In Your Wildest Dreams!                                                                  10 June 2021

For the past week ending 10 June, Dubai Land Department recorded a total of 2,069 real estate and properties transactions, with a gross value of US$ 2.92 billion. It confirmed that 1,418 villas/apartments were sold for US$ 765 million and 219 plots for US$ 398 million over the week. The three most expensive residential units sold were a Dubai Investment Park First villa for US$ 93 million, a Marsa Dubai apartment for US$ 77 million and an Al Merkadh apartment for US$ 77 million. The most popular locations were in Al Hebiah Fourth, with 101 sales transactions worth US$ 120 million, Hadaeq Sheikh Mohammed Bin Rashid with 18 sales, at US$ 58 million, and Al Hebiah Third with 15 sales for US$ 9 million. The amount of mortgaged properties for the week was US$ 6 billion, with the highest being for a plot of land in Al Warsan Second, mortgaged for US$ 1.28 billion. The top three land transactions were a plot in Palm Jumeirah sold for US$ 90 million, followed by land that was sold for US$ 19 million in Al Safouh Second, and thirdly land sold for US$ 14 million in the Burj Khalifa area. Mortgaged properties for the week totalled US$ 272 million, including a plot for US$ 25 million in Al Thanyah First. 51 properties were granted between first-degree relatives, worth US$ 210 million.

According to Property Finder, May recorded the highest monthly transaction value – at US$ 3.00 billion – in over four years, as the Dubai property market continues its escape from a six-year bear market that saw prices collapse. 62% of all May transactions were for secondary or ready properties, (2.8k properties at US$ 2.3 billion) and the balance for off-plan properties – 1.7K at US$ 70 million. The top areas of interest in terms of searches for villas/townhouses in the month were Dubai Hills Estate, Arabian Ranches, Palm Jumeirah, Damac Hills and Mohammed bin Rashid City. The top areas of interest for apartments were Dubai Marina, Downtown Dubai, Palm Jumeirah, Business Bay and Jumeirah Village Circle.

Over the past twelve months, it was estimated that the average transaction value for a single property had increased 16.77% for villa/townhouses and 17.18% for apartments. For the month of May, total property transactions jumped 205% to 4.4k, compared to a year earlier, with sales growing 324%. Interestingly, the portal noted that there had been a 36.5% rise in the total volume of sales transactions, along with an 83.8% hike in the total value of sales transactions when comparing the past two years from May 2019 to May 2021. According to the Dubai Media Office, real estate transactions over the past five months topped US$ 13.6 billion by the end of May – twice as high as the comparative 2020 figure.

A Palm Jumeirah signature villa sold this week for US$ 19 million but what was different to recent similar deals was that it included the Holger Albers’ private art collection. The 5 B/R villa, comprising 10k sq ft built up area and placed on a 14.5k sq ft plot of land, also included a separate study and media room, was sold to a mystery overseas buyer. The German seller estimated that the redesigned villa would rent for US$ 1 million a year and could prove to be a useful investment asset, with a 5%+ gross return and capital appreciation.

By the end of May, Emaar Properties saw Dubai sales rise over 250%, compared to the five months to 31 May 2020, with total property sales in excess of US$ 2.86 billion. So far this year, the developer has launched three new projects – Palace Beach Residents in Emaar Beachfront, Golf Place ~Terrace in Dubai Hills and Bliss in ~Arabian Ranches 3. The company expects even higher growth figures in June.

This week saw Damac’s founder, Hussain Sajwani, resign as its chairman to avoid any conflict of interest, as he now aims to take over the rest of the company that went public in 2015. He owns 72% of the developer and his personal investment company, Maple Leaf, has offered to buy the remaining 28% for US$ 600 million, valuing each share at US$ 0.354 – equating to a 45% decline on its IPO price. By 31 March, Damac had delivered 33.3k homes and has a development portfolio of 33k more units in the pipeline. The offer price is 31% lower than the average price for the shares over the past five years and with the recent upturn in the Dubai real estate sector could be seen to be on the low side.

ENBD Reit has announced a 17% decline in its net asset value to US$ 180 million for the year ending 31 March; this equates to US$ 0.72 a share, with a loan to value ratio of 52%.The Shariah-compliant real estate investment trust’s total assets fell 12% to US$ 360 million for the year, driven by a softening real estate market during the pandemic which also saw gross rental income dropping.

With Dubai expecting that 25% of mobility journeys in the emirate to be autonomous by 2030, the Roads and Transport Authority and China’s Zhong Tang Sky Railway Group. have signed a MoU to develop a futuristic suspended transport network. This is the latest agreement that the RTA has signed with various specialist companies to develop suspended transport systems, in line with the Dubai Self-Driving Transport Strategy. It hopes that Dubai will enhance its position as one of the best global locations for living and business, a destination for visitors, and the smartest and happiest city in the world.

Always ahead of the game, Dubai is taking further steps to ease the process and cost of doing business in the emirate, with the Crown Prince, Sheikh Hamdan, issuing directives this week to reduce government-related procedures by 30%. This move, which will be fully implemented by the end of Q3, is part of a strategy to speed up Dubai’s recovery and further enhance Dubai’s status as a business hub. At a meeting attended by his brother, the Deputy Ruler of Dubai, Sheikh Maktoum bin Mohammed, he also commented that, “promoting partnerships with the private sector is a key strategic objective for Dubai,” Since the onset of the pandemic fifteen months ago, the Dubai government has rolled out stimulus packages worth US$ 2 billion to help the private sector.

Luxembourg managed to pip the UAE at the post in Coursera’s Global Skills Report 2021, ranking second globally in overall business skills. The study involved more than 77 million learners on the platform to benchmark skills proficiency across business, technology, and data science from over one hundred countries. The UAE was placed within the top 97 percentile or higher in five business skills – Communication, Entrepreneurship, Leadership and Management, and Strategy and Operations. However, in technology and data science skills, the country was only ranked 72^nd and 71^st but this should rapidly improve given the government’s prioritisation of digital transformation as a driver of national development and economic advancement.  

May saw the Dubai non-oil private sector economy continuing to expand but at a slower rate – at 51.6, compared to April’s strong figure of 53.5 which had been a seventeen-month high. Of the five main sub-indices used, only suppliers’ delivery times moved higher, with output charges and new orders providing the biggest falls – both 3.8 lower on the month; output charges declined with firms seeking to boost their sales, whilst cost pressures remained weak. After three years of decreasing selling prices, April had seen the first rise since 2018, but May saw selling prices returning to its previous status quo. There was no surprise to witness travel and tourism posting a renewed decrease in activity, but construction was the only sector where activity moved up at a faster pace, whilst wholesale/retail had a slower expansion. Common sense dictates that a weak greenback, oil prices over US$ 70, rising property prices and no new pandemic waves will ensure a much-improved H2 for business/consumer confidence and the Dubai economy.

Emirates NBD’s listing of a US$ 750 million Tier 1 Capital bond brings the bank’s total bond issues on Nasdaq Dubai to US$ 5.1 billion and the bourse’s total US dollar denominated debt listings to US$ 93.1 billion – the highest value in the ME. The perpetual bond carrying a 4.25% coupon rate, which was 2.3 times oversubscribed, was the lowest pricing for a conventional Tier 1 bond from the UAE, and the second lowest from the ME.

In 2019, Emirates Development Bank had its first bond issue for US$ 750 million which was 4.7 times oversubscribed. This week, the bank has successfully closed another US$ 750 million five-year bond issue, priced at a fixed re-offer yield of 1.639% pa in the Regulation S markets. This was part of the financial institution’s US$ 3 billion Euro Medium Term Note programme to boost its accessibility to capital markets and strengthen its funding profile; its EMTN has received an ‘AA-’ issuer rating by Fitch. EDB is a major player in the country’s diversification plans, having allocated a portfolio of US$ 8.2 billion, (AED 30 billion), to support priority industrial sectors over the next five years. With the target of financing up to 13.5k SMEs, it hopes to create 25k new jobs in the UAE.

In an initial funding round, Trukkin raised US$ 7 million to expand its business further and invest in technology; the Series A funding was led by Saudi Arabia-based Emkan Capital. The UAE and Saudi Arabia-based logistics and supply chain start-up, launched in 2017, offers digital logistics solutions for long-haul trucking by operating on an asset-light model, which means it does not own the trucks it uses. Clients can utilise the app to arrange transport solutions by being able to select a chosen supplier from the bidders. The firm, which is active in twelve ME countries, and entered the Pakistani market last year, is also venturing into FinTech to provide solutions for payments, insurance and financial services.

In its IPO, a Norwegian-founded agri-tech start-up, Desert Control raised US$ 23 million on Euronext Growth Oslo, (a multilateral trading facility operated by the Oslo Stock Exchange) and is in the throes of introducing a commercial rollout of liquid natural clay. Four years ago, it had joined the alumni network of in5 an enabling platform for tech, media and design entrepreneurs in Dubai and is expanding its operations. LNC has the ability to turn deserts into fertile land and the company has plans to stop and reverse soil degradation – it is estimated that every year, twelve million hectares of fertile land, (an area more than twice the size of Denmark) is lost to desertification.

According to Magnitt, e-commerce start-ups, along with fintech companies, received the bulk of the funding for regional start-ups in 2020, with the data platform indicating that there was a 13.0% hike in the Mena region funding last year to US$ 1.03 billion, compared to 2019. Magnitt foresees a massive growth curve in the coming years, noting that “the size of the market is considerable at US$ 50 billion. Currently, local fragmented players dominate the market in the region, and we are working to be an enabler that brings this fragmented market together on an integrated platform”.

P&O Ferrymasters, whose parent company is DP World, has signed an agreement with Belgium-based Genk Green Logistics to build a 10k sq mt state-of-the-art warehouse near the Belgian Port of Genk. The new facility, which will further enhance the company’s position as a leading pan-European rail, road and warehousing network, will be located in Flanders’ main industrial area and near to the port.  P&O Ferrymasters operates integrated road and rail links to countries across Europe and facilitates the onward movement of goods from Asian countries via the Silk Road. The new warehouse will also be a hub for the import and export of goods requiring storage for international deep-sea routes and to the United Kingdom via both the English Channel and North Sea.

The country’s national banks reported a 5.2% increase in savings, (among Emiratis and residents), to US$ 54.2 billion, in the first four months of 2021; the local banks account for 88% of the total balance in all UAE-based banks. Covid-19 has been the main driver in moving saving balances higher, with much money waiting to be spent when global lockdowns ease further. Currently, some of the “pent up savings” has been spent in the housing sector – either by purchasing or upgrading property. Savings are expected to grow even further over the coming few months.

About 140 creditors, owed more than US$ 6.4 billion, have reached an agreement with NMC Health’s administrators Alvarez & Marsal, who confirmed that it had received enough firm commitments from creditors to embark on a restructuring. It is inevitable that creditors will have to take a “hair cut”, in return for equity instruments under a Deeds of Company Arrangement; the plan will bring the company’s debt down to US$ 2.25 billion, with a mechanism allowing them to benefit from an eventual exit that generates more than that amount. With the administrators announcing receipt of firm creditor commitments to ensure the troubled firm’s successful exit from Abu Dhabi Global Market administration, it appears that creditors have taken control. In a further bid to obtain more money for the creditors, the administrators are also claiming against the company’s former auditor, EY, and its former directors and shareholders. A formal voting process to complete the restructuring will now begin which will give creditors a better deal than what would have occurred if there had been a distressed sale or liquidation.

The bourse opened on Sunday 06 June, 199 points up (7.6%) the previous five weeks, gained a further 18 points, to close on 2,842 by Thursday 10 June. Emaar Properties, US$ 0.08 higher the previous five weeks, shed US$ 0.04 to close at US$ 1.06. Emirates NBD and Damac started the previous week on US$ 3.76 and US$ 0.38 and closed at US$ 3.73 and US$ 0.354. On Thursday, 171 million shares changed hands, with a value of US$ 67 million.

By Thursday, 10 June, Brent, US$ 5.90 (9.0%) higher the previous two weeks gained US$ 0.75 (1.1%) to close on US$ 71.97. Gold, up US$ 142 (8.1%) the previous four weeks, gained a further US$ 2, by Thursday 10 June, to close on US$ 1,896.  

Last April, India imposed a 2% levy, known as Digital Services Tax, on local earnings by overseas tech companies and e-commerce companies such as Amazon, Facebook and Google. Now, fifteen months later, the Biden administration has threatened to increase import duties, by 25%, on a 26-product range of Indian goods, including rice, pearl, copper foil, bamboo, window shutters and prawns; if implemented it is expected to net US$ 55 million – roughly the same amount being collected by the Indian taxman. This is in retaliation for the DST and will come into effect in December, unless India backs down and cancels the 2% duty. (At the same time, the Biden administration pointed out that five other countries – Austria, Spain, Italy, Turkey and the UK – are in the firing line over their use of DST on certain US goods).

ProPublica, a US news website, has managed to leak tax returns of some of the world’s richest people in what it called a “vast trove of Internal Revenue Service data”. It showed how little tax some billionaires are actually paying, including those paying no tax such as Jeff Bezos (in 2007 and 2011) and Elon Musk (2017). The website estimated that from 2014 – 2018, the wealth of the 25 richest Americans jumped by US$ 401 billion – but they only paid US$ 13.6 billion in income tax over those five years; this is equivalent of them paying an average of 15.8% less tax than most mainstream US workers.

At the beginning of the year, it was GameStop, last week, US cinema chain AMC Entertainment and this time it is Clover, as the “meme stock” effect, (the trend of small, underperforming and frequently shorted stocks being picked up by retail investors), continued on Wall Street. The latest rally involves the healthcare insurer whose share value has more than doubled, despite analysts indicating that Clover is at least 43.5% shortened. Recently, other stocks that have rallied include Bed Bath & Beyond, Workhorse Group and the original meme stock, GameStop.

As the economic world continues to open up, the first country to reap the benefits is China, where both its manufacturing base and exports have bounced back amid strong global demand. May exports were 28% higher on the year, whilst imports rocketed, at their fastest pace since March 2010, up 51.1%. China’s exports have benefitted from a resurgence in Covid-19 cases in India and South-East Asia which has led to production disruptions there which in turn has seen more orders being directed towards China. Manufacturers of communication and electronic equipment have led the country’s recovery, followed by electrical machinery, automobiles, chemicals and pharmaceutical companies. The International Monetary Fund expects the economy to expand 8.4% in 2021 this year – up from 2020’s 6.0% level.

The latest World Bank report this week painted a rosier picture on the state of the global economic health, forecasting a 5.6% growth level – its fastest rebound rate since 1973, and well up on its previous January forecast of 4.1%. It again warned that “this recovery is uneven and largely reflects sharp rebounds in some major economies”. The two main drivers behind this improvement have been vaccinations and massive government stimulus in rich countries; poorer countries have suffered because of a lack of vaccines and slow progress with inoculations. Measuring by income, the world body expects that 90% of advanced economies are expected to return to pre-pandemic levels by next year, whilst global output will be 2.0% below pre-pandemic projections, with 67% of emerging market economies having still not made up last year’s per-capita income losses. Other growth forecasts see the US, China, the EC, Japan and emerging markets growing at 6.8%, 8.5%, 4.2%, 2.9% and 4.4% respectively.

The OECD countries posted a marginal 0.1% rise in April unemployment levels to 6.6%, a 0.7 million rise to 43.8 million – the first monthly increase in a year when it reached 8.8% in April 2020; the OECD bloc includes the eurozone countries as well as the US, Australia, Japan and the UK, among others. However, there was a note of caution indicating that the level has been “artificially” boosted by the return to work of temporary laid-off workers in the US and Canada, where they are recorded as unemployed. The latest figure is still 1.3% higher than that recorded pre-pandemic in February 2020. A further breakdown of the figures sees the eurozone rate improving 0.1% to 8.0%, with the likes of Colombia and Canada posting figures of 15.0% and 8.1%, whilst the US unemployment mark dipped 0.1% to 6.1% in April.

As expected, the European Central Bank kept its stimulus package and interest rates unchanged, as it continues with speedier emergency bond-buying to maintain the bloc’s recovery from the impact of Covid. Its president, Christine Lagarde, maintained the stimulus package at US$ 2.25 trillion and confirmed the continuance of lower interest rates until the inflation outlook tops the bank’s 2% target. In the short-term, there is no sign of an early slowing in the ECB’s pandemic emergency purchase programme, initiated in March 2020, and Q3 may well see the pace of PePP accelerating, with a gradual tapering taking place towards the end of the year.

Ahead of the main G7 meeting this weekend, in Cornwall, the G7 finance ministers met in London, where its seven members and other countries have seemingly agreed to a minimum 15% tax on multinational businesses, such as Google, Apple and Amazon, as well as ensuring that they pay more tax in the markets where they sell goods and services. The deal, which was years in the making, also promises to end national digital services taxes levied by the UK, France and other European countries that the United States reckoned unfairly targeted US technology giants. It is one step forward that the seven leading countries buy into the agreement, it is another leap to get the same accord at next week’s G20 meeting in Venice. However, it appears a long way off to get all countries to back this bold plan – even in the EU, the likes of Ireland, Cyprus and Hungary will take a lot more convincing particularly as their tax rates are lower than this nominated threshold. Even though the UK Chancellor, Rishi Sunak, said the deal was a “huge prize” for taxpayers, he still does not know whether the UK would be better off. The agreement is also very vague stipulating that the businesses impacted will be only “the largest and most profitable multinational enterprises”. The tax proposals are in two parts – the first allows countries tax a share of the profits earned by companies that have no physical presence but have substantial sales, and the other is for countries to tax their home companies’ overseas profits at a rate of at least 15%.

It is obvious that many details still have to be negotiated among various blocs, such as the EU, G20 and the OECD, and the exact wordings need to be negotiated that will take several years to fruition. But the fact is that countries are becoming increasingly concerned that MNCs should pay taxes in the same places where they are earning their profits, which is patently not the case at the moment. Whether the tech giants will come to the party is another matter, and if anyone thinks they will be paying 15% tax in the future, it will never happen, even In Your Wildest Dreams!