Better Late Than Never!

Better Late Than Never!                                                                              08 July 2021

For the past week ending 08 July, Dubai Land Department recorded a total of 1,705 real estate and properties transactions, with a gross value of US$ 1.5 billion. It confirmed that 1,164 villas/apartments were sold for US$ 640 million and 102 plots for US$ 171 million over the week. The top two transactions were for a plot of land in Hadaeq Sheikh Mohammed Bin Rashid, sold for US$ 23 million, and a plot that was sold for US$ 17 million in Island 2. The most popular locations were in Nad Al Shiba First, with 17 sales transactions worth US$ 11 million, Hadaeq Sheikh Mohammed Bin Rashid, with 16 sales at US$ 56 million, and Jumeirah First, with 12 sales transactions worth US$ 28 million. The top three transfers for apartments and villas were all apartments – US$ 102 million in Marsa Dubai, US$ 59 million in Burj Khalifa and US$ 54 million in Palm Jumeirah. Mortgaged properties for the week totalled US$ 272 million, including a plot for US$ 68 million in Business Bay. 97 properties were granted between first-degree relatives, worth US$ 268 million.

June property sales touched US$ 4.0 billion in June – the highest monthly figure since 2013. Property Finder noted that this was partly down to the continued economic rebound and a boost in consumer confidence, with a move by many buyers to upgrade to larger homes and more garden space. In June, the top locations for villa sales were the Green Community, Mohammed Bin Rashid City and Dubai Hills Estate and for apartments, Meydan, Jumeirah Lakes Towers and Dubai Marina. Property Finder reported that June’s volume and value of sales transactions were 173.5% and 204.5% higher than the same month in 2020. It is estimated that 62.2% of transactions (4.0k valued at US$ 3.1 billion) were in the secondary or ready property market and the 37.8% balance, (2.4k valued at US$ 950 million) in the off-plan segment. In Q2, there were 15.6k sales transactions totalling US$ 10.0 billion and for H1 27.4k transactions worth US$ 16.9 billion.

The latest figures from ValuStrat shows that, in Q2, Dubai real estate prices came in 3.8% higher on the quarter, led by a 7.0% Q2 increase in villa prices – but only 6.3% up compared to the same period in 2020; apartments, which account for 87% of the Dubai property portfolio, saw prices 1.7% higher in Q2 but still 4.8% lower on the year. The locations with the better performances were JBR, Palm Jumeirah, Downtown Dubai and The Views. The ValuStrat index registered 69 points in June compared to 69.4 points a year earlier. There is still some way to go for the market to hit the 100 points, registered in January 2014, and its highest ever level of 112.9 points seen in June of that year. The highest annual capital gains were found in The Meadows, Arabian Ranches, The Lakes, Jumeirah Islands, Dubai Hills Estate and Mudon.

Wednesday saw the one-year anniversary of Dubai opening its borders to international tourists, after a three-month lockdown that had started in late March 2020. Since then, the emirate has welcomed 3.7 million overnight visitors in the eleven months to 31 May; in H2 2020, the number was 1.7 million and 2.0 million YTD to May. Staycations have boosted hotels’ revenue, as occupancy rates rose from 35% in July 2020 to 58% in May 2021, peaking in December at 69%. A total of 591 hotels, with 100k rooms, were available in June 2020 which had grown to 715 properties (128k keys) by the end of May 2021. During the nine-month period from September 2020, 814k delegates attended over 3.1k business events, including mega ones such as Arab Health, Arabian Travel Mart, Gulfood and Gitex.

Dubai Economy’s report on Business Bay indicates that there are 17.9k business operating in the location, dominated by two sectors – Commercial, 12.4k (69%) and Professional, 5.1k (28.7%), with the balance from the Tourism and Industry sectors. Business Bay boasts over 52k investors, with 84% of that total classed as businessmen. Accounting for 90% of the legal entities were LLCs (58%), Sole Establishments (23%) and Civil Companies (9%). The Business Bay concept was the brainchild of HH Sheikh Mohammed bin Rashid Al Maktoum, who saw it as a new quasi-city, within the city of Dubai, and built based on being a private, commercial and residential complex, as well as a new extension of Dubai Creek from Ras Al Khor to Sheikh Zayed Road. Business Bay has already built up a reputation for upscale amenities, and a fast-paced and contemporary lifestyle, with a range of residential and commercial properties.

Scarcely a week goes by without DP World announcing a major global deal and this week is no exception. To enhance its African capabilities, and expand regional infrastructure of its regional ports, terminals and economic zones, it has paid US$ 890 million to acquire JSE-listed Imperial Logistics. The company, listed in Johannesburg, is an integrated logistics and market access company, with operations in twenty-five countries, mainly across the African continent and in Europe. The offer price was at a 34.2% premium, when compared to the Imperial share price as of 07 July and is subject to shareholders’ and regulators’ approvals; the deal will be financed internally.

It is reported that Dubai’s Global Village, which claims to be the world’s largest tourist, leisure, shopping and entertainment project, will reopen on 26 October for 167 days to close the season on 10 April 2022. Prospective partners have until 01 August to submit their ideas and bids for kiosks or food carts. The concept started twenty-four years ago in January 1997 and was located on the Creek Side before later shifting to the Oud Metha Area near Wafi City for five years.  Since then, it has seen annual attendances of over six million and has been at its current location on the exit of Sheikh Zayed Exit 37.

The 24th edition of Dubai Summer Surprises opened on 01 July and is scheduled to run until 04 September, during which time the emirate will be home to amazing deals and promotions. It kicked off with a choreographed light and music show at Dubai Festival City, with specially created projections illuminating the night sky in tune to Dubai Kawkab. DSS will see exclusive shopping deals, daily surprises, thrilling competitions and shop-and-win promotions.

Latest Q2 figures from Dubai Economy sees consumer optimism in Dubai rising to its highest level since 2011, at 151 points, 6 points higher on the quarter and 26 points up on the year. The Consumer Confidence Index, launched in 2011, captures a consumer’s perceptions on the overall economy, personal finance and job opportunities as well as their intentions and expectations of buying and saving.

Since the signing of the Abraham Accords in Washington last September, bilateral trade between the UAE and Israel has topped US$ 658 million. The first official Israeli ministerial visit to the UAE involved Foreign Minister, (and Alternate Prime Minister), Yair Lapid, who noted that “it is estimated that the bilateral trade potential will multiply many times over in the coming years”.

Dubai Aerospace Enterprise expects to collect US$ 500 million as it prepares to sell nine narrow and wide body aircraft by the end of the year. According to its CEO, Firoz Tarapore, “the post-pandemic market for trading aircraft assets is robust. These transactions demonstrate DAE’s ability to originate and trade aircraft assets with a lease attached from high quality airline credits.” The Dubai-based DAE is a global aviation services company, servicing over 170 airline customers in over 65 countries from its Dubai HQ and six office locations in Dublin, Amman, Singapore, Miami, New York and Seattle. The leasing division has an owned, managed, committed and mandated to manage fleet of approximately 425 Airbus, ATR and Boeing aircraft with a fleet value exceeding US$ 16.0 billion.

The Emirates Development Bank has listed a five-year, US$ 750 million bond on Nasdaq Dubai which was four time oversubscribed. The money raised will support individuals, SMEs, and corporates across priority industrial sectors in the country to build a knowledge-based economy.  The bourse is the largest listing venue in the ME for US$ denominated debt listings, with a total value of US$ 98.5 billion.

With 1,230 new member companies in H1, DMCC reported their best-ever half-yearly figures since the halcyon days of 2013; in 2020, it had attracted over 2k new companies, greatly assisted by the free zone’s relief packages offered during the global pandemic. If the present trend continues, the DMCC will be home to over 20k entities by the end of the year.

The bourse opened on Sunday 03 July, 46 points (1.6%) lower the previous two weeks, shed a further 37 points (1.3%) to close on 2,780 by Thursday 08 July. Emaar Properties, US$ 0.02 lower the previous week, lost US$ 0.03 to close at US$ 1.10. Emirates NBD and Damac started the previous week on US$ 3.65 and US$ 0.35 and closed at US$ 3.65 and US$ 0.34. On Thursday, 08 July, 122 million shares changed hands, with a value of just US$ 38 million, compared to 76 million shares, with a value of US$ 32 million, on 01 July.

By Thursday, 08 July, Brent, US$ 0.57 (0.8%) lower the previous week, shed a further US$ 1.42 (1.9%) to close on US$ 74.08. Gold, US$ 119 (6.3%) lower the previous fortnight, recovered somewhat, gaining US$ 27 (1.5%), by Thursday 08 July, to close on US$ 1,777.

The government has voiced concern with other OPEC members about future output stating that the “UAE believes that the market needs an increase in production and supports an increase from August, whilst still affirming that “the UAE’s commitment to OPEC and OPEC+ agreements”. Over the past two years, the UAE has delivered 103% compliance but now “believes that the market needs an increase in production and supports an increase from August.” The dispute centres around the Joint Ministerial Monitoring Committee’s move to attach conditions to increasing production in August “on the condition of an extension to the current agreement, which would prolong the UAE’s unfair reference production baseline until December 2022, from the existing agreement end date of April 2022.” The UAE called on members of the exporters’ group to ‘decouple’ output restrictions from a planned extension of the agreement beyond April 2022.

According to Refinitiv, the Sharia-compliant finance industry is expected to register “low to mid-single digit growth” in 2021 and to be worth almost US$ 3.7 trillion by 2024.This year, the market will be supported by sustainability-linked and green sukuk issuances, but the volume of such Sharia-compliant instruments is expected to remain limited. In H1, the Islamic Development Bank issued sukuk worth US$ 2.5 billion, indicating that it would use 10% of the proceeds to finance green projects, with the balance earmarked for social development programmes. Malaysia also issued a US$ 1.3 billion Islamic bond that included an US$ 800 million sustainability tranche.

S&P Global Ratings expect that global sukuk issuance will jump 11% this year to US$ 155 billion, driven by low interest rates, higher energy prices and abundant liquidity; however, it will not touch 2019’s record of US$ 167 billion. H1 issuance, at US$ 90.6 billion, was 4.9% higher than the return in H1 2020. Market support came from Sharia-compliant bond sales in Malaysia, Saudi Arabia and Oman as well as higher primary issuance volume, which rose by 20%. Volumes fell in Bahrain, Indonesia, Turkey and the UAE, with the latter’s falling because of the adoption of new Sharia standards. Sukuk worth around US$ 20 billion is set to mature in H2, some of which will probably be refinanced through the market.

Two months after bringing 15% of the global trade to a standstill, Ever Given will finally leave the Suez Canal after a formal solution had been agreed between the insurers, the UK Club, and the Suez Canal Authority. The initial claim was for US$ 916 million, including US$ 300 million for a salvage bonus and the same amount for loss of reputation but the insurers rejected the claim on the basis of it being “extraordinarily large” and “largely unsupported”. The SCA later lowered their claim to US$ 500 million but the owners and insurers reportedly offered to pay US$ 150 million and a tugboat. However, the final settlement figure is still unknown.The ship was laden with 18k containers, with a value of US$ 775 million, at the time of the incident that blocked the canal for four days.

According to Deloitte’s ‘Global Power of Retailing 2021 report, Dubai-based Majid Al Futtaim and Lulu are the only two UAE (and ME) retailers among the world’s top 250 most powerful retailers. The list is headed by Walmart Stores followed by Amazon, Costco Wholesale Corp, Schwarz Group and The Kroger Co. Over the past year, there has been a 4.4% composite year over year retail revenue growth to US$ 4.85 trillion. MAF’s revenues reached US$ 9.57 billion, and the group posted a net retail income of $7.65 billion with CAGR retail revenue of 6.5%. Although the global sector was badly hit by enforced store closures, travel bans and reduced demand, Covid did present them a tasty alternative – online shopping that made up the shortfall and pushed the industry into a new way of shopping.

June figures from the Society of Motor Manufacturers and Traders (SMMT) saw Elon Musk’s Tesla Model 3 become the UK’s best-selling car model, with 5.5k units sold, ahead of Volkswagen Golf’s 4.6k, and the Ford Puma, with 4.5k. By the end of April, it was estimated that there were 39.9kTesla Model 3s and 38.9k Nissan Leaf electric cars on UK roads. However, YTD, Vauxhall’s Corsa and the Ford Fiesta remain the two most popular new cars on the road. There has been a slow but marked increase in a move towards electric and hybrid vehicles ahead of a ban on petrol and diesel cars. June UK sales jumped 28%, compared to a year earlier. The industry has been ravaged by the double whammy of the pandemic and the global semiconductor shortfall cuts which has eaten into production levels. A life saver for the UK industry will be the shift towards new technology to electric vehicles which is expected to create 40k new jobs by 2030. New cars that only rely on petrol and diesel will be banned in Britain from 2030, while hybrids will be stopped from 2035.

As the size of the UK High Street continues to diminish, retailer John Lewis has announced plans to move into the residential property market by building 10k rental homes over the next few years. 70% of the homes will be built on sites already owned by the company, whilst some may be built on new sites, which is hoped to give it a stable, long-term income, as well as providing new job opportunities. John Lewis also noted that this would it give a stable, long-term income, as well as providing new job opportunities. It also wanted to support local communities as well to address the national housing shortage. Tenants will have the choice of renting fully furnished, with John Lewis products, or using their own; each development will have its own concierge service and would feature a Waitrose convenience store nearby. It is reported that some homes could be built in department store car parks, above Waitrose supermarkets or next to distribution centres. The retailer has shed about a third of its store portfolio, since the start of the pandemic, and now has just thirty-five.

Apollo Global is considering making a rival offer for Morrisons, days after the UK supermarket agreed to a US$ 8.7 billion takeover by another US investment group led by Fortress Investment Group, the owner of Majestic Wine. The directors of the UK retailer are recommending that shareholders accept the latest offer. By Monday, shares in Morrisons had jumped 11% to US$ 3.71, somewhat higher than the original Fortress bid of US$ 3.51 which itself had been at a 42% premium on the retailer’s share price before the offer period. It is all but inevitable that a bidding war has started and that there will be other big players entering the battle; there is every chance that when it is all over, investors may be receiving more than US$ 4.00 per share. Even before this is finally put to bed, there is every chance that Sainsbury’s, and to a lesser extent Tesco, may have investment firms knocking on their doors.

Q2 saw Deliveroo’s order surging 88% to 78 million from the same period in 2020, with UK orders posting even better figures – up 94% to 38 million – with its international sector up 83% to 40 million. In relation to gross transaction value, the amount spent by customers was 87% higher to US$ 2.39 billion, with the UK segment accounting for US$ 1.26 billion of the total; the international share was up 65%, to US$ 1.13 billion. H1 figures were 99% to the good at US$ 4.68 billion. It must be noted that in March, Deliveroo debuted on the LSE and saw more than 30% (US$ 2.75 billion) wiped off its US$ 10.46 billion valuation. It nadired on 26 April at US$ 314.45 but has since recovered to trade at US$ 431.71 on 08 July. Deliveroo also indicated that it would be hiring a further four hundred software engineers, data scientists and designers over the next twelve months to drive innovation on its platform.

Wednesday saw London’s largest ever tech listing with Fintech company Wire gaining 10% on its first day of trading; with shares trading at US$ 12.13 by the end of the day’s session, the company was valued at US$ 12.06 billion, well above earlier market expectations of US$ 8.27 billion – US$ 9.65 billion. With such a strong opening for Wire, and a record-breaking year for London listings, allied with the government’s keenness to attract technology groups to list in the country, an increasing number of fast-growing companies in the financial technology sector may now be looking at London as a favourable option for future IPOs.

Westpac says it has fallen victim to an “elaborate fraud”, which has cost the bank more than US$ 215 million, committed by a Sydney equipment-leasing company, Forum Finance, headed by a person called Bill Papas, but whose real name is Basile Papadimitriou. He was also president of the Sydney Olympic Football Club, until he resigned last week, and is assumed to be overseas but his exact whereabouts are unknown. The bank became aware of the elaborate fraud in May after one of its customers discovered “an anomaly” in a lease agreement with their (the customer’s) name on it and then began legal proceedings against Mr Papas and co-director Vincenzo Tesoriero in the Federal Court. Following investigations, Westpac discovered that in less than three years, it had paid US$ 189 billion to Forum – for various leasing contracts for office equipment including computers, photocopiers and printers. There will be one or two red faces at the bank, (and perhaps their auditors), once further details are released.

Having jumped 8.8%, (on average with a value of US$ 29k), in the previous twelve months, the ongoing monthly rises in UK house prices came to a halt with a 0.5% monthly decline in June, as the stamp duty holiday began to be phased out. This tax break has been the main reason behind the price increase, as Halifax warned that it was “important to put such a moderate decrease in context.” Since June 2020, buyers have not had to pay any stamp duty on the first US$ 687k of their purchase price, but from the start of the month, it is being slowly phased out and will return to “normal” rates in October. Then the stamp duty will be levied at 5% on purchase between US$ 344k and US$ 1.27 million, (GBP 250k – GBP 925k). The average price of a UK property is now US$ 358k and there is a growing demand for detached properties, which sell for more than US$ 275k, than for the typical semi-detached house. However, the fact that there is a lack of available properties in the country may see prices continue their upward trend for some time.

 According to June’s Purchasing Managers’ Index from IHS Markit/CIPS, UK’s economic recovery slowed with the composite PMI dipping 0.7 to 62.2 on the month; any figure above 50.0 indicates that figures are still considered strong, with 50.0 being the threshold between expansion and contraction. A separate index showed that the services sector was down 0.5 to 62.4., with both months’ figures being driven by an easing of Covid-19 pandemic restrictions releasing pent up demand for business and consumer services. A marginal slowdown in monthly sales growth has been put down to capacity constraints and staff shortages resulted in some service providers struggling to keep up with new orders.  Despite job creation being at its highest level since 2014, staff shortages contributed to the highest level of backlogs since the survey began in 1996 which, in turn, pushed up prices by the most on record for inputs and prices charged.

Europe’s progress is in line with that displayed by the UK, with the economic recovery showing traction with inflationary pressure moving north quicker than initially expected. The bloc’s two powerhouses, Germany and France, saw their composite PMIs at very respectful levels of 60.1 and 57.4, However, hopes have been dashed that backlogs and producer price pressures would abate but this has not happened and will continue to edge even higher in the coming months.

The Delta variant has dealt a huge blow to what some may argue was a cavalier approach by the Australian federal and state governments. Prior to the middle of June, the country had been enjoying a “Covid normal” environment where people could visit restaurants and nightclubs and join crowds at sports events, festivals and theatres. It appeared detached from the rest of the world where governments had been imposing strict lockdowns and severe restrictions. With almost no person allowed to travel in or out of Australia, state border closures and mandatory quarantine, their Covid protocol appeared impenetrable, with weekly limits on the number of returning citizens and complete bans from global hotspots. All changed with the Delta variant.

Positive cases in one week rose from almost zero to 100 and by the end of last month, there were outbreaks not only in Sydney but also all over the country necessitating government action of putting 80% of the 25 million population under restrictions and Sydney, Darwin, Perth and Brisbane in lockdown. It appears that the government had failed to ensure that it fully understood that the new variants were more dangerous and more transmissible than the original Covid-19. It is a sad indictment that Australia is last among OECD countries, when it comes to the rollout of vaccines. Seven months after mass vaccinations started on the global stage, Australia has only managed 5% of their adult population being fully vaccinated, with 29% having received a first dose – and have now returned to early pandemic lockdowns, with an optimistic mass vaccination target by Q3 2022.  Reasons given include supply issues, complacency over low Covid rates, and concerns around Astra Zeneca’s rare blood clotting risk, further sensationalised by the media. It is hoped that the Morrison government has finally got the message and that they start taking the vaccination protocol seriously. Better Late Than Never!

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