It’s Not Over ‘Til It’s Over!

It’s Not Over ‘Til It’s Over!                                                                21 January 2022

Valustrat confirmed that the real estate sector continued its impressive recovery into Q4, as the Valustrat Price Index – covering thirteen villa communities and twenty-one apartment areas – jumped 5.1% and 16.6% in the fourth quarter and for the year. Capital values for villas and apartments in Dubai surged in Q4 2021, as the UAE economy charted a strong recovery from the Covid-19 pandemic. The index tracks change in capital values for a representative fixed basket of properties, with villas accounting for 13% of the “basket”, apartments – 87%. The highest capital gains were seen in the older gated communitiesArabian Ranches (34.1%), Jumeirah Islands (33.9%), The Lakes (31.2%) and Palm Jumeirah (27.6%). For apartments, the top three communities were Palm Jumeirah (17.3%), Jumeirah Beach Residence (14.6%) and Burj Khalifa (8.7%). Total estimated completions of residential properties, as of the final quarter, stood at 24.2k apartments and 5.8k villas in Dubai, equivalent to nearly 53% of the preliminary estimates for this year. The report begs the question – why do the leading consultancies consistently overestimate this figure at the beginning of every year?

It is interesting to note how average areas of living space have grown over the past three years, expanding from 142 sq mt in 2019, to 177 sq mt in 2020 and 191 sq mt last year. The property recovery is the result of a combination of many factors, including timely fiscal/monetary measures, pent up demand, improved investor sentiment and new government initiatives, such as visas for expatriate retirees and the expansion of the ten-year golden visa scheme. Residential occupancy in Dubai was estimated at 83% at the end of the year. On average, Dubai average asking rents posted an 18.3% hike on the year, with average annual rents for a 2 B/R, 3 B/R and 4 B/R villas of US$ 32k, US$ 45k and US$ 64k. Meanwhile for apartments, average prices for studio, 1 B/R, 2 B/R and 3 B/R ended on US$ 10k, US$ 16k, US$ 22k and US$ 34k.

Valustrat also posted that Dubai office capital values increased 17.3% year-on-year in Q4, with the VPI climbing to 69.7, now more than at pre-pandemic levels, but still 30.3% lower than in 2015. JLT and DIFC posted the highest annual gains at 19.1% and 18.9%, respectively.

Savills posted that Dubai recorded the third highest price growth, in the luxury property sector, among global cities last year, and expects 2022 expansion levels to soften to between 4.0% – 5.9%, but that the emirate would continue to be a safe haven for investment. Last year, average prices were up 17.4%, according to Savills World Cities Prime Residential Index, with H2 growth at levels not seen since before the 2008 GFC; this was down to “strong demand which outstripped supply, a successful vaccination programme, opening of international borders, and other national government measures.” Both Miami (at 21%) and LA (20%) were above Dubai which was ahead of Hangzhou, Moscow, Guangzhou, Seoul and Shanghai recording growth levels of 17.1%, 15.0%, 14.5%, 12.0% and 11.0% respectively.

Nakheel has sold the last remaining beachfront land plot on the Crescent of the Palm Jumeirah for US$ 65 million to Arada, a Sharjah-based company. The 20.5k sq mt plot – the developer’s first foray in the Dubai property market – faces the Burj Al Arab on The Palm’s East Crescent, and will be a mixed-use project comprising residential, leisure and F&B components, with further details being revealed at the Q3 sales launch. Prince Khaled bin Alwaleed bin Talal, Vice Chairman of Arada, commented that it has “a reputation for delivering beautifully designed projects to an exceptionally high standard, and we look forward to bringing that capability to Dubai”. To date, Arada has delivered 2.2k homes and has ongoing projects including Aljada, Sharjah’s largest ever mixed-use megaproject, where 5k units are currently under construction, and Masaar, an upscale forested community with 4k villas and townhouses.

An investigation by the Khaleej Times has unravelled a major property scam that seems to have netted the perpetrators more than US$ 8 million, in advance payments, from over 230 renters. Notwithstanding the amount lost, homeowners, who signed contracts with the fraudulent Evernest Holiday Homes Rental LLC, have also been denied access to their own homes. Having sent a mass email, entitled ‘Happy Holidays’, to their staff, the four scammers downed shutters, and vanished without a trace. The deception, not the first to be seen in the emirate, was that the company approached homeowners in upscale Dubai neighbourhoods; one team offered to sublease their properties above prevailing rents, backed up by four post-dated rental cheques, whilst the other reached out to prospective tenants, who were offered the same properties way below market rates – but they had to pay the entire year’s rent upfront.

The scam came to light when the post-dated cheques issued to homeowners bounced, due to insufficient funds and then they found that their properties were occupied by people who had paid full year’s rent to Evernest and had contracts to show they were rightful tenants; they, in turn, had separate contracts with the agency, and could be in danger of eviction, with many already having had their utilities disconnected. Former employees were unaware of the fraud and blamed the South Asian owner, who has already fled the country, and his three cohorts, who executed the scam with such meticulous planning, working in two teams – one hoodwinking unsuspecting homeowners and the other seeking potential tenants. Evernest Holiday Homes has a tourism licence, that actually expires tomorrow, 22 January, which was modified last September to change the company ownership. This is not the first major scam to hit the local real estate sector. In 2013, Jamal Al Mutarreb allegedly fled to Lebanon after he had carried out a major fraud on numerous victims centred on The Greens area, and in 2019, some two hundred Dubai residents were hit by a similar scam after two holiday home firms — Don Holiday and Place Holidays — had shut shop and disappeared.

Latest reports indicate that Dubai’s mortgage market, topping 19.5k transactions, posted its best ever year – 26% higher than the previous highest, and up by 575, compared to pre-Covid 2019. It was reported that Q4 deals were 10% and 21% higher than the returns in 2020 and 2019.

This week, Property Finder reported that it had fully integrated Homevalue’s solutions, insights and technology into its ecosystem which will enhance its capabilities to buyers, tenants and to the overall home-owners experience. The move will also see Property Finder benefitting from the data available, and improving the analytical capabilities for customers, traders, and brokers. The founder and CEO of Homevalue, Fouad Bekkar, becomes vice president of Property Finder.

Driven by the influx of Expo 2020 international visitors, and the comparatively long holiday season, last month saw Dubai’s hotel room rates climb to their highest level in six years. STR estimates that the December average daily rate topped US$ 260, with the ADR for News Year’s Eve reaching US$ 535. The monthly RevPAR (revenue per available room) stood at US$ 203 – its highest level since March 2015. 

A new survey, compiled using Instagram data of more than ten million Instagram hashtags, has revealed that the Burj Al Arab is the most beautiful five-star hotel in the world, ahead of Soneva Jani (Maldives), Bellagio (Nevada), The Plaza (New York) and the Beverly Hills Hotel (California). The only other Dubai hotel, in the top twenty listing, was the Palazzo Versace. On a regional basis, six other Dubai properties were included in the list of the most beautiful hotels in the Middle East – Jumeirah Al Naseem, Taj Dubai, Park Hyatt Dubai, Le Royal Meridien Beach Resort, Waldorf Astoria Dubai and W Dubai – The Palm.

H.H. Sheikh Hamdan, Crown Prince of Dubai, issued Executive Council Resolution No. (6) of 2022 appointing Khalid bin Touq as CEO of Tourism Activities Sector and Classifications at the Department of Economy and Tourism in Dubai.

Dubai’s Department of Economy and Tourism saw new business licences issued, 68.9% higher, at 72.2k, in 2021, compared to the previous year. As usual, Bur Dubai and Deira topped the list with 48.6k and 23.5k of the new licences, with 59% and 41% being recorded as ‘professional’ and ‘commercial’. Sole establishment companies accounted for 37% of new licences, 26% were for limited liability companies and 13% were civil companies.

A survey by Boston Consulting Group placed Dubai second, to New York, among the world’s sixteen ‘megacities’, standing out as a leader in two key areas. The first pertains to economic opportunities, which includes living standards and platforms for professional realisation, with 72 points, behind only New York. The other ranked the emirate third, behind Singapore and Toronto, amongst megacities in the relationship with authorities’ segment – open and trusted dialogue with authorities a central enabler for widespread satisfaction.

MEASA’s first e-commerce free zone is to introduce exclusive incentive packages toencourage new companies, and potential investors. Dubai CommerCity announced the launch of a business setup stimulus scheme for company registrations, and office space reservation at its facilities, which will only apply for this month and only if lease contracts have been signed; it does not apply to smart desks. Part of the incentive is that fees can be paid on a monthly basis. The free zone, which covers an area of 2.1 million sq ft and has invested US$ 872 million in world class infrastructure, aims to target new and existing e-ecommerce companies in the region.

Dubai’s Infinity Bridge, an arch shaped structure resembling the infinity symbol which symbolises Dubai’s unlimited ambitions, and first announced in 2018, was opened to traffic on Sunday, 16 January. The 300 mt long and 22 mt wide bridge, which traverses Dubai Creek, is part of the U$ 1.44 billion Al Shindagha Corridor Project; its twelve lanes can accommodate 24k vehicles an hour in both directions and also features a combined 3 mt track for pedestrians and cyclists. With the link between the Infinity Bridge, and the new bridges to Al Shindagha Tunnel, in the direction from Deira to Bur Dubai, still to be completed, the latter will be temporarily closed for the next two months.

The DFM opened on Monday, 17 January, 18 points (0.6%) lower on the previous week, gained 8 points (0.2%) to close the week, on Friday 21 January, on 3,210. Emaar Properties, US$ 0.16 higher the previous three weeks, shed US$ 0.03 to close on US$ 1.32. Emirates NBD, DIB and DFM started the previous week on US$ 3.58, US$ 1.50 and US$ 0.71 and closed on US$ 3.68, US$ 1.50 and US$ 0.68. On 21 January, slightly improved trading saw 61 million shares change hands, with a value of US$ 54 million, compared to 36 million shares, with a value of only US$ 30 million, on 14 January 2022.

By Friday 21 January 2022, Brent, US$ 9.96 (13.4%) higher the previous four weeks, continued its mega run and gained a further US$ 3.50 (4.2%), to close on US$ 87.78. Gold, down US$ 48 (2.6%) the previous fortnight, gained US$ 5 (0.3%), to close Friday 21 January on US$ 1,836. 

An indicator that the region is fast recovering from the negative economic impact of the pandemic can be seen from the value of M&A deals jumping 57% to US$ 109.1 billion, and the number of deals by 40% to over 1.1k, last year; this was the first year that deals surpassed the 1k mark. The latest Refinitiv report noted that the largest deal in the Mena region was Aramco’s US$ 15.5 billion lease and leaseback agreement for its gas pipeline network; energy and power was the most active sector, with deals valued at US$ 38.8 billion. Inbound and outbound deals were 88% higher at US$ 45.4 billion and 198% up ,to US$ 30.2 billion respectively. Reflecting the strong recovery, proceeds from equity capital markets came in 193% higher at US$ 14.5 billion, (including KSA’s US$ 8.9 billion and UAE’s 4.3 billion), and a record US$ 66.0 billion from investment-grade corporate debt. With this major improvement, it was no surprise to see investment banks benefit, with a 3.0% hike in fees to US$ 1.4 billion.

According to RedSeer, the Menat, (Middle East, North Africa and Turkey), gaming market is booming, with 2021 revenue 15% higher, at US$ 6.5 billion. The growth is expected to continue, with the region gaining a bigger share of the global market, which currently stands at US$ 175.8 billion, estimated to grow to US$ 218.7 billion by 2024. There are an estimated three billion global players, with regional players at 434 million – 15% of the total – behind only the Asia-Pacific’s 1.61 billion players. The UAE and Saudi Arabia are the two biggest regional players, generating US$ 0.48 billion and US$ 1.1 billion in 2021 revenue. One interesting fact, highlighting the impact of the gaming segment, is that the top fifteen VC funds dedicated to gaming now have almost US$ 2.8 billion in assets under management.

The US Fed finally issued its discussion paper on establishing an official digital version of the US dollar that would result in US citizens having a wider choice, speedier payment options and a safe, digital payment option for households and businesses.  However, the paper made no recommendations and any hints on whether or not it should launch a central bank digital currency, but it did post that it would not proceed with creating one “without clear support from the executive branch and from Congress, ideally in the form of a specific authorising law”. The downside of such a currency is privacy concerns and financial stability risks. The central bank aims to collect public feedback, via an online form, within 120 days, on the potential costs and benefits of a CBDC. It is estimated that some ninety countries are exploring or launching their own CBDCs.

The world’s biggest carmaker has warned its domestic customers that they will have to wait for up to four years to take delivery of its new Land Cruiser SUV. No reasons were given for this delay, but Toyota indicated that the delay was not related to the global chip shortage or the supply chain crisis. Because of the current increased cases of Covid infections, the car maker will be slowing production at up to eleven plants in Japan. After seventy years in production, the Land Cruiser is Toyota’s longest-selling vehicle and there has been reports that, because of its global appeal, there had been plans to ramp up production in the medium and long-term.

Driven by a legal dispute involving grounded A350 wide-body jets, Airbus has terminated a contract with Qatar Airways for an order of 50 A321 aircraft. The ME carrier is claiming  US$ 600 million in compensation over A350 flaws which were discovered last year when it sent one of its A350 aircraft to be repainted with the World Cup livery. The dispute worsened when the two parties disagreed over the causes of and solutions to flaws on the surface paint of the twin-aisle A350 jets. The defects led Qatar’s aviation regulator to ground 21 of the A350s, that is 40% of its current fleet of A350s, for which it was the launch customer with the biggest order. Airbus acknowledged the issue, conducted studies and offered remedies but insisted that the flaws did not represent a safety issue. Other airlines including Air France, Cathay Pacific, Finnair, Lufthansa and Delta have also raised concerns over surface flaws on the A350 jet. However, the European Union Aviation Safety Agency (EASA), which is responsible for the overall design but not the locally regulated airworthiness of individual planes in service, has said it has not so far found safety problems with the A350s it has inspected. The case is likely to end up in the High Court of London.

Shares in Netflix sank almost 20%, equating to about US$ 45 billion, after it had added just 2.5 million subscribers in Q4 – and a total of 18.2 million for the year – as investors became wary of a continuing slow down. There are no dominant factors attributable to this decline, but a tough economy, especially in Latin America, as well as lingering fallout from the pandemic, do not help. The strong greenback is costing Netflix money in many of its international markets, with estimates that the dollar’s appreciation will reduce 2022 sales by about US$ 1 billion. Management also acknowledged the potential impact from rival streaming services but is confident in the long-term prospects for the business.

The man who, in 2015, raised the price of Daraprim, a long-established medicine used to treat toxoplasmosis, from US$ 13.50 to US$ 750 – around 4,000% – overnight, has been ordered to repay US$ 65 million in profits he made from the scheme. The New York court found that the drug firm executive, Martin Shkreli, had violated laws against monopolies, noting that he had designed supply agreements to block competitors from offering a generic version of the unpatented medicine, which is used to treat the parasitic disease in pregnant women and patients with Aids. The man, nick-named “Pharma Boy”, who had been banned from working in the pharmaceutical sector for life, has been serving a prison sentence for a separate offence, that of defrauding investors.

The death of the former chairman and chief executive of supermarket chain Sainsbury’s, Lord Sainsbury of Preston Candover, was announced earlier in the week.  The 94-year old spent forty-two years with the retailer and, having been appointed a director in 1958, became its chief executive in 1969 until his 1992 retirement. John Davan Sainsbury started working in his family’s business in 1950, initially as the biscuit buyer and then bacon buyer in 1955. During his time, the family business grew from a regional, middle-sized grocery chain to a national household name. He was responsible for developing Sainsbury’s own range of products, and led the company through other significant changes, including conversion to scanning, the introduction of debit and credit cards, and energy management.

Primark, which employs 29k staff across 191 UK stores, is to cut 400 jobs to “provide clearer accountability, greater flexibility and more management support on the shop floor”. AB Foods, Primark’s parent company, (along with Ovaltine and Twinings as well as other ingredients and agricultural subsidiaries), noted, that despite higher inflation and Omicron impacting the retailer’s sales, the Group had witnessed strong trading. However, it did warn that higher energy and transport costs may push up future prices, but that “Primark prices for the consumer will remain where they are,” despite sales yet to make their way back to pre-pandemic levels.

A BBC Scotland investigation points to Brewdog exporting multiple shipments of beer to the US, between 2016-2017, in contravention of US federal laws; it is alleged that the Scottish beer giant shipped beer with ingredients that had not been legally approved. This week, its CEO, James Watt, admitted to “taking shortcuts” with the process, and that two of its flagship products, Elvis Juice and Jet Black Heart, contained extracts which would not be approved in the US. It seemed that many of the Brewdog staff knew of this problem amid a culture of ‘just make it happen’. It is reported that US treasury officials from the Alcohol and Tobacco Tax and Trade Bureau were given false information. In 2016, James Watt wrote ‘Business for Punks: Break All the Rules – the Brewdog Way’ and the title says much about his modus operandi – but his beer is good!

Despite their US$ 50 billion offer for GlaxoSmithKline’s consumer health business being rejected, being “fundamentally undervalued”, Unilever is considering a higher offer, noting that GSK’s consumer healthcare unit – which produces Sensodyne toothpaste, Advil painkiller and Emergen-C vitamin supplement – was a “strong strategic fit” for its brand, which makes Lifebuoy and Dove soap. GSK said, at the weekend, that it had rejected three offers from Unilever for a bundle of brands. It also noted that “the acquisition would create scale and a growth platform for the combined portfolio in the US, China and India, with further opportunities in other emerging markets.” Unilever is to undergo a much-needed restructure, and plans to sell slow-growth brands, but is still interested in acquiring GlaxoSmithKline’s consumer unit, whilst GSK announced that it would stick to its plan of listing the business this year.

Activision Blizzard has been acquired in a mega US$ 68.7 billion all-cash deal by Microsoft which now becomes the third largest gaming company in the world, behind China’s Tencent and Japan’s Sony. This latest acquisition is the tech company’s largest to date, easily surpassing its 2016 US$ 26.2 billion purchase of LinkedIn. There is no doubt that this latest addition will accelerate the growth in Microsoft’s gaming business across mobile, personal computer, console and cloud, and, according to the company “will provide building blocks for the metaverse”. The acquisition will bolster Microsoft’s Xbox Game Pass, as it will be able to integrate Activision Blizzard games into the portfolio, including’Warcraft,’ ‘Diablo’, ‘Overwatch’, ‘Call of Duty’ and ‘Candy Crush’, in addition to global esports activities through Major League Gaming. Prior to this deal, Microsoft had been strengthening its gaming portfolio, buying ‘Minecraft’ maker Mojang for US$ 2.5 billion in 2014 and last year, US$ 7.5 billion for game maker Bethesda. There was no surprise to see Activision Blizzard’s share value jump 27.1%, to US$ 83.10, on the news.

On Monday, Emirates suspended flights to nine US cities — Boston, Chicago, Dallas Fort Worth, Houston, Miami, Newark, Orlando, San Francisco and Seattle — until further notice due to operational concerns, associated with the planned deployment of 5G mobile network. However, Emirates flights to New York JFK, Los Angeles and Washington DC continue to operate as scheduled. The US Federal Aviation Administration posted a warning that the deployment of new 5G technology could affect sensitive airplane instrument, such as altimeters, and significantly hamper low-visibility operations. Other international carriers have taken similar action. Japan’s All Nippon Airways and Japan Airlines, said they would curtail their Boeing 777 flights, as have Lufthansa and Korean Airlines, whilst Air India has curtailed its operations to the US from India. By yesterday, Thursday 20 January, the situation returned to normality, after the US Federal Aviation Administration and Boeing issued formal notifications that lifted the previous restriction on aircraft operations.

A ruling by the UK High Court, against the fugitive Kingfisher tycoon Vijay Mallya, could see him being evicted from his luxury Central London home. He had held a mortgage with UBS on this multi-million-pound property, located along Cornwall Terrace, and the judge refused a request by Mallya’s lawyers for a stay on repaying the UBS loan after Mallya had failed to meet a previous repayment deadline in April 2020; at that time, the Swiss bank was unable to carry out an eviction order because of the then Covid regulations. He has been living in London, with his son and 95-year old mother, since he fled his home country after being accused of a US$ 24.5 million fraud, relating to the collapse of Kingfisher Airlines. He was ordered to be extradited by the UK High Court, after hearings lasting three years, but remains on bail while the UK government considers what is thought to be an asylum application. It is reported that Mallya and his family own numerous other properties in the UK and elsewhere, including a sprawling country home in Hertfordshire.

According to Oxfam, the world’s ten richest men have seen their collective fortunes more than double since the onset of Covid-19 in March 2019, whilst on the other side of the coin, more than 160 million people have been pushed into poverty. Elon Musk, Jeff Bezos, Bernard Arnault and family, Bill Gates, Larry Ellison, Larry Page, Sergey Brin, Mark Zuckerberg, Steve Ballmer and Warren Buffet have seen their combined wealth increase from US$ 700 billion to US$ 1.5 trillion. It was noted that among the ten, there was significant variation between them, with the Tesla founder’s fortune growing by more than 1,000%, whilst that of Bill Gates rose by a more modest 30%. More strikingly, it estimated that a new billionaire had been created almost every day during the pandemic, with 99% of the world’s population worse off because of lockdowns, lower international trade and less international tourism.

No doubt the report’s contents will be discussed at this week’s World Economic Forum meeting in Davos; for the second year in a row, it will be online and will also see the likes of the future path of the pandemic, vaccine equity and the energy transition on the agenda. Oxfam noted that 160 million more people were living on less than US$ 5.50 a day and that lower incomes for the world’s poorest contributed to the death of 21k people each day. The World Bank has estimated that because of a lack of access to healthcare, hunger, gender-based violence and climate breakdown contributed to one death every four seconds. The World Economic Forum will hold its annual meeting in-person from 22 – 26 May, in the Swiss ski resort of Davos-Klosters.

A warning that the volatile start to the global markets may be a precursor of what is on the horizon. There is no doubt that many global stock markets – and probably most other assets – are in a massive bubble that will inevitably burst and maybe this has already started. When the bubble does burst, not only will real estate, stocks, commodities, bond markets and cryptocurrencies join the global bourses, but all asset classes could lose up to 40% in value quicker than they gained those levels. Take note the words of Bob Dylan, – “and the first one now. will later be last” – because when the bubble does burst, and burst it will, fortunes will be lost. Take action now before it is too late – the sell-off is well under way!

There is no doubt that during the next six months of France’s presidency of the EU, its president, Emmanuel Macron, will use his position as a springboard towards a re-election bid in April, with critics already accusing him of doing so. This week, he has been detailing his country’s priorities for the six-month rotating presidency of the bloc, pledging to make the EU more powerful and to add changes to the charter of fundamental rights of the EU to make it “more explicit about environment protection and the recognition of the right to abortion”. Although he is the front-runner to win a second term, he has been attacked on both fronts – one from French MEPs, claiming that he is promoting his candidacy, rather than caring about EU issues, and the other asking “how can you claim you’ll bring Europe together when you have been until the end the one widening divisions in France?” Another criticised Macron’s presidential actions as reflecting “arrogance, powerlessness and scheming.”

To the surprise of many, China cut a key interest rate for the first time in almost two years, after Q4 figures has indicated that the economy had slowed to 4.0%, compared to a year earlier, with retail sales growth weakening 1.7%. The People’s Bank of China lowered both the interest rate on US$ 110 billion worth of one-year medium-term lending facility loans to 2.85%, and the seven-day reverse repurchase rate, while the bank pumped another US$ 31.4 billion of medium-term cash into the financial system. Official data also shows an 8.1% annual growth but that does not reflect the impact of the recent coronavirus outbreaks of late December which badly hit the service industry. China joins Turkey in lowering interest rates, whilst the likes of the US Federal Reserve, which signalled a possible three rate hike this year, and last month, the Bank of England which raised interest rates for the first time in three years. However, there are concerns that the country’s future growth could be stymied by the government’s crackdown on some of its major businesses, the well-publicised liquidity and debt problems of its mega property developers, (that account for 25% of China’s GDP), and the recent spread of the Omicron variant.

Consequently, shares on Hong Kong’s benchmark Hang Seng index traded 3.4% higher on Thursday, despite the worries around China’s economic slowdown and recent Omicron outbreaks. Share prices of Hong Kong-listed Chinese property developers rose sharply, reversing some of the losses they have seen in recent months, and despite major Chinese property firms, like crisis-hit Evergrande, up 4.6% on the day, struggling to make debt repayments. Sunac China closed 15.2% higher, while Shimao Group and Logan Group both posted gains of over 10%, amid reports that Chinese regulators may ease restrictions on their access to pre-sale funds.

Savills announced that it recorded total sales of US$ 2.7 billion for 522 London homes valued at US$ 6.8 million or more last year – its highest number since 2013 – as the wealthy went looking to upsize their residences, as the pandemic continued; 31.2% of the total sales occurred in Q4 – the strongest ever quarter for houses valued at more than US$ 13.6 million. Although more than 50% of sales took place in the well-heeled London boroughs of Kensington, Chelsea, Belgravia, Notting Hill and Knightsbridge, demand for locations outside the city, in Wimbledon, Battersea, East Sheen and Wandsworth, also headed north. Prices will remain strong even though demand will soften because of the shortage in suitable supply.

At last, US and UK have begun formal negotiations on UK steel and aluminium exports, after the former Trump administration levied a 25% duty on steel and 15% tax on foreign aluminium in 2018. Following a virtual meeting between the UK Secretary of State for International Trade, Anne-Marie Trevelyan, and United States Secretary of Commerce, Gina Raimondo, a statement noted that “both parties are committed to working towards an expeditious outcome that ensures the viability of steel and aluminium industries in both markets against the continuing shared challenge of global excess capacity and strengthens their democratic alliance”. The Biden administration was quick to reach a deal to remove border taxes on European metals shipments last year, whilst the UK exporters were left to face these taxes. The UK steel lobby welcomed the news, noting that the existing tariffs had reduced UK exports by nearly 50%. UK steel companies are also desperately keen to get the 25% tariffs on their exports removed as soon as possible, as it puts them at a significant competitive disadvantage, compared to their EU counterparts.

Driven by the rapid spread of the Omicron variant, UK retail sales, of which over 25% were online, declined 3.7% last month, after a 1.0% rise in November. The good news was that despite the fall in December figures, they are still well up on pre-Covid figures of almost two years ago. The main falls were fuel sales dropping 4.7%, and non-food stores 7.1% in December, on the previous month, and were 6.6% lower compared to the pre-pandemic level. UK sales could recoup previous deficits possibly in Q4, as government continues to lift restrictions. The 3.8% increases in average earnings in the quarter ending 30 November have been erased by the 5.4% jump in in inflation.

With job vacancies surging to a record 1.25 million in December, UK’s unemployment rate dipped to 4.1% in the quarter ending 30 November – its lowest level since the onset of Covid – whilst the number of people on company payrolls rose by 184k in the month. Jumping on the bandwagon, future prime minister Rishi Sunak noted that the latest figures were “proof that the jobs market is thriving, with employee numbers rising to record levels, and redundancy notifications at their lowest levels since 2006.” In December, the improvement was more marked, when in September, the last month of the government’s furlough scheme, it was supporting more than a million workers.  These figures indicate that, despite the current spate of Omicron, the economy will continue its upward trend and that the main problem facing the BoE will be to rein in inflation which will be over 6% come the end of Q1; the next rate increase could be as early as 03 February.

Although wage growth is the real conundrum facing regulators, because of the soaring inflation rates, wages actually fell in November for the first time since July 2020. Although that month saw quarterly wages 4.2% higher on the year, fast-rising inflation is eroding the benefit of higher pay, with pay excluding bonuses flat in inflation-adjusted terms. Surging wage growth and a booming jobs market this month may nudge the BoE to increase rates again in February for the same reason why rates were moved higher last month.

Even though UK prices have risen at their fastest rate since March 1992, it is inevitable that there is worse to come. Surging energy and food costs are the main drivers behind the current crisis that has seen the December inflation rate top 5.4%. Energy costs have been kept in some sort of check by a government price cap; when this is lifted, in April, there are some forecasting energy costs surging by up to 50%. With limited cash available, an increasing number of UK households are having to choose between “heating or eating”. In an environment, where real wages are declining, factors such as Universal Credit top-up withdrawal, food inflation and April tax rises, will only make matters worse. One immediate solution would be for the BoE, still sticking to its laughable 2% inflation target, to raise rates sooner than they seem to want to do.

Dr Tedros Adhanom Ghebreyesus has issued a warning to world leaders that the coronavirus pandemic “is nowhere near over”, as many believe, because the new Omicron variant is significantly milder and has eliminated the threat posed by the virus. He warned global leaders that “with the incredible growth of Omicron globally, new variants are likely to emerge, which is why tracking and assessment remain critical”. The head of the World Health Organisation noted that, over the past week, there were eighteen million new infections and that “the narrative that it is a mild disease is misleading”. On Tuesday, France posted nearly half a million new daily cases and next day, more than a record 100k new infections were posted in Germany. However, some countries are seeing case numbers starting to drop, including in the UK, Ireland and Spain, with the Johnson administration, (maybe for other political reasons0, confident enough to lift all coronavirus restrictions on Wednesday. Maybe It’s Not Over ‘Til It’s Over!

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