Take Me Home Country Roads!                                                              02 September 2021

For the past week, ending 02 September, Dubai Land Department recorded a total of 1,667 real estate and properties transactions, with a gross value of US$ 2.56 billion. It confirmed that 1,080 villas/apartments were sold for US$ 613 million, and 146 plots for US$ 613 million over the week. The top two land transactions were for a plot in Marsa Dubai, selling for US$ 179 million, and another in Al Murqabat for US$ 89 million. The top three transfers for apartments and villas were all apartments in Marsa Dubai, Burj Khalifa and Business Bay selling for US$ 63 million, US$ 54 million and US$ 45 million respectively. The most popular locations were in Jabal Ali First, with 40 sales transactions worth US$ 24 million, Ras Al Khor, with 30 sales at US$ 188 million, and Wadi Al Safa 5, with 14 sales transactions worth US$ 19 million. Mortgaged properties for the week totalled US$ 1.09 billion, including a plot for US$ 545 million in Al Kheeran area. 61 properties were granted between first-degree relatives worth US$ 128 million.

Asteco has carried out a summary of the leading Dubai property locations, and their price movements, on a quarterly and annual bases and some of the results were quite surprising. Of the twelve “villa locations”, four showed double digit rises over both periods – Arabian Ranches – 19% on the quarter and 24% for the year, along with Dubai Sports City (14%:11%), Dubai Hills (13%:20%) and The Meadows (10%:15%), with Mirdiff recording annual growth at 15%, and on the quarter 9%.  On an annual basis, Palm Jumeirah and Dubai Silicon Oasis both saw prices up 10% but posted single digit quarterly growth of 6% and 8%. Of the remaining five – Jumeirah Parks, Jumeirah Village, Umm Suqeim, The Springs and The Lakes – posted annual figures of 9%, 8%, 8%, 2% and 2%, with quarterly returns of 8%, 9%, 8%, 4% and 2%.

In contrast, the fourteen “apartment locations” showed mostly subdued growth and, in six cases, annual losses The top six annual growth locations were The Greens, Dubai Marina, Business Bay, JLT, JBR and Palm Jumeirah with prices up 6%, 4%, 4%, 3%, 2% and 1%. Both Downtown and Jumeirah Village were flat but the six remaining areas – International City, Discovery Gardens, Dubai Sports City, Deira, SZR and DIFC – saw yearly values move southwards by -12%, -11%, -5%, -3%, -2% and -1%, although but one, International City, recorded growth levels of between 1% – 7%.

According to the latest New World Wealth report, Dubai’s total wealth climbed 7.8% to US$ 529 billion by the end of June, compared to the same period in 2020; it also maintained its position as the 29^th wealthiest city globally. There are reports that a large number of ultra-high net worth individuals have been showing interest in the emirate’s high-end properties and that many millionaires have moved to Dubai, seeing it a safe and secure location in which to live.  In H1, Palm Jumeirah saw the highest selling price for a villa, at over US$ 30 million, and the highest rental for a villa, at over US$ 1 million. The three most popular places for the emirate’s twelve billionaires, (nine last year), and 54k high net worth individuals, (49.4k last year), were Emirates Hills, Jumeirah Golf Estate and Palm Jumeirah.

In its latest quarterly report, global consultancy Colliers estimated that Dubai will open about 40% of 2021 forthcoming supply to coincide with the 01 October opening of Expo 2020 Dubai. By 30 June, it reckoned that the country’s branded hospitality market, with Dubai the main contributor, topped 108k keys. Over the next two years, it expects that supply will increase by an 8.0% compound annual growth rate. Some estimate that the number of hotel rooms in Dubai could reach 160k by the time of the Expo opening and, even with the Covid cloud hanging over the event, the target is still an optimistic 25 million visitors. Occupancy rates continue to cause concern, as the current level is 23% higher than the same month last year, but it is still 16% lower than in July 2019. On the same lines, revenue per available room has increased 23% on the year but is still 16% lower, compared to 2019 figures.

Dubai Media Office claims that the emirate’s sports sector contributes US$ 1.1 billion to the local economy every year and its contribution to the national and local economy will continue to grow, as the emirate attracts investment and creates more jobs. Some of the contribution derives from a number of national and international events which attracts global visitors. In addition, there are more than 20k people employed in Dubai’s sports sector, along with five factories manufacturing sports equipment and sportswear in the emirate, and more than 2.5k outlets that sell training equipment and merchandise. In addition, there are more than 350 registered companies that organise various sports events and training camps.

Between now and November, Emirates will receive its last three A380s, bringing its fleet size to 118, (almost half of the 248 total ever built); six of this number will be a four-class configuration, with the introduction of Premium Economy seats, which can be found on its London Heathrow and Paris Charles De Gaulle routes. The Dubai carrier expects to be the largest operator of the A380 for the next two decades. As travel restrictions ease, the jumbo will be reinstated on twelve more routes – including Cairo, Frankfurt, Guangzhou, Los Angeles, Manchester, New York JFK and Zurich – by next month.

The latest public auction of Dubai’s special car plate numbers, organised by the RTA, raised almost US$ 10 million, with the five most expensive numbers – E55, W29, X35, V88888 and BV9999 going under the hammer for US$ 994k, US$ 681k, US$ 676k, US$ 270k and US$ 234k. One hundred various numbers were on offer.

The UAE fuel price committee has announced petrol and diesel prices for the month of September 2021, with the three petrol grades all US$ 0.008 higher, on the month, with Super 98, (US$ 0.703), Special 95 (US$ 0.673) and US$ 0.651). Diesel prices will head in the opposite direction – down US$ 0.019 to US$ 0.649 per litre.

Established in 2002, DMCC recorded 204 new member companies – its highest ever August figure, two months after posting its best H1 returns, of 1,230, since 2013.  The free zone is on track to top 20k members by the end of the year. It has recently launched DMCC Crypto Centre – a comprehensive ecosystem for businesses operating in the cryptographic and blockchain sectors.

A new law sees the UAE enhancing transparency in government by holding ministers and senior officials accountable for wrongdoing, allowing the Public Prosecutor to investigate complaints against any senior official. If found guilty, any minister, or an official under investigation, can be banned from travelling and have their money frozen which will also apply to funds of their wives and minors, if necessary. The potential penalties for violators include censuring, forced retirement, job termination, or relief of duties, along with deprivation of pension or bonus at a maximum of 25% of the total. In announcing the decree, HH Sheikh Mohammed bin Rashid Al Maktoum commented, “we are a law-abiding country. The integrity and transparency of our federal government is a top priority.”

The July IHS Markit PMI sees an improvement in the country’s non-oil private sector and confirms that the country’s economy continues to improve, with the index hitting a two year high of 54.0. Three contributing factors pushing the economy are the easing of restrictions, (and the increasing of capacity), at local restaurants, cinemas and malls, cases trending downwards to their lowest since October 2020 and the resumption of tourist visas; rising oil production and higher oil prices have also helped boost the recovery. Output and new business rose at the quickest rates since July 2019, with firms reporting their sharpest rise in new orders for two years, amid soaring domestic sales and strengthening market confidence. One possible drag would be the fact that local banks continue to struggle with rising bad loans, resulting in credit to the private sector being stuck in negative territory.

A Dubai farm, with more than 1.2k date trees, has teamed up with Terraplus Solutions to implement an underground watering system that is claimed could save the UAE an annual one trillion litres of water, equivalent to the amount of water used by half the emirate’s population. Since 2019, experiments have been carried out at the Al Awir farm which sees a 30% reduction in water usage by implementing an underground watering system that saves up to 50k litres of water per tree every year. The new subsurface technology, which has pipes inserted into the ground, allowing water to directly find the trees’ roots, results in the farm now losing 86 million litres, compared to the prior total of 170 million litres. Apart from the water saving, it appears that the amount of crop each tree produces increases by up to 10%. It is thought that there are twenty million date trees in the UAE and that the global agricultural sector uses 70% of all the world’s potable water every year. With such facts, if the technology were installed in the UAE, there is no doubt that it would not only transform the sector but would also allow the UAE, (and the world), to use the money saved on many projects that are currently unaffordable.

Mainly because of the global economic uptick and increased demand, Emirates Global Aluminium, posted a record H1 net profit of US$ 474 million, compared to a loss of US$ 57 million a year earlier, and is 166% higher than the US$ 178 million figure of H2 2020. EBITDA for the half year was 111% higher on the year at US$ 951 million, with revenue climbing 20.0% to US$ 2.94 billion. With the global demand for aluminium high, the future is positive for the country’s biggest industrial company, outside the oil and gas sector, jointly owned by Abu Dhabi’s Mubadala Investment Company, and the Investment Corporation of Dubai. Aluminium was trading at US$ 2,245 in H1, 41.0% higher than a year earlier, as October aluminium futures currently trading at US$ 2.6k.

Kamco Invest’s latest GCC Banking Report noted that gross loans of GCC’s listed banks jumped 4.6% by the end of Q2, compared to the previous quarter, and up 7.1% on the year, driven by broad-based growth seen in all its markets. Total bank revenue for GCC banks increased 3.5% on the quarter, driven by higher net interest income, partially offset by a decline in non-interest income. The two GCC countries, with the lion’s share of the regional balance sheet, were the UAE (with total assets of US$ 840 billion – 29.9% of the total) and Saudi Arabia, with 26.7% of the aggregate. Gross credit came in 0.9% higher at US$ 482 billion, marginally higher than the pre-pandemic gross credit of US$ 480 billion. UAE banks registered their biggest increase in profits in Q2, at 11.8%, after nine out of the sixteen listed banks reported rising net profits.

As widely expected, more than 95% of NMC Health creditors have approved its proposed deeds of company arrangement, (DOCA) restructuring process, resulting in the 34 companies of the UAE’s biggest healthcare provider to exit administration; it is expected that NMC Healthcare will remain in administration in order to pursue potential litigation claims on behalf of itself and the other DOCA companies. The creditors, owed more than US$ 6.4 billion by NMC Health, will see US$ 4 billion of their debts being wiped out in return for equity instruments. In H1, gross revenue for its UAE and Oman businesses beat company expectations by 10% to reach US$ 611 million.

As from 03 October, the DFM will extend its trading time by one hour and will remain open from 10.00 hrs to 1500 hrs. International interest in the local market continues to increase, with latest figures showing that international investors account for 48.2% of its trading activities and own 18.5% of the market capitalisation by the end of June 2021. Interestingly, foreign investors accounted for 69% of new investors on the DFM. Furthermore, in a bid to further promote investors’ participation in the market, the bourse has announced that the minimum trading commission will be waived, with immediate effect. The result was swift, with Wednesday’s trade witnessing a 161% increase, along with the highest level of daily trade count since the beginning of this year, which jumped 146%, YTD, compared to its 2,740 average.

The DFM opened on Sunday 29 August, 196 points (6.8%) higher the previous six weeks, rose 12 points (0.4%) to close the week on 2,912. Emaar Properties, up US$ 0.03 the previous fortnight, gained a further US$ 0.02 to close on US$ 1.15. Emirates NBD and Damac started the previous week on US$ 3.79 and US$ 0.34 and closed flat at US$ 3.79 and US$ 0.34. On Thursday, 02 September, 149 million shares changed hands, with a value of US$ 44 million, compared to 233 million shares, with a value of US$ 44 million, on 26 August.

For the month of August, the bourse had opened on 2,820 and, having closed the month on 2,903, was 83 points (1.6%) higher. Emaar traded from its 01 August 2021 opening figure of US$ 1.11 – up US$ 0.03 – to close August on US$ 1.14. Two other bellwether stocks, Emirates NBD and Damac, started the month on US$ 3.37 and US$ 0.35 and closed on 31 August on US$ 3.57 and US$ 0.35 respectively. YTD, the bourse had opened the year on 2,492 and gained 411 points (16.5%) to close the eight months on 2,903, as Emaar traded US$ 0.18 higher at US$ 1.14   NBD and Damac started the year on US$ 3.33 and US$ 0.35 and closed 31 August at US$ 3.77 and US$ 0.35.

At their meeting this week, Opec+ confirmed that it had started to taper a historic production restriction pact, planning to bring two million bpd back to the markets by the end of the year. The bloc, headed by Saudi Arabia and Russia, will begin by increasing output by 400k bpd during the month of September. The fact that the oil supply pipeline is being ramped up saw oil prices fall, whilst the oil market is expected to remain in deficit for at least the next four months, with a six million bpd oil demand growth forecast.

By Thursday, 02 September, Brent, US$ 3.77 (10.9%) higher the previous week, shed US$ 0.82 (1.2%), to close on US$ 70.53. Gold, US$ 50 (2.9%) higher the previous fortnight, gained a further US$ 11 (0.6%) to close Thursday 02 September on US$ 1,810.   Brent started August on US$ 75.19 and lost US$ 3.37 (2.6%) during the month, to close on US$ 71.82. YTD, it started the year trading at US$ 51.80 and gained US$ 20.02 (38.6%) to close on US$ 71.82 during the first eight months of the year. Meanwhile, the yellow metal opened August trading at US$ 1,817 and shed US$ 2 (0.1%), during the month, to close on US$ 1,815. Over the year it has lost US$ 80 from its opening year balance of US$ 1,895.

It is estimated that 835k new UK companies were registered in the twelve months to January 2021 – 42% higher than a year earlier, and despite the period covering the devastated economy caused by the onset of Covid; in the US, the figure was 4.4 million, 24% higher. In this day and age, not only do they all need a distinctive name but also a domain name, more so for the many e-commerce entities set up in tandem with the expansion of people shopping online. A stand-out name and domain name will often be the unique selling point that ensures that it will often become the “first to go to company” as similar entities vie for the same business; in days gone by, this would not necessarily have been the case. There is no doubt that demand for business names has soared and that a host of websites has sprung up that can help them both to pick one and register a connected domain.

Amazon is planning to extend its current 275k global payroll, by a further 55k, for corporate jobs and roles in robotics, research and engineering. 72.7% of the total will be in the US, with a further 2.5k being added in the UK, where it has recruited 10k already this year. A big percentage will be required in the company’s new satellite launch programme – Project Kuiper – to widen broadband access. In the past, the new chief executive, Andy Jassy, had commented that the company needs more staff to keep pace with expansion of its retail, cloud computing and advertising arms.

Covid has claimed another victim, with Marks & Spencer announcing that the retailer will no longer sell men’s suits at more than 57% of its 254 bigger stores, as men’s preference has shifted to “smart separates”, such as chinos and shirts, with an increased demand for casual wear. M&S reckons that they only sold 7.5k suits in the first two months of the pandemic – 80% lower than in the same period a year earlier. Market research consultancy, Kantar Group, has estimated that suit sales last year were 54% lower, at two million, compared to the 4.3 million sold in 2017. The study also noted that the average spend on men’s suits was 62.1% lower, at US$ 219 million, to the twelve months to July 2021, compared to five years earlier.

Zoom Video Communication posted a 70.6% rise in Q2 net profit to US$ 317 million, driven by a 54%, year on year, revenue hike to US$ 1.02 billion. It has updated its full-year revenue forecast to over US$ 4.0 billion, which would be 55% higher than their 2020 return. It put the revenue increase to “acquiring new customers and expanding across existing customers”. The tech company is confident that, even if the pandemic threat were to go away, the demand for video conferencing will not decline, as companies continue to adopt hybrid work models. During the period, it invested US$ 82 million in R&D, as well as acquiring, cloud call centre software provider Five9 for US$ 14.7 billion, as part of its strategy to adapt to the post-pandemic world; this was the fourth purchase by Zoom since the start of the Covid-19 pandemic. With total cash and marketable securities of US$ 5.1 billion, Zoom has enough finance to acquire new start-ups and competitors in the same space of video conferencing.

In July, coffee prices had surged to seven-year highs, after reports that frost had damaged crops in the world’s biggest producer Brazil, with the price for arabica coffee rising above the US$ 2 level, or 60% higher, YTD. Lower-quality robusta coffee prices performed likewise – up 40% YTD – to its highest level since October 2017. Late August saw reports that the world’s second largest coffee producer, Vietnam, was having to deal with similar problems faced by all global producers, including a dire shortage of containers, soaring freight rates and various climatic issues, including frost and rain. In addition, the country has had to deal with a fresh outbreak of the delta variant which has led to stringent travel curbs in the country, badly impacting some key producing areas of the Central Highlands.

Exactly ten years ago, when Tim Cook took over the reins of Apple from its co-founder, Steve Jobs, he struck a deal that has already made him a billionaire. A company filing with the US SEC confirms that he has sold most of the five million shares, he has received as part ofthe deal, for more than US$ 750 million.  Part of the agreement was contingent on the value of Apple’s shares, over the past three years, surpassing at least two-thirds of companies in the S&P 500. Cook silenced all those critics, who thought him to be too technocratic to match Jobs’ success, by the fact that Apple shares have returned more than 1,100%, its revenue has doubled, and its market value has topped US$ 2.5 trillion.

Even though most member countries posted Q2 expansion, averaging 1.6%, compared to 0.6% in Q1, the OECD economies still remain an average 0.7% below pre-Covid levels. The bloc includes a group of major world economies from the Eurozone, the US, Japan and the UK. Q2 growth levels varied, with the UK top of the list, growing 4.8%, (following a 1.6% contraction in Q1), ahead of Italy with a 2.7% growth, compared to just 0.2% the previous quarter. Five other countries that make up the “Major Seven” – US, Germany, France, Canada and Japan – recorded the following growth levels of 1.6%, 1.6%, 0.9%, 0.6% and 0.3% in Q2. Four months ago, the OECD upgraded its 2021 growth forecast from 4.2% to US$ 5.8%, whilst noting that many member states will only return to pre-pandemic levels by the end of 2022. (After declining 0.3% and 0.1% in Q1, the euro area and the EU posted GDP growth of 2.0% and 1.9% respectively).

As its central bank raises its base rate from a record low of 0.50% – set three years ago – to 0.75%, South Korea has become the first major Asian economy, and the first G20 nation, to lift rates since the pandemic began. The country’s household debt and home prices have recently soared, and it is hoped that this move may improve the situation and curb the risks that high inflation and surging public debt may bring to the economy. It will not be too long before other nations follow suit by raising their own bank rates and curtail their massive stimulus packages, introduced to save their economies in the first eighteen months of Covid.

Despite mining stock returning impressive returns, the Australian market traded relatively flat on Monday, with the ASX 200 trading at 7,490 points; the standout performer was Fortescue Metal, up 6.3%, at US$ 15.51, with the world’s fourth largest iron ore miner posting a 117% jump in annual profit to US$ 10.3 billion, after shipping a record amount of iron ore to take advantage of soaring prices. Those prices topped a record US$ 233 in May, attributable to Brazilian supply problems and high Chinese demand, but they have since dipped 32.2% to US$ 158 a tonne; the current price is expected to nudge slightly higher for the rest of the year. With a final dividend of US$ 1.54 expected, the total annual payout will come in at US$ 2.61 per share, equating to a total of US$ 8.0 billion, of which its major shareholder, Andrew Forrest, will take home US$ 681 million.

The latest CoreLogic report notes that, in August, Australian property prices moved 1.5% higher to US$ 491k, with Darwin, Canberra and Hobart posting annual rises of at least 22.0%, with Melbourne reporting the slowest price rise at 13.1%. Regional property rises of 22% were higher than those seen in capital cities, with an 18% increase.  On a monthly basis, the plaudits go to Hobart, Canberra and Brisbane, with increases of 2.3%, 2.2% and 2.0%. Although housing values are still heading north, they are moving at a slower rate than of late. Sydney and Melbourne median values rose to US$ 766k and US$ 567k by the end of August, with the number of properties advertised for sale 5.8% lower than the five-year average, pushing prices higher. Australia’s median property price has risen by over US$ 76k in the past year, equating to US$ 1.46k per week. Another interesting statistic sees house prices rising almost eleven times faster than wages growth over the past year.

An ABC report discovered that 20k companies, (of all sizes), tripled their turnover yet accrued US$ 275 million in JobKeeper during the first three months of the pandemic, with a further 15k entities doubling their turnover, earning US$ 236 million, whilst receiving government support through JobKeeper. It is obvious that thousands of profitable companies qualified for the subsidy based on projected turnover falls that never eventuated. It also estimated that US$ 4.4 billion was received by companies that increased turnover during the first six months of the pandemic. An earlier ABC report previously noted that over 16% of JobKeeper businesses did not suffer a downturn during the three months of the pandemic, racking up nearly US$ 3 billion in subsidies. When first introduced, most businesses with US$ 740 million, AUD 1 billion), revenue were required to show or predict at least a turnover fall of 30% to qualify JobKeeper, with a 50% turnover threshold for big companies and 15% for charities. Once accepted into this government scheme, companies continued receiving payments until around the end of September, when turnover tests changed. At no stage did the legislation, which has cost more than US$ 66 billion, address what would happen if companies were not impacted or actually “benefitted” from Covid so there was no mechanism to recoup money from such firms. By the end of the week, there were reports that because tax commissioner, Chris Jordan, had failed, with a Senate request, to forward details of large private companies, with a turnover greater than US$ 7.4 million, (AUD 10 million), that received JobKeeper payments, he could be fined or sent to jail under the Parliamentary Privileges Act.

Finally, there is good news that its economy has bounced back from the COVID recession, as national growth rose 9.6% over the year to June, and 0.7% to the June quarter. However, economists note that the data is “inherently backward-looking” and expect that the real impact of the recent lockdowns may only be felt this month, where some analysts are looking at a 3.0% quarterly contraction. The country’s terms of trade rose 7% in the quarter to its highest level in history and that strong export prices for mining commodities were the main driver, contributing to a 3.2% increase in nominal GDP. Domestic demand was also a key factor in the GDP figures, with household spending 1.1% higher, but still 0.3% down on the figure in December 2019. Public spending came in 7.4% to the good.

Reports from China indicate that the government has unilaterally banned children, (i.e., anyone under the age of 18), from playing online games for more than three hours a week, citing their concern about youngsters getting addicted to gaming. Online gaming companies will be barred from providing gaming services to younger users, in any form, outside those hours, and authorities will increase the frequency and intensity of their inspections. Prior to this edict, the hours were restricted to an hour and a half per day and three hours on public holidays. In a notice published by the National Press and Publication Administration, juvenile playing time will be restricted to between 8pm – 9pm on Fridays, weekends and on public holidays, starting today, 02 September. With this latest news, and the ongoing crackdown, by the regulators, on the tech giants, there is little wonder why their stocks are falling on the world’s bourses. 

The Federal Reserve’s chairman, Jerome Powell, has been reading from the same script for some time and confirmed again that the bank was in no rush to raise interest rates, despite a recent spike in inflation, and that any increase would be based upon the economy returning to maximum employment and inflation returning to the bank’s 2% target. lf the US economy continues to improve for the rest of the year, it seems highly likely that the Federal Reserve will begin the tapering of the Fed’s bond purchases, that has reached US$ 120 billion monthly since the onset of the pandemic in March 2020. In his annual speech, at the Jackson Hole Economic Policy Symposium, earlier in the week, Powell noted that, “we have said that we would continue our asset purchases at the current pace until we see substantial further progress toward our maximum employment and price stability goals.  .   .    My view is that the ‘substantial further progress’ test has been met for inflation. There has also been clear progress toward maximum employment.”

Latest figures see the country’s GDP – at 6.6% – growing at a faster rate than expected and that last week’s jobless claims had risen to 353k, with its July unemployment rating slipping to 5.4%, with 943k jobs created. One fly in the ointment could be the current rise in the Delta variant that may put these plans on hold.

Last month, British house prices rose 2.1% on the month, to an average US$ 343k, driven by robust demand and a shortage of homes for sales, despite the tapering of the stamp duty holiday on purchases; the price increase is the second largest in fifteen years, with the biggest increase – at 2.3% – seen in April 2021. On an annual basis, the pace of growth accelerated by 0.5% to 11.0%; current values are now 13% higher than before the pandemic. Although the consensus was that the tapering of the stamp duty tax break would see reduced demand, this was not to be, as the key driver turned out to be limited supply.

There is no doubt that Covid has fundamentally changed the way cities are viewed and there has been a marked interest, on a global scale, in emigrating from cities to the country. In the light of the pandemic, many city dwellers are re-evaluating the importance of larger (and generally cheaper) homes, green spaces and a less hectic lifestyle. For example, an August 2020 survey by London Assembly, polled 450 Londoners and the response was that 4.5% of them would definitely move out of the city within the next 12 months; this equates to 416k people. Take Me Home Country Roads!