Wasim, Rohit Saraf
Three stars
TO A LAND UNKNOWN
Director: Mahdi Fleifel
Starring: Mahmoud Bakri, Aram Sabbah, Mohammad Alsurafa
Rating: 4.5/5
UAE currency: the story behind the money in your pockets
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COMPANY PROFILE
Name: HyperSpace
Started: 2020
Founders: Alexander Heller, Rama Allen and Desi Gonzalez
Based: Dubai, UAE
Sector: Entertainment
Number of staff: 210
Investment raised: $75 million from investors including Galaxy Interactive, Riyadh Season, Sega Ventures and Apis Venture Partners
'How To Build A Boat'
Jonathan Gornall, Simon & Schuster
Mercer, the investment consulting arm of US services company Marsh & McLennan, expects its wealth division to at least double its assets under management (AUM) in the Middle East as wealth in the region continues to grow despite economic headwinds, a company official said.
Mercer Wealth, which globally has $160 billion in AUM, plans to boost its AUM in the region to $2-$3bn in the next 2-3 years from the present $1bn, said Yasir AbuShaban, a Dubai-based principal with Mercer Wealth.
“Within the next two to three years, we are looking at reaching $2 to $3 billion as a conservative estimate and we do see an opportunity to do so,” said Mr AbuShaban.
Mercer does not directly make investments, but allocates clients’ money they have discretion to, to professional asset managers. They also provide advice to clients.
“We have buying power. We can negotiate on their (client’s) behalf with asset managers to provide them lower fees than they otherwise would have to get on their own,” he added.
Mercer Wealth’s clients include sovereign wealth funds, family offices, and insurance companies among others.
From its office in Dubai, Mercer also looks after Africa, India and Turkey, where they also see opportunity for growth.
Wealth creation in Middle East and Africa (MEA) grew 8.5 per cent to $8.1 trillion last year from $7.5tn in 2015, higher than last year’s global average of 6 per cent and the second-highest growth in a region after Asia-Pacific which grew 9.9 per cent, according to consultancy Boston Consulting Group (BCG). In the region, where wealth grew just 1.9 per cent in 2015 compared with 2014, a pickup in oil prices has helped in wealth generation.
BCG is forecasting MEA wealth will rise to $12tn by 2021, growing at an annual average of 8 per cent.
Drivers of wealth generation in the region will be split evenly between new wealth creation and growth of performance of existing assets, according to BCG.
Another general trend in the region is clients’ looking for a comprehensive approach to investing, according to Mr AbuShaban.
“Institutional investors or some of the families are seeing a slowdown in the available capital they have to invest and in that sense they are looking at optimizing the way they manage their portfolios and making sure they are not investing haphazardly and different parts of their investment are working together,” said Mr AbuShaban.
Some clients also have a higher appetite for risk, given the low interest-rate environment that does not provide enough yield for some institutional investors. These clients are keen to invest in illiquid assets, such as private equity and infrastructure.
“What we have seen is a desire for higher returns in what has been a low-return environment specifically in various fixed income or bonds,” he said.
“In this environment, we have seen a de facto increase in the risk that clients are taking in things like illiquid investments, private equity investments, infrastructure and private debt, those kind of investments were higher illiquidity results in incrementally higher returns.”
The Abu Dhabi Investment Authority, one of the largest sovereign wealth funds, said in its 2016 report that has gradually increased its exposure in direct private equity and private credit transactions, mainly in Asian markets and especially in China and India. The authority’s private equity department focused on structured equities owing to “their defensive characteristics.”
If you go
Where to stay: Courtyard by Marriott Titusville Kennedy Space Centre has unparalleled views of the Indian River. Alligators can be spotted from hotel room balconies, as can several rocket launch sites. The hotel also boasts cool space-themed decor.
When to go: Florida is best experienced during the winter months, from November to May, before the humidity kicks in.
How to get there: Emirates currently flies from Dubai to Orlando five times a week.
Ain Dubai in numbers
126: The length in metres of the legs supporting the structure
1 football pitch: The length of each permanent spoke is longer than a professional soccer pitch
16 A380 Airbuses: The equivalent weight of the wheel rim.
9,000 tonnes: The amount of steel used to construct the project.
5 tonnes: The weight of each permanent spoke that is holding the wheel rim in place
192: The amount of cable wires used to create the wheel. They measure a distance of 2,4000km in total, the equivalent of the distance between Dubai and Cairo.
COMPANY PROFILE
Founders: Alhaan Ahmed, Alyina Ahmed and Maximo Tettamanzi
Total funding: Self funded
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Business Insights
- As per the document, there are six filing options, including choosing to report on a realisation basis and transitional rules for pre-tax period gains or losses.
- SMEs with revenue below Dh3 million per annum can opt for transitional relief until 2026, treating them as having no taxable income.
- Larger entities have specific provisions for asset and liability movements, business restructuring, and handling foreign permanent establishments.
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Company%20Profile
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The Sand Castle
Director: Matty Brown
Stars: Nadine Labaki, Ziad Bakri, Zain Al Rafeea, Riman Al Rafeea
Rating: 2.5/5
FIGHT%20CARD
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The specs
Engine: 1.5-litre turbo
Power: 181hp
Torque: 230Nm
Transmission: 6-speed automatic
Starting price: Dh79,000
On sale: Now
TEACHERS' PAY - WHAT YOU NEED TO KNOW
Pay varies significantly depending on the school, its rating and the curriculum. Here's a rough guide as of January 2021:
- top end schools tend to pay Dh16,000-17,000 a month - plus a monthly housing allowance of up to Dh6,000. These tend to be British curriculum schools rated 'outstanding' or 'very good', followed by American schools
- average salary across curriculums and skill levels is about Dh10,000, recruiters say
- it is becoming more common for schools to provide accommodation, sometimes in an apartment block with other teachers, rather than hand teachers a cash housing allowance
- some strong performing schools have cut back on salaries since the pandemic began, sometimes offering Dh16,000 including the housing allowance, which reflects the slump in rental costs, and sheer demand for jobs
- maths and science teachers are most in demand and some schools will pay up to Dh3,000 more than other teachers in recognition of their technical skills
- at the other end of the market, teachers in some Indian schools, where fees are lower and competition among applicants is intense, can be paid as low as Dh3,000 per month
- in Indian schools, it has also become common for teachers to share residential accommodation, living in a block with colleagues
The biog
Title: General Practitioner with a speciality in cardiology
Previous jobs: Worked in well-known hospitals Jaslok and Breach Candy in Mumbai, India
Education: Medical degree from the Government Medical College in Nagpur
How it all began: opened his first clinic in Ajman in 1993
Family: a 90-year-old mother, wife and two daughters
Remembers a time when medicines from India were purchased per kilo
