It’s All In The Game                                                                                       21 April 2021

According to latest figure from Valustrat, the average Dubai Q1 rent for residential units, apartments and villas stood at US$ 20.9k, US$ 15.0k and US$ 57.6k respectively; this translates into yields of 6.1%, 6.4% and 4.9%. The report, which estimated that residential occupancy was at 80%, noted that rentals for studio, 1 B/R, 2 B/R and 3 B/R averaged US$ 9.5k, US$ 14.2k, US$ 21.2k and US$ 31.0k; rents for 2 B/R, 3 B/R and 4 B/R villas averaged US$ 28.0k, US$ 40.1k and US$ 57.7k. These rents are expected to rise in H2 on the back of the upcoming Expo and an improvement in the economic environment. Valustrat expects a further 42.5k units to be handed over this year, with this figure slightly lower than the 42.9k apartments/villas of 2020. If these figures are taken, along with the assumption that the ratio between new apartments and villas is 6:1, then the emirate’s property portfolio at the end of year will stand at 125k villas and 610k apartments to house 3.411 million (being the population as of 31 December 2020). The ValuStrat Price Index posted this quarterly gain in Q1 for the first time in almost seven years. Not surprisingly, all established freehold villa locations, including the Meadows, the Lakes and Arabian Ranches, saw price increases from 1.8% to 5.4%, whilst only 50% of apartment locations improved in value, with some areas posting declines of up to 2.8%.

For the week ending 15 April, there was a total of 1,733 real estate and property transactions, valued at US$ 1.17 billion, of which there were 135 plots and 1,107 villas/apartments sold, valued at US$ 172 million and US$ 559 million respectively. The top three transfers were for  a Marsa Dubai apartment sold for US$ 79 million, a villa sold for US$ 65 million in Hadaeq Sheikh Mohammed Bin Rashid, and a Burj Khalifa apartment sold for US$ 40 million. The busiest locations were Al Hebiah Third, Hadaeq Sheikh Mohammed Bin Rashid and Nad Al Shiba Third with 22, 21 and 17 transactions, valued at US$ 15 million, US$ 51 million and US$ 12 million respectively. The total value of mortgaged properties was US$ 272 million, of which half of the value was for one plot of land in Al Mamzer. The two top land deals occurred in Hadaeq Sheikh Mohammed Bin Rashid sold for US$ 15 million, followed by a plot that was sold for US$ 14 million in Wadi Al Safa 3. Over the week, 73 properties were granted between first-degree relatives worth US$ 98 million.

The value of property transactions for the week ending today, 22 April, was US$ 1.04 billion of sales, according to the DLD. Of that total, there were 1,086 villa/apartment sales, worth US$ 480 million, and 93 plots worth US$ 140 million. The three most expensive transactions were for US$ 60 million, US$ 57 million and US$ 44 million for an apartment in Marsa Dubai, a villa in Hadaeq Sheikh Mohammed Bin Rashid and a Burj Khalifa apartment. Most transactions took place in Al Hebiah Third, (33 transaction values at US$ 25 million), Hadaeq Sheikh Mohammed Bin Rashid, (15 sales transactions worth US$ 45 million), and Nad Al Shiba Third – 15 sales transactions worth US$ 11 million. The week’s mortgaged properties totalled US$ 272 million, with the highest being for land in Nadd Hessa for US$ 51 million. 90 properties were granted between first-degree relatives, worth US$ 115 million.

March saw a total of 6.6k real estate transactions, valued at US$ 6.24 billion – a 43% growth in numbers and 40% in value, compared to March 2020; it was also the second highest number of monthly transactions, bettered only by returns in February 2017. Compared to Q1 2020, numbers and values were both higher at 27% and 47%. One interesting feature was that 5.7k new investors entered the market for the first time, equating to 64% of the total. The top five popular locations for villa sales in Q1 wereHadaeq Sheikh Mohammed Bin Rashid, followed by Wadi Al Safa 5, Wadi Al Safa 7, Nad Al Sheba 1, and Al Thanyah Fourth. Dubai Marina, Palm Jumeirah, Business Bay, Burj Khalifa, and Al Merkadh topped the list for apartment sales.

Azizi Developments has awarded Stromek Emirates Foundations with a multimillion deal for shoring, excavation, and dewatering in its latest development, Riviera’s Phase 3. The waterfront lifestyle community project, located in MBR City, will comprise more than 16k residences, spread across 71 mid-rise buildings and overlooking an extensive retail boulevard, a canal walk – with artisan eateries – and boutiques, and Les Jardins, a lush-green social space.

In 2020, Dubai’s external foodstuff trade reached US$ 14.2 billion, despite the impact of Covid-19; of that total, imports accounted for US$ 9.5 billion, exports US$ 2.7 billion and reexports US$ 2.0 billion. There is no doubt that food security was increasing in importance, even before the pandemic onset, and that UAE has performed remarkably well in securing food supply over the past twelve months. Dubai uses a united food platform, with cooperation between Dubai Customs, DP World and Dubai Municipality, to ease shipments, in both directions, throughout Dubai ports.

A new development in Australia could prove a winner for some keen Dubai investor if only part of the idea were taken up on the emirate’s shores. That part of the idea revolves around a wave pool, obviously located in the sea, creating five levels of waves ranging from beginner to professional. The machine bobs up and down in the water to produce waves that fan out and react with an artificial reef; the result is perfect waves twelve months a year. Just as cycling has moved from an almost zero base to now an established national past time, with thousands taking to the dedicated cycling tracks, which are some of the best anywhere in the world. The same would surely happen if there was guaranteed year-round surfing on offer in Dubai and would prove not only a USP for the emirate’s tourism sector but would also see school groups, disabled surfers and even aged care groups involved in learning to surf.

The impact hat Covid has had on Dubai tourism figures is reflected in two statistics – the first two months of 2021 see the emirate hosting 810k international visitors, (75.2% lower than in the comparative period last year), and the 2020 number of visitors at 5.51 million was down 67% on the previous year. With the usual caveat, that there will be no further lockdowns, there is no doubt that tourists will come flocking back to Dubai in their millions this year, a  once key source markets such as Saudi Arabia, UK and Germany open up again for travel. Issam Kazim, chief executive of Dubai Tourism, has indicated three focal points – to tap into the conferences business, boost leisure events and start a new global marketing campaign in May to showcase the emirate as a summer destination for families. Dubai has several drivers to push tourism numbers higher – a speedy and successful Covid-19 vaccination campaign, the hosting of the six-month Dubai Expo from October, the UAE’s 50-year celebrations, open borders, visa reforms and the new market of Israel.

Despite the pandemic, Dubai Customs completed five million transactions in Q1, 20% higher on the year, and double the number of transactions in the same period in pre-pandemic 2019. The figures reflect the emirate recovering quicker than expected from the pandemic, as well as witnessing outstanding growth, with Q1 customs declarations 24% higher at 4.47 million, compared to Q1 2020. The aim is to raise the value of trade to US$ 2 trillion in the next five years, by targeting new international markets and attracting more foreign investments in line with the objectives of the 2030 Dubai Strategic Plan. To enhance the emirate’s position as a global online, Dubai Customs has recently signed an agreement with JAFZA, Dubai South and DAFZA to enable them utilise all the services and benefits Dubai Customs provides through its cross border e-commerce platform.

Dubai CommerCity has launched the first stage of the region’s first dedicated e-commerce free zone, comprising 470k sq ft and located in Al Ramool. The US$ 871 million project, which will eventually span 2.1 million sq ft, will have a built-up area of over 320k  sq ft of office space in the Business Cluster, including 145k sq ft e-commerce logistics units and multi-client warehouses in the Logistics Cluster. The free zone has already leased more than 51% of the logistics warehouses to companies launching their operations in different sectors.

On a like for like basis, there was a 9.6% hike in DP World’s Q1 gross volumes, 9.6%  higher than the same quarter in 2020, on a like-for-like basis and 8.2% higher on a reported basis. It also reported that Jebel Ali port handled 3.5 million TEUs in Q1, a 2.6% increase, year on year, and this despite a “more benign trading environment”. The port operator noted that it remained focused on containing costs to grow profitability, managing growth capex and continuing to execute its strategy of delivering supply chain solutions to cargo owners. Any improvement for the remainder of the year could be jettisoned by factors such as trade wars, more lockdowns and geopolitical uncertainty.

HH Sheikh Mohammed bin Rashid Al Maktoum has announced a new rewards programme for positive behaviour, focussing on the three main pillars of homeland, society and family. The National Behavioural Rewards Programme is based on living a positive life, with residents winning “points” to pay for government services by demonstrating strong ethics, loyalty and patriotism. The programme is being run by the Ministry of Possibilities, set up two years ago as a virtual ministry, with no designated minister, and is led by a committee of existing government authorities. It was established to take a new approach to tackling issues of national importance so as to shake up current practices and help the country become a global power.

A strange case for Dubai Police this week was a man being fined for not following safety protocols. The police discovered that he was riding a bike in Naif to the bank, carrying US$ 272k (AED 1 million) in a plastic shopping bag. It seems that the police have stopped several potential victims of theft outside banks, as they were not following adequate safety measures and probably saved them from being a victim of a daylight robbery. It advises that companies must assign at least two employees to transport, (in a car and not a cycle), collections to the bank.

To further consolidate its strengthening position in the global gold and jewellery, the UAE is planning a federal platform for gold trading. At a recent meeting of the Emirates Gold Bullion Committee, there was a major review of technical plans for the platform and for establishing a comprehensive database of all its main players, as well as discussing the progress of the introduction of the UAE Good Delivery Standard. The Minister of State for Foreign Trade, Thani Al Zeyoudi, noted that the committee had made tangible progress in implementing policies, aimed at bolstering gold trading. Gold continued to top the list of commodities accounting for US$ 58 billion of the country’s total non-oil exports.

3iQ Corporation, the world’s first Bitcoin fund to trade on a major exchange (Toronto) is to list on Nasdaq Dubai next month, after gaining approval from the Dubai Financial Services Authority. This new listing will also help the firm, in terms of trading times, as Bitcoin is an all-day global trading asset. Currently, the company has net assets of US$ 1.45 billion, after starting trading last year on the TSE, with assets of US$ 15 million. With cryptocurrencies in the middle of a boom period, (Bitcoin, for example, has increased almost eightfold in a year), 3iQ is confident that its Dubai début will be successful, as it aims for initial subscriptions “north of US$ 200 million”, which can be increased in size.

Having bought 21.53% of National General Insurance Company shares, Dubai Investments now has a 29.99% stake in one of Dubai’s leading insurers. The deal will help the company, which is 11.54% owned by the Investment Corporation of Dubai, aims to expand within the UAE’s insurance sector and also to focus on strategic business investments, reinforcing the company’s foray into newer business sectors. ICD already owns Dubai Investments Park, venture capital company Masharie, Al Mal Capital, Globalpharma and the district cooling company Emicool. It has various other interests in sectors encompassing real estate, industrial, financial, healthcare and education.

Driven by lower impairment costs, (down 31% to US$ 479 million) and operating expenses (9% lower to US$ 506 million), Emirates NBD posted a 12% hike in Q1 net profit, attributable to equity holders, of US$ 632 million. Results were boosted by higher fees, foreign exchange income, and investment income as well as noting that the accelerated push of Covid-19 vaccinations was speeding up the economic recovery; it expects that the UAE’s non-oil economy will grow 3.5% this year. With total bank assets flat at US$ 189.2 billion, customer deposits rose by US$ 422 million to US$ 103.2 billion as total customer loans dipped by US$ 1.5 billion to US$ 118.7 billion. Dubai’s biggest lender by assets now has six branches in Saudi Arabia, having expanded with new branches in Madinah and Makkah.

A week after pulling out from an IPO on the DFM, Tristar Group posted strong Q1 results, although no figures were readily available. Consolidated revenue was said to have demonstrated resilience, whilst both EBITDA and net profit both moved northwards – up 9.9% and 9.3% respectively.

The bourse opened on Sunday 18 April and, having gained 75 points (1.0%) the previous fortnight, shed 8 points (0.3%) to close on 2,625 by Thursday 22 April. Emaar Properties, US$ 0.09 higher the previous fortnight, lost US$ 0.01 to close at US$ 1.05. Emirates NBD and Damac started the week on US$ 3.26 and US$ 0.34 and closed on US$ 3.27 and US$ 0.32. Thursday 22 April saw typical Ramadan market trading lower at 92 million shares, worth US$ 47 million, (compared to 184 million shares, at a value of US$ 89 million, on 15 April).

By Thursday, 22 April, Brent, US$ 6.25 (8.7%) lower the previous four weeks, was US$ 2.23 higher (3.38%) to close on US$ 63.38. Gold, up US$ 34 (1.6%) the previous three weeks, was US$ 17 (1.0%) higher, by Thursday 22 April, to close on US$ 1,778. On Tuesday, Brent crude climbed US$ 0.64, or about 1%, at $67.69, after hitting its highest level since 18 March  at $68.08, mainly attributable to Libya’s National Oil Corp declaring force majeure on Monday on exports from the port of Hariga, which is usually handles 180k bpd, as well continuing dollar decline. Meanwhile, gold eased off a seven-week high, not helped by a rebound in US Treasury yields.

With contracts slowing, and revenue slumping by 25.5% to US$ 4.1 billion, Petrofacc posted a US$ 180 million Q1 loss. The leading energy services firms has reported that a serious fraud investigation, by the SFO, is causing it “real and material” harm. Earlier in the year, former global head of sales, David Lufkin, pleaded guilty in a London court to three charges of bribery and corruption relating to US$ 30 million of payments made to agents to influence the awarding of US$ 3.3 billion-worth of contracts in a MENA country. The company was not helped by the collapse, early in 2020, of energy prices which forced an immediate US$ 200 million cost cut.

On a global scale, aviation lost a massive US$ 126 billion last year but with more government support, 2021 losses will be lower but still worryingly high. IATA estimates that last year, ME carriers lost US$ 7.1 billion because of a 72% slump in passenger demand, (66% globally) and a 63% decline in capacity, (57% globally). The average global loss per passenger is at a slightly lower US$ 66.04  – in the region, it was US$ 68.47. Job losses in aviation and related industries could be as high as 1.7 million in the ME. One bright note was that cargo only declined by 10% in 2020. The global body also called for regional coordination to ensure that restart plans can be efficiently implemented and urged governments to remain vigilant about the industry’s financial situation.

There was more good news for the UK High Street, after a hectic week of trading following the lifting of lockdown in the UK. One of the country’s biggest commercial landlords, Hammerson – owning Birmingham’s Bullring, London’s Brent Cross, the Oracle site in Reading and the Victoria Quarter in Leeds in its portfolio – has indicated that it could reduce rents by up to 30%. Over the past year, the firm had collected about 75% of rents owed by its tenants and agreed abatements with those shops who needed it. It also noted that last Monday’s footfall had been stronger than the week after the first lockdown in June, as consumers have more money to spend, (with the BoE estimating that UK households have accumulated over US$ 175 billion in pent-up savings) and are more confident with the success of the vaccine programme. This may see an unlikely resurgence in the High Street.

The billionaire Blackburn brothers who last year bought Asda for US$ 950 billion have now acquired more than seventy restaurants across the UK and Europe after buying the British fast food chain, Leon. Mohsin Issa and Zuber Issa, reportedly through their giant petrol forecourt business EG Group, have spent up to US$ 140 million acquiring 42 company-owned restaurants, as well as 29 franchise sites which are mainly found in airports and train stations across the UK and a handful of European countries; it is also committed to keeping on Leon’s management team and staff. It already operates more than 700 food outlets in the UK and Ireland, including branches and “drive-thrus” for KFC, Starbucks and Greggs,  and had a bid turned down by the administrators of Café Nero last November.

The Johnson government is expecting to pay US$ 168 million to the bondholders of London Capital and Finance which collapsed into administration in January 2019. At the time, the regulatory body, the Financial Conduct Authority, had failed to “effectively supervise and regulate” LCF, with the then head, (and now Bank of England governor), Andrew Bailey apologising to the thousands who lost their  life savings; it is estimated that 11.6k people invested a total of US$ 332 million with LCF before it collapsed. The government’s compensation is expected to be paid to about 8.8k people who have not qualified for other payouts, who will be given back 80% of the money that they lost when LCF went into administration, capped at US$ 95k.

Despite taking a US$ 911 million hit over charges relating to losses from its dealing with hedge fund, Archegos, Morgan Stanley still posted a 150%+ jump in Q1 profit from  US$ 1.59 billion to US$ 3.98 billion, driven by the boom in deal-making, with a marked increase in business mergers, acquisitions and companies’ IPOs. The US investment bank saw revenue come in at US$ 15.67 billion. By the end of last month, Archegos suffered when several of their investments turned sour and margin calls were made forcing the hedge fund to sell stock at a lower price than for what they had paid. Morgan Stanley was one of six banks that were exposed to the hedge fund’s liquidity problems so much so that they were owed US$ 644 million and lost a further US$ 267 million by selling out of shares linked to its trades with the hedge fund.

Scarred largely by self-inflicted injuries, Credit Suisse has turned to its shareholders for US$ 1.9 billion extra capital, as it reels from “unacceptable” losses. The bank took a US$ 4.8 billion dollar hit after disastrous foray with Archegos and is also a creditor of failed financial firm Greensill, which hit the headlines over its role funding the UK’s Liberty Steel and ‘dodgy’ lobbying by former Prime Minister David Cameron. Matters became worse for the bank when it was announced that Finma, the Swiss regulator, were widening probes into Credit Suisse’s activities. This week, Credit Suisse posted a Q1 US$ 827 million loss on what should have been its best trading quarter since the GFC. No wonder their shares lost 5% on the news this week and their YTD deficit comes in at 30%.

An indicator that the car industry is facing increasing supply problems relating to a  shortage of computer chips came earlier in the week with Jaguar Land Rover shutting its two main UK car factories temporarily. Covid is the main culprit for the industry’s difficulties; at the beginning of the pandemic, car sales tanked so manufacturers moved to other revenue sources and at the same time demand ramped up for semiconductor chips for use in electronics such as computers, as people worked from home, with suppliers unable to keep up with demand. The difficulties at Britain’s biggest carmaker echo similar problems at other manufacturers, including Ford, who have been hit by a global shortage of chips. The situation deteriorated as a fire at one of the world’s largest makers of semiconductors for the car industry cut supply even further. Many of the world’s leading carmakers, including Daimler, General Motors and Volkswagen have suspended production lines in recent weeks, with the problem being exacerbated by the fact that most of the industry relies on just-in-time delivery, where parts are brought in when needed, rather than being stockpiled.

IMF’s Kristalina Georgieva has indicated that advances made in digital money can help reshape cross-border payments and remittances, making them “easier, faster and cheaper”. The head of the world body noted that remittances have played a key role in improving the lives of people in developing economies and supporting economic activity. He noted that the biggest beneficiaries could well be the vulnerable people, sending small value amounts, making it more important to reduce the risk of the growing digital divide between rich and poor countries, so that all countries can benefit from the latest innovations in digital money and payments, particularly remittances. Many global central banks are in the throes of developing digital currencies not only to modernise financial systems but also to counter the threats from cryptocurrencies. She stressed the need for “shorter payment chains, faster transactions and more competition among remittance providers”.

The BoE becomes yet another central bank studying the possibility of a central bank digital currency. It will look at the risks and opportunities, involved in creating a new kind of digital money which could exist alongside cash and bank deposits, rather than replacing them. It has previously said it is interested in a central bank digital currency (CBDC) because “this is a period of significant change in money and payments” and considers having its own digital currency as a way of “avoiding the risks of new forms of private money creation”, including crypto-currencies such as Bitcoin. The use of cash has steadily declined, a process that Covid has actually speeded up, with the use of payments by debit cards, credit cards and direct debits increasing.

The nation of “battlers” has again seemingly taken on China with which it has had many problems in recent years. Australia has scrapped agreements tied to China’s Belt and Road initiative, a move that will ruffle the Beijing administration and deepen the existing  tensions between the two countries. The Morrison government has introduced new legislation that has allowed it to cancel two deals made between the state of Victoria and China on the grounds of protecting Australian interests. A Chinese spokesman commented that this action was “bound to bring further damage to bilateral relations and will only end up hurting itself.” Foreign Minister Marise Payne said that the agreements were “inconsistent with Australia’s foreign policy or adverse to our foreign relations”. If there is no change in the attitude of both sides, the two questions that have to be answered are how long China will be Australia’s largest trading partner and how long will it be the biggest source of overseas university students. Relations have worsened in recent years, leading to diplomatic and trade ructions.

What seemed to have been a plan made in heaven has become unravelled before football fans’ very eyes as the scheme to start a new European Super League has provoked strong opposition from every quarter. There is no doubt that, in the past, the major global sporting bodies have been run either inefficiently or fraudulently – just look at FIFA under the tutelage of Joao Havelange, (1974-1998), followed by his protégé Sepp Blatter, (1998-2013), that seemed to make more money for its administrators rather than working for the good of the game.  In July 2012, a Swiss prosecutor’s report revealed that, during his tenure, he and his son-in-law, Ricardo Teixeira, took more than US$ 41 million in bribes in connection with the award of World Cup marketing rights. So, for forty years, FIFA was headed by known crooks and one has to ask whether the world body has changed for the better. Even Blatter’s successor, Gianni Infantino, has been tarnished by the endemic problem of corruption within the game. He had been with EUFA since 2000 and had been Deputy General Secretary of UEFA in 2007, and Secretary General in October 2009. In 2007, Michel Platini was appointed President of EUFA until he was suspended in October 2015 and banned from football for six years, two months later. Surely this is a sign  – not only to the overseas billionaire owners who would have been involved, (and made money), in the now defunct super league, but also to the fat cat football administrators – that the game still belongs to the fans. It’s All In The Game.