I Did It My Way!                                                                                 25 November 2021

Into Q4, and towards the end of 2021, the Dubai real estate market continues to post further growth sales transactions records. Latest figures from the 20^th edition of Mo’asher, indicates 5,352 sales transactions, worth US$ 3.57 billion, making it the best October since 2013. YTD, there have been 48,651 sales transactions, worth US$ 48.34 billion – 63.4% higher, year on year. Even with two months to go until the end of the year, it has already surpassed the highest yearly sales figure since 2015. With the index base rate of 1 in 2012, October’s overall monthly index was at 1.132, (with an index price of US$ 296k); apartments’ monthly Index posted 1.16, and an index price of US$ 266k, with villas/townhouses monthly Index at 1.13 and an index price of US$ 535k.

In October 2021, 60% of all transactions were for secondary/ready properties and 40% for off-plan properties, which witnessed 2,133 transactions, valued at US$ 1.20 billion. The prime markets saw figures of 3,219 sales transactions, worth US$ 2.38 billion. The total transaction value of US$ 3.57 billion on 5,352 deals can be split between the developers’ 3,395 transactions, worth US$ 2.20 billion, which included off-plan and prime, ready properties while individual sales accounted for 1,957 transactions, worth US$ 1.37 billion.

Property Finder estimates that Damac Hills 2, Nad Al Sheba, The Springs, Dubai Hills Estate and Arabian Ranches were the best locations for sales of villas/townhouses, with Dubai Marina, Business Bay, Jumeirah Village Circle, Downtown Dubai and JLT sectors the leaders for apartments.For off-plan properties, the best locations for villas/townhouses were Dubai Marina, Business Bay, JVC, Downtown Dubai and JLT. For off-plan properties, and for apartments, Dubai Harbour, Mohammed bin Rashid City, Dubai Creek Harbour, Business Bay and Downtown Dubai were the leading locations.

A plot of land, located next to Burj Daman, and opposite ICD Brookfield, has been sold in a cash deal for US$ 79 million to a private family developer, represented by Luxhabitat Sotheby’s International Realty. Initially acquired by Al Rihab Real Estate in 2010, it became the first-ever repossession order, granted by the DIFC courts in favour of Emirates NBD after a lengthy legal case. With an estimated total built-up area of 2.2 million sq ft, the luxury development is expected to include exclusive hospitality, residential, commercial and retail space.

For the first ten months of the year, Dubai’s Department of Economy and Tourism issued 55.2k new business licences – up 69.2%, year on year; they were split 59:41 between professional and commercial. Location wise, Bur Dubai accounted for 37.6k and Deira 17.6k of the total. Three types of legal entities – Sole Establishment, LLC and Civil Company – accounted for 38%, 28% and 24% of the total. Over the period, business registration and licensing transactions being completed were 17.0% higher at 233.9k, with the total number of renewal transactions touching 120.1k, a growth of 2.7%.

At this week’s 12th World Chambers Congress in Dubai, Hamad Buamim commented that Expo 2020 Dubai had already proven to be a catalyst for growth for the emirate’s economy. The president and chief executive of Dubai Chamber also noted that the emirate is set to expand at the faster pace of 4.0% next year, by taking steps to develop its digital economy and boosting the start-up ecosystem. The local economy has recovered quicker than expected from the pandemic’s impact, driven by speedy government measures to support businesses and the digital transformation during the crisis. Mr Buamin also commented that “we think the recovery we are seeing in the fourth quarter will fuel the [economic activity] in 2022,” and “hopefully, it will bring the recovery way beyond the single-digit level that we have seen projected for the UAE and Dubai.” Mr Buamim expects business confidence in Dubai’s growth potential to remain high, as the economic transformation, driven by the Expo, will last beyond the six months of the world’s fair. He also noted that trade and the digital economy were at a better stage than they were in 2019 and that it is only a matter of time before tourism and retail perform likewise.

Under the directive of Dubai’s Crown Prince, HH Sheikh Hamdan bin Mohammed, the Dubai Executive Council has introduced a programme that explores the use of the tech in several sectors, including health, security, shipping and food. Dubai’s Crown Prince noted that “the Dubai Programme to Enable Drone Transportation will create an advanced infrastructure that enables innovators and relevant entities to test prototypes of unmanned aerial vehicles in designated areas and develop legislation that optimises their implementation”. This programme will not only enhance the emirate’s competitiveness but also attract talent and local and foreign investments to the drone applications sector. Dubai Future Foundation will oversee the implementation of the outputs of the Dubai Program to Enable Drone Transportation through Dubai Future Labs. As far back as 2014, Dubai had attracted thousands of innovators in this field, from 165 countries, to participate in the UAE Drones for Good Award, seen to be “beginning of our journey with this emerging technology”.

Emirates Central Cooling Systems Corporation posted a 49%, nine-month, year on year, expansion in the number of new registered individuals and companies in Dubai. The company, better known as Empower, is the first district cooling services provider in the country, and the region, to launch electronic registration. This strategy is in line with the ‘Dubai Paperless Strategy’ which saves time and money for all stakeholders, as all transactions are now online, without the need of visiting customer service centres. The company noted that the recent improvement in the UAE economy would inevitably open up many more deals and new expansion projects.

Shuaa has confirmed that it is in the “very early stages” – and that it may list “one or more” of its subsidiaries – and is in talks with different, yet to be named, stock exchanges to list through initial public offerings. According to Bloomberg, the investment bank is in discussions with the DFM to launch IPOs for two of its subsidiaries – Stanford Marine Group and NCM Investment which have a combined US$ 545 million valuation; this could happen before the end of Q1 2022. This comes at a time when the Dubai government is to list ten state-owned companies, starting with DEWA and Salik, as part of its wider strategy to double the size of the local financial market to US$ 815 billion; it also planning to set up a US$ 545 million market-maker fund to encourage listings from private and family owned businesses from the energy, logistics and retail sectors, as well as  a US$ 272 million fund to attract more technology companies to list.

The DFM opened on Sunday, 21 November, 489 points (17.6%) higher the previous five weeks but shed 95 points (2.9%) to close the week at 3,265. Emaar Properties, US$ 0.32 higher the previous four weeks, closed US$ 0.05 lower at US$ 1.34. Emirates NBD and Damac started the previous week on US$ 3.87 and US$ 0.38 and closed on US$ 3.58 and US$ 0.37. On Thursday, 25 November, 416 million shares changed hands, with a value of US$ 147 million, compared to 582 million shares, with a value of US$ 225 million, on 18 November.

By Thursday, 25 November, Brent, US$ 0.62 (0.7%) lower the previous week, shed US$ 0.84 (1.0%), to close on US$ 81.21. Gold, US$ 78 (4.2%) higher the previous fortnight, lost all that gain, shedding US$ 78 (4.2%), to close Thursday 25 November on US$ 1,792. 

The UK government has set aside nearly US$ 2.3 billion to help the failed firm Bulb, which was put into special administration on Wednesday, continue supplying energy to its 1.7 million customers. Teneo, the appointed administrator, estimates it will cost around US$ 2.8 billion to keep Bulb trading until the end of next April. Due to its size, Bulb – which is triple the size any other energy supplier that has failed in recent years – will be run as normal for the time being, rather than its customers being immediately transferred to other suppliers, as has happened in the past. Since the beginning of September, twenty-two energy suppliers have failed, following a spike in gas prices.

In its biggest ever single investment in the US, Samsung will spend US$ 17.0 billion building a computer chip plant, in the Texan city of Taylor, that will be completed by H2 2024 and provide employment for2k; this will bring Samsung’s total US investment to US$ 47.0 billion. In line with its global rivals Samsung is racing to expand chip making in the US to tackle supply chain issues that currently appear not to be going away, The Biden administration, which has been pushing tech giants to increase their chip production in the US, noted that the new facility would help “protect our supply chains, revitalise our manufacturing base and create good jobs”. Earlier in the year, Taiwanese chipmaker TSMC announced a US$ 100 billion investment in Arizona, while US contract semiconductor manufacturer Global Foundries announced that it will increase its investment in upstate New York.

“We are well on our way to becoming an indispensable platform for enterprises, individuals and developers to connect, collaborate and build in the flexible hybrid world of work,” were the words of Eric Yuan, Zoom’s founder. The company had just announced a massive 71.5% hike in Q3 net profit, to US$ 340 million, on the back of a 35.2% improvement in revenue to US$ 1.05 billion and driven by an increase in the number of paid customers for the video-conferencing platform. Despite these results, the market was not happy, with the share value dipping 3.5% to US$ 242, a third down YTD. By the end of last month, Zoom had 512k paid customers, with more than ten employees – 18% higher than the same period in 2020 – and total cash and marketable securities stood of US$ 5.4 billion. It also recently called off plans to acquire Five9, for a reported US$ 14.7 billion, citing that the cloud call-centre software provider had not obtained the requisite stockholder support for the merger agreement.

New guidelines involving special purpose acquisition companies – also known as blank-cheque companies – have been issued by the Dubai Financial Services Authority, With the aim of mitigating some of the risks associated with Spacs, DIFC’s market regulator will ensure that they adequately ring-fence proceeds raised from investors and that applicants will also be required to appoint a sponsor company for the initial listing and subsequent acquisition of a target company. A Spac is a vehicle with no commercial operations that is formed with the intention of raising funds through an IPO and then acquiring an existing company. Since these entities do not have the onerous disclosure requirements of an IPO listing, they have grown in popularity to meet the need to take fast-growing companies public quickly. On a global scale, Q3 saw 88 Spacs announcing mergers with existing companies, with a US$ 16 billion value. PwC estimated that “there is nearly US$ 120 billion in cash on the sidelines in Spacs that have yet to announce a merger.”  

Although many had thought that the Modi government would do a U-turn on its cryptocurrency stance, it now seems likely that it will go ahead to ban most cryptocurrencies under a long-awaited bill. On the news, cryptocurrency prices dropped on Indian exchanges, as the new law aims “to create a facilitative framework for the creation of the official digital currency to be issued by the Reserve Bank of India”. Bitcoin declined 13%, as Shiba Inu and Dogecoin both dropped more than 15%. It seems that India is following on the coattails of China’s recent decision to make cryptocurrency illegal. There is no doubt that the RBI has very conservative views on cryptocurrency, with the 2020 verdict by the country’s supreme court overturning a digital currency trading ban imposed by RBI for two years. Only last week, the bank noted that it had “serious concerns from the point of view of macro-economic and financial stability”, and that blockchain technology can thrive without cryptocurrencies.

Unlike most other advanced economies, Japan will buck the trend by introducing a record US$ 490 billion spending package to further cushion the economic blow from the pandemic impact, at a time when many other countries are phasing out stimulus measures. Indeed, Prime Minister Fumio Kishida, in his earlier life, would have favoured fiscal restraint to focus on reflating the economy, and redistributing wealth to households, rather than spending to get the economy out of trouble. He is now following in the footsteps of his predecessor, Shinzo Abe, and appears to be using the scatter-gun approach shooting money at any target, whether the spending is to be effective or not, resulting in a lot of wasteful and unnecessary public spending. Kishida is also planning a US$ 280 billion year-end budget to fund the measures. including measures to counter higher oil prices, by subsidising oil refiners in the hope of capping wholesale gasoline and fuel prices to assist households and firms from rising oil costs.

Driven by concerns over higher prices and rising household debt, South Korea’s central bank has raised interest rates for the second time, (following its August move), in 2021, to 1.0%; it becomes the latest central bank to focus on monetary policy, which includes raising rates, as opposed to fiscal policy which involves spending money to spur economic growth in a bid to help with the post-pandemic recovery and rising inflation. The bank also raised its inflation outlook to 2.3% for this year and marginally lower to 2.0% for 2022 – an indicator that further rate rises are more than probable. The bank has to act on surging house prices and household debt to control financial risks, so the immediate need is to put a cap on rising prices, as well as to contain growing financial imbalances.

This week, the Reserve Bank of New Zealand lifted its official cash rate, by 25 bp to 0.75%, for the second consecutive meeting, in a bid to counter rising inflation, whilst its Australian counterpart reiterated that it is unlikely to hike rates before 2024. The RBNZ also withdrew pandemic stimulus – which had been one of the main factors that had driven consumer price inflation to its highest point since 2010; the CPI inflation rate is expected to top 5%, probably before the end of the year, but there are hopes that it will dip to its original 2% target by the end of 2023. New Zealand’s unemployment level has fallen but inflation and property prices have headed in the other direction.

Despite the apparent inaction by the RBA, there are many that believe it will have to make moves to raise rates earlier, driven by forecasts that wages will rise faster, than the central bank is expecting, and house prices may fall by 2023. (Some see Aussie house prices rising slower in 2022 by 7%, followed by a 10% decline a year later). The central bank is hoping that some of the factors driving near-term inflation – including higher oil prices, rising transport costs and the impact of supply shortfalls – are transient. The RBA’s forecast sees “normal” inflation will reach 3% by Q3 2023, at which time there will be full employment.  – that, being the case, it rules out any chance of a rate hike in 2022, with the RBA board being “prepared to be patient”.

Following a request from the US administration, that is pushing other nations, including China, for lower oil prices, by utilising their reserves, Japan is considering releasing oil from its stockpile. However, it appears that this would be against Japanese law as it states that reserves can be released only at a time of supply constraints or natural disasters, but not to lower prices. The world’s third biggest economy has used its reserves over the past thirty years on two occasions – following the fallout of the Gulf War in the early 1990s and the deadly earthquake and tsunami in 2011. Currently, the resource-poor country’s strategy seems to be coordinating with major consumer nations and international organisations such as IEA, at a time when surging oil prices and a weakening yen are driving up the cost of imports.

As bilateral tensions continue to worsen over the status of Taiwan and other issues. the US government has added twelve more Chinese companies to its restricted trade list. The Biden administration, also citing national security and foreign policy concerns, noted that eight of the firms were helping develop the Chinese military’s quantum computing programme, and have been added to the so-called “Entity List”; they were also accused of acquiring or attempting “to acquire US origin-items in support of military applications”. Sixteen individuals and entities, operating in China and Pakistan, were also added to the list due to their involvement in “Pakistan’s unsafeguarded nuclear activities or ballistic missile program.”

Jerome Powell, Donald Trump’s appointee in 2018, has seen Joe Biden nominate him for a second term as chair of the US Federal Reserve. His closest rival for the position was Lael Brainard, favoured by progressives on the left of the Democratic Party, was nominated for vice chair. Powell has been criticised for weakening regulation of financial institutions, as well as not doing enough to tackle climate change and poverty. The two appointments still have to be ratified by the Senate, where there will be opposition from those liberal members who want the Fed to be more aggressive in addressing income inequality and banking power. Biden’s view of continuing stability in the Fed is at odds with those who advocate more urgent action to better manage risks to the current financial system as well tackle climate change issues.

In another bid to counter China’s ever-growing global influence, especially in developing countries, the UK has overhauled its British International Investment institution which offers capital backing for schemes that promote growth in developing countries. It is hoped that the BII would be a “reliable and honest” source of funding for infrastructure and technology projects in countries across Asia, Africa and the Caribbean. This is part of the government’s policy to invest US$ 10.7 billion in international projects every year until 2025. African and developing world nations, some of which are recipients of high-interest Chinese loans, may see this as a welcome option to taking on “strings-attached debt”. BII will prioritise sustainable infrastructure investment to provide honest financing and avoid unsustainable debt, at a time when “too many countries are loading their balance sheets with unsustainable debt. Reliable and honest sources of finance are needed”.  It is estimated that since 2003, China has granted or lent US$ 843 billion to infrastructure projects in 165 countries.

Following zero growth the previous month, UK sales rose by 0.8% in October, driven by early Christmas shopping, as clothes sales jumped to just 0.5% lower than pre-pandemic levels. It was noted that shoppers were buying, or pre-ordering other items, such as toys, shoes and accessories earlier than usual for Christmas this year. However, there were declines in food and online sales, with fuel prices tanking, as consumers returned to normal levels after the September fuel supply crisis. Like for like sales in second-hand shops and other non-food stores headed north, with the charity shop sector posting sales 3% to 5% higher than pre-pandemic sales figures. Retailers continue to face supply chain problems, whilst labour shortages throughout the supply chains – from farms to distribution – are pushing up costs. As 5% inflation and climbing energy prices, will undoubtedly push up end prices, there is the chance that demand may slow as consumer confidence and spending start to dip next month.

On Tuesday, the Biden administration made the expected announcement that the United States will utilise its emergency stockpile by releasing fifty million barrels of the 605 million barrels in the reserve, in a bid to lower energy prices which have been skyrocketing in recent months; it had been discussing this strategy with major Asian energy consumers, including China, India, Japan and South Korea. This had arisen as OPEC+ appeared to reject US advances to tame soaring prices and put a cap on them; the oil cartel had already added 400k bpd to meet the increasing demand and have argued that the rebound in demand could be fragile if more supply was added.   So, the idea seems to be by pumping up supply, prices will fall to match rising demand. It is estimated that up to 140 million barrels, with the likes of India and South Korea contributing just small token amounts, will be released from the stockpiles and if that is the amount of the ‘release, this could be “very negative for pricing”.

After eleven straight days of declines, the Turkish currency tanked 15% on Tuesday to trade at just over thirteen lira to the greenback – down 45% YTD to make it the world’s worst performing currency. President Tayyip Erdogan has pushed Turkey’s central bank to make three rate cuts since September, in a move that he thinks will boost the flagging economy, but his action is the main driver for inflation levels rising above 20%; he still thinks that raising interest rates causes inflation, and that the way to combat rising prices is to make money cheaper. The president is determined that it’s his way or the highway. The fact is that the Turkish president is adamant that cutting rates is the best policy for Turkey and he will be telling the electorate next year, when the lira hits rock bottom and inflation skyrockets, that I Did It My Way!