Do You Believe in Magic?                                                                             12 August 2021

professionals are starting to bear fruit. Incentives to support entrepreneurs and the private sector, proactive safety measures to combat Covid-19, and visionary thinking for events such as Expo 2020, have underpinned investor appetite for real estate in Dubai. While nothing is guaranteed, we expect that confidence to continue to grow for the remainder of the year,” said

For the past shortened week ending 11 August, Dubai Land Department recorded a total of 1,188 real estate and properties transactions, with a gross value of US$ 1.28 billion. It confirmed that 1,072 villas/apartments were sold for US$ 621 million, and 116 plots for US$ 178 million over the week. The top three transfers for apartments and villas were an apartment for US$ 76 million in Marsa Dubai, a villa sold for US$ 62 million in Wadi Al Safa 5 and thirdly, an apartment sold for US$ 45 million in Um Suquam Third. The top two land transactions were for a plot in Island 2, sold for US$ 15 million, and a plot that was sold for US$ 8 million in Hadaeq Sheikh Mohammed Bin Rashid. The most popular locations were in Nad Al Shiba First, with 21 sales transactions worth US$ 16 million, Jebal Ali First, with 19 sales at US$ 15 million, and Hadaeq Sheikh Mohammed Bin Rashid, with 15 sales transactions worth US$ 9 million. Mortgaged properties for the week totalled US$ 545 million, including a plot for US$ 59 million in Al Hebiah First. 47 properties were granted between first-degree relatives worth US$ 29 million.

As Dubai economy continues to recover from the impact of Covid-19, July property prices in Dubai rose 15%, year on year. Property Monitor noted that the average property price was US$ 256 per sq ft – 15.0% higher over the past twelve months – and that YTD, Dubai prices were up 11.8%, and 1.9% higher in July. Emaar accounted for 23.1% of all property transactions, followed by Sobha Group with 15.1% of the total.

A report by SmartCrowd confirmed what the market already knew – that Dubai’s residential property sector had witnessed a V-shaped recovery in H1, after finally bottoming out late last year. In their “Dubai Residential Property Report,” it noted that the market had recorded a 74%, year on year, increase in overall volume of transactions, with the value of property transactions rising 113%. The report also added that “with a lack of new supply in Dubai’s most popular areas, and pricing at levels last seen in 2011, there is positive sentiment in the market and a resultant boost in demand for existing properties.” Other interesting points indicated that H1 growth for ready and off plan villas came in 19.3% higher, at US$ 247, and up 9.3% to US$ 204 respectively, whilst ready apartments and off plan apartments increased by 8.7% and declined by 9.5% respectively.

According to Knight Frank, Palm Jumeirah is not only registering new record high villa prices but also posting the highest number of home sales in almost five years. It estimates that the average transaction prices, of US$ 572 per sq ft, are at their highest levels since 2016, and 40% higher than four years ago. Furthermore, 19 of the 34 US$ 10 million + homes sold in Dubai were on the Palm Jumeirah; in H1, the highest price paid for a villa was One100 Palm sold for US$ 30 million in March – this was surpassed by a July Jumeirah Bay Island villa sale for US$ 33 million. Although only accounting for 2.0% of total Dubai sales in Q1, numbering ninety transactions, Palm Jumeirah sales accounted for 13.5% of the US$ 4.31 billion value. Palm Jumeirah apartments, of which 300 were sold in Q2, are selling at an average US$ 490 per sq ft – its highest level since 2016.

Dubai’s hospitality sector is gearing up for what promises to be an eventful end to 2021, as the country celebrates its golden anniversary, Expo 2020 starts in October and 80% of the country is now vaccinated, with international travel restrictions slowly being lifted. Global demand for travel to Dubai is beginning to ramp up, with Wego reporting that its website had seen 533k searches last month on flights and hotels for the six-month Expo period. Indeed, hotels have started offering packages and special deals for visitors to the exhibition. Figures from Dubai’s Department of Tourism and Commerce Marketing showed that the emirate welcomed over 2 million visitors in the five months to May 2021 and that there will be no problem with coping the expected surge in demand in Q4; the emirate has a portfolio of 128.5k hotel rooms spread across 715 hotels, 134 of which are five-star.

In July, Dubai’s non-oil private sector economy, as measured by the HIS Marketing PMI, rose 2.2, month on month, to 53.2 – its fastest pace in a year – as demand gained traction, driven by an uptick in customer numbers that boosted sales in the travel/tourism and wholesale/retail sectors. New employment numbers for Dubai rose at their quickest rate in eighteen months, whilst businesses recorded a rise in new orders in July, with increased consumer spending, leading to the joint-fastest rise in output since July 2020.

An interesting move by Abu Dhabi Department of Economic Development sees the introduction of a new professional licence that gives foreigners 100% ownership of businesses related to over six hundred different activities; they include accounting, training, consultancy, beauty centres, computer and internet network companies. Furthermore, a local service agent will be responsible for managing licensing requirements, if there is no Emirati partner, and the new licence holder can also open an additional branch “if the business activity is consistent with or complements the professional licence issued”. Existing businesses can amend their legal status from a commercial to a professional facility. Currently, this new regulation only applies in the emirate of Abu Dhabi.

Having raised US$ 50 million in its latest Series B funding round, bringing its total financing to US$ 130 million, Dubai-based Tabby is now valued at US$ 300 million. At this price, the buy now, pay later provider has become one of the most valued start-ups ever in the Mena region. The money raised will be used to expand both its product range and also to enter a number of new markets. Tabby, which boasts over 400k active shoppers, integrates with 2k retailers, including Chalhoub Group, Al Futtaim Group, Landmark Group, and Apparel Group, to allow their customers to shop at their online and physical stores with interest-free instalments.

On 01 September, creditors of NMC Health, who are owed more than US$ 6.4 billion, will meet to discuss proposals from joint administrators relating to future financial restructuring of the UAE healthcare group, founded by BR Shetty. Having already agreed to US$ 4.0 billion of the debt being wiped out, and replaced by equity instruments, the creditors will discuss “revised” proposals and the proposed Deeds of Company Arrangements. NMC Health had been placed in administration in April 2020 when an independent investigation uncovered more than US$ 4.4 billion in previously unreported debt.

Shuaa Capital reported over a 1k% jump in H1 profits to US$ 15 million on the back of higher net fee and commission income, with net fee and commission income increasing 52% to US$ 43 million. However, Q2 profits came in at US$ 8.0 million, compared to US$ 73 million a year earlier, as operating expenses jumped 37% to US$ 23 million. The Dubai-based investment bank, which merged with the Abu Dhabi Financial Group two years ago to create a business with both an asset management and investment banking platform, has assets under management worth US$ 14 billion. The company also plans to establish three SPACs, with a capital of US$ 200 million each, in a bid to tap into the growing market for blank-cheque companies – development stage entities that have no specific business plan or purpose or have indicated their business plan is to engage in a merger or acquisition with an unidentified company.

Emaar Malls posted an 80% hike in H1 profit to US$ 169 million, with revenue climbing 23% to US$ 452 million, with Q2 witnessing a steady recovery from the pandemic’s impact on the global retail market. Its wholly owned subsidiary, Namshi, saw Q2 sales 65% higher, on the quarter, at US$ 116 million, with H1 revenue figures at US$ 186 million. The e-commerce fashion and lifestyle platform added 240 new brands in the period and saw strong growth in the GCC.

Despite H1 revenue increasing 52% to US$ 3.4 billion, Emaar Properties posted an 8.0% decline in net profit to US$ 425 million, as operating and other expenses headed north. During the period, property sales were 229% higher at US$ 4.49 billion. In Q2, Dubai’s largest listed developer posted a 17.0% decline in net profit, at US$ 246 million, although revenue was up 125% to US$ 1.8 billion. Since 2002, Emaar has handed over a total of 77k residential units and has currently 36.7k units under development, of which 25.7k are in the UAE. Meanwhile, both H1 revenue and net profit rose at its Emaar development arm – by 61% to US$ 2.1 billion and 46% to US$ 411 million.

The DFM opened on Sunday 08 August, 106 points (1.9%) higher the previous three weeks, dipped 5 points (3.9%) to close the shortened week, (because of the Islamic New Year), on 2,815. Emaar Properties, US$ 0.03 higher the previous week, was US$ 0.01 lighter at US$ 1.10. Emirates NBD and Damac started the previous week on US$ 3.65 and US$ 0.33 and closed flat at US$ 3.65 and US$ 0.33. On Wednesday, 11 August, 103 million shares changed hands, with a value of US$ 35 million, compared to 86 million shares, with a value of US$ 44 million, on 05 August.

By Thursday, 12 August, Brent, US$ 3.50 (4.7%) lower the previous week, dipped US$ 0.11 (0.1%), to close on US$ 71.31. Gold was US$ 26 (1.4%) lower last week and lost a further US$ 53 (3.0%) to close Thursday 12 August on US$ 1,749.   

Even with an extra 400k bpd hitting the market for the rest of the year, as Opec+ nations raised the output limit imposed on five countries, including the UAE, by phasing out 5.8 million bpd production cuts by September 2022, it appears that the market will be in deficit by year end. The current proposed 1.6 million bpd hike will not take immediate effect and will probably be enforced by a redistribution of quotas between members. This minimises the risks of any future supply hikes and a possible flooding of the market by some members. There are fears that the market may see a downturn if the Delta variant spreads more quickly, which would see China’s energy demand reduce, or there was renewed Taliban unrest in Afghanistan.

Meanwhile, Aramco – in line with many other energy giants – posted very healthy Q2 figures, with net income climbing 288% to US$ 25.5 billion, on the back of a 30% YTD rise in oil prices as demand recovers, with global lockdown measures easing and businesses returning to some form of normalcy. The Saudi conglomerate noted that “we are heading into the second half of 2021 more resilient and more flexible, as the global recovery gains momentum.” In July, US energy giant Exxon Mobil posted a Q2 rise in income of US$ 4.7billion, compared to a loss of more than US$ 1.0 billion a year earlier.

It is reported that Virgin Atlantic Airways, founded in 1984, is considering an IPO on the London Stock Exchange later this year, as international air travel shows promising signs of recovery. The airline, founded by Richard Branson, has received a “positive” reaction from institutional investors, whilst Citi and Barclays have reportedly been hired to oversee the listing. Currently, Branson’s Virgin Group holds a 51% stake in the airline, and it is likely that if the IPO goes ahead, its founder will relinquish control. Because of its dependence on the UK-US transatlantic routes, Virgin has been badly hit by the pandemic which has decimated demand for air travel, particularly for long-haul trips. Now the airline is keen to raise funds to return to some form of operational normalcy.

Following news that online food delivery firm Delivery Hero had paid US$ 393 million to buy a 5% stake in its rival, Deliveroo shares jumped 11% on Monday to US$ 4.98 – its highest level since it went public in March at US$ 5.40.  Niklas Oestberg, Chief Executive of the German Delivery Hero, commented that his investment was acquired “at a decent gross profit margin”, and that he considered Deliveroo’s stock to be “undervalued”, due to being “oversold at IPO”. Interestingly, despite rising revenue figures, bought on by the pandemic, neither company has yet to make a profit.

Paddy Power owner Flutter has exceeded expectations by seeing H1 revenue 28% higher at

US$ 4.1 billion, as its average number of gamblers rose 40% to more than 7.5 million. There is no doubt that there has been a general uptick in online gambling since the onset of the pandemic in early 2020, as many countries closed physical shops, with gamblers moving on-line. Flutter, which owns brands such as Betfair and Sky Betting and Gaming, posted that it had 59% more online customers than in the same period in 2019 before the coronavirus crisis. In the UK, numbers (rising 44% to 3.3 million), outpaced the 30% revenue grow to US$ 900 million.

Fortress Investment Group has raised its initial offer, by 7.1% to US$ 9.3 billion, to acquire Morrisons, which has been agreed by the UK supermarket chain. UK’s fourth largest grocer has attracted interest from several private equity groups, including former Tesco boss Sir Terry Leahy and Clayton Dubilier & Rice, because of its large real estate portfolio, with the company owning about 90% of its almost 500 stores; CD&R had earlier submitted a US$ 7.66 billion offer which was rejected by the board. Morrisons is attractive to potential buyers because it generates large amounts of cash and has low underlying debt, as well as a pension surplus. Because of this, it is highly unlikely that we have seen the last move for Morrisons, but even if that is the case, perhaps Sainsbury’s could be next supermarket up for grabs.

Australia’s largest lender, Commonwealth Bank of Australia, posted a 19.7% jump in annual profit, (to the year ending 30 June), to almost record highs of US$ 6.5 billion, driven by a sustained economic recovery from the coronavirus pandemic. It also saw its impairment provision reduce to US$ 408 million, (down from US$ 1.9 billion last year). Its profit would have come in higher at US$ 7.5 billion, if discontinued operations – such as the sales of its Colonial First State, CommInsure Life, Colonial First State Global Asset Management, PT Commonwealth Life divisions – had been included.  CBA also declared a final US$ 1.47 dividend and announced a record US$ 4.4 billion share buyback.

With gains in the leisure/hospitality, education and professional services, the US economy saw July employment numbers jump by 943k. However, as the rise in the number of Delta variant cases only surfaced towards the end of the month, there are concerns that if new restrictions are imposed, this would have a negative impact on August employment data. Although the July unemployment figure dipped 0.5% to 5.7%, the total number of employed at 8.7 million is still much higher than the pre-pandemic return of5.7 million in February 2020. However, a month earlier, US job numbers had hit a record high, up 590k, on the month, to 10.1 million – a sure indicator that the country could be facing a labour shortage, particularly in the leisure and hospitality sectors. The shortfall has been attributed to various factors such as lack of affordable childcare, generous unemployment benefits, and pandemic-related retirements and career changes.

Mainly because of the hospitality sector opening in April, along with non-essential retailers including gyms, hairdressers and outdoor dining, the UK economy grew by 1.0% in June and 4.8% in Q1; this was the fastest quarterly growth of the G7 countries. In addition, schools were fully opened as well as restaurants, cafes, theatres, galleries and cinemas. Although the GDP figure was 22.2% higher than at this time last year, it is still 2.2% lower than in February 2020, just prior to Covid. There was a 2.2% June decline in total exports of goods, excluding precious metals, attributable to a 5.6% fall in exports to non-EU countries, mainly because of declines in medicinal and pharmaceutical products and cars. Whether the pace of the recovery continues into Q3 is debatable because of staff shortages, caused by self-isolation requirements, and the government’s over-zealous contact tracing rules, along with global supply-chain bottlenecks. Furthermore, the government’s wage support scheme is set to end in September, and this may have a drag effect on the economy.

On top of the US$ 1 billion package, that will see infrastructure investment in roads, bridges, airports and waterways, US senators also began voting on a follow-up US$ 3.5 trillion spending package that Democrats plan to pass without Republican votes. The main beneficiaries would be companies in the energy, industrial and material sectors and so there was no surprise to see the share prices of Caterpillar, Deere and Vulcan Materials each posting 2%+ rises. Energy shares also moved higher, as crude prices rebounded more than 2%. With daily new coronavirus cases rising by 35%, to over a 100k in the country, progress on the infrastructure package should support the recovery in the world’s largest economy.

This week saw record highs on the blue-chip Dow and the benchmark S&P 500 in the US as well as the ASX in Sydney. Driven by gains in economically sensitive value stocks, after the Senate passed a US$ 1 trillion bipartisan infrastructure package, but still to go through the House of Representatives, the Dow Jones Industrial Average rose 172 points, to 35,274 and the S&P 500 gained 7 points to 4,439, in Tuesday trading. Again, on Tuesday, the ASX 200 rose for the sixth time in August to close on 7,584 points – over 15% higher YTD – driven by the banks and the mining companies, (although the price of iron ore has tanked 30% since May). There is no doubt that the market will turn probably before the end of the year and when it does, it will not be a pretty sight. If you do not think so – Do You Believe in Magic?