A World Without Love                                                                     18 March 2022

For the past week, ending 18 March 2022, Dubai Land Department recorded a total of 2,400 real estate and properties transactions, with a gross value of US$ 2.53 billion. A total of 355 plots were sold for US$ 362 million, with 1,547 apartments and villas selling for US$ 807 million. The top three transfers for apartments and villas were all apartments – one was sold for US$ 101 million in Marsa Dubai, a second sold for US$ 73 million in Business Bay, and the third sold for US$ 58 million in Burj Khalifa. The top two land transactions were for a plot of land in Al Safouh First, worth US$ 49 million, and one in Al Thanayah Fourth for US$ 13 million. The most popular locations in terms of volume and value were Al Hebiah Fifth, with 244 transactions, totalling US$ 142 million, followed by Jabal Ali First with 25 sales transactions, worth US$ 24 million, and Al Merkadh, with 20 sales transactions, worth US$ 54 million. Mortgaged properties for the week totalled US$ 1.26 billion, with the highest being for land in Palm Jumeriah at US$ 86 million. 130 properties were granted between first-degree relatives worth US$ 102 million.

According to CBRE, February property prices rose in most areas of the city, as the two-month YYTD transaction volume hit a record high of 11.1k. In the month, average prices were 10.7% higher, year on year, with average villa prices 21.0% to the good and apartments 9.1% higher. Month on month, the highest price gains for villas and apartments were seen in JVC and Palm Jumeirah, 3.0% and 2.9% higher, for villas and the Green Community, Jebel Ali, DFC and Meydan City with average monthly price hikes of 3.0%, 2.8%, 2.7% and 2.7%. There are many factors that have made Dubai one of the hottest property markets in the world and they include:

• government initiatives, including residency permits for retirees and remote workers, the expansion of the ten-year golden visa
• the economic boost from Expo 2020 Dubai
• the country’s widespread successful coronavirus vaccination programme
• demand for extra space and additional amenities amid spells of working from home
• favourable packages offered by developers
• historic low interest rates
• a marked improvement in business conditions, (and consumer confidence), in the non-oil private sector

Readin data indicates that total February residential activity rose 34% a year to US$ 4.22 billion, with 6.9k units sold, driven by a triple surge in the value of off-plan sales and a 107% jump in the sale of move-in ready homes. During the month, 2.4k off-plan units, valued at US$ 1.15 billion, were sold compared with 955 homes valued at just US$ 343 million during same month in 2021.The most active areas for off-plan sales were found in Mohammed bin Rashid City, Dubailand, Dubai Marina, Business Bay and Downtown Dubai. In the month, affordable homes accounted for 48% of total residential transactions, while budget and luxury home sales made up 31% and 21% of the total mix.

The EFG Hermes report estimated that the split between villa, apartment and land sales value was 36%, 31% and 29%, and that residential sales rose 41.3% on the year to US$ 439 per sq ft across all segments. It noted that Palm Jumeirah registered the biggest increase annually, up 87.7% to US$ 2.0k per sq ft whilst, on the other side of the coin, Bur Dubai registered a 51.2% fall to US$ 355 per sq ft. When it came to rentals, the report noted that Downtown Dubai led the recovery, with International Media Production Zone, Sports City and Dubai Silicon Oasis being the worst performers in February. In the luxury market segment, total annual activity rose 156% to US$ 899 million, with the five leading locations being Palm Jumeirah, Downtown Dubai, Dubai Harbour, Dubai Creek Harbour and Jumeirah Bay Island. In the affordable property segment, the report indicated that the transaction value of cheaper homes rose 26% a year to US$ 2.02 billion, with MBR City, Dubai Marina, Business Bay, Damac Lagoons and Arabian Ranches making up the top five areas by transaction value. Dubailand accounted for 41% of the total activity in the budget property market, which grew 9% annually to US$ 1.31 billion, followed by Al Furjan, Tilal Al Ghaf, Jumeirah Village Circle and Jumeirah Golf Estates.

The federal Ministry of Economy is re-launching its 2014 National Programme for SMEs, with new services including registration for the federal government’s procurement tenders, business services from telecoms to internal audits, and easier access to funding. The enhanced programme will offer Emirati-owned SMEs over US$ 27 million in financing through the Emirates Development Bank. It has added a further twenty public and private sector entities, to its programme which are participating in the development of these initiatives and services. It is estimated that SMEs comprise 98% of the country’s total companies and some 52% of its non-oil economy. In the latest Global Entrepreneurship Index, the UAE beat the rest of the world and was ranked first. Last year, it was estimated that over 29k new commercial licences were registered for Emirati entrepreneurs. The National Programme for SMEs comprises three main initiatives – government procurement, business support and financing solutions. The funding ranges from US$ 545k for SMEs in the services sector to US$ 954k for SMEs in the industrial sector.

Binance has been granted a virtual asset licence to operate in Dubai, within the emirate’s “test-adapt-scale” virtual asset market model, and as part of the Virtual Asset Regulatory Authority initial regulatory phase. The world’s largest cryptocurrency exchange will be “permitted to extend limited exchange products and services to pre-qualified investors and professional financial service providers”. Earlier in the week, Binance, founded by Changpeng Zhao in China five years ago, had received regulatory approval from the Bahrain Central Bank to operate as a crypto-asset service provider in the kingdom. Even though it has headquartered offices, in both Seychelles and Cayman Islands, it is hoping to expand in the ME which is one of the fastest-growing global crypto markets; it is estimated in the twelve months to June 2021, the region was the beneficiary of US$ 271.7 billion worth of cryptocurrency, equating to 6.6% of global activity. Last December, Binance signed an initial agreement with the Dubai World Trade Centre Authority to develop an industry hub for global virtual assets in the emirate; the deal not only included exchange operations but also the development of a blockchain technology hub in DWTC.

Emirates has announced that Skycargo will reactivate its cargo hub in Dubai South for dedicated freighter aircraft operations from next week, after a gap of almost two years because of the pandemic – it will still also operate out of DXB. Emirates SkyCentral DXB will handle cargo arriving or departing on passenger aircraft and Emirates SkyCentral DWC will be for cargo on freighter aircraft; the latter, inaugurated in 2015, has a total cargo capacity of more than one million tonnes per annum.

At the 28^th edition of the Dubai International Boat Show 2022, which ended earlier in the week, French firm, SeaBubbles, and local solutions provider, Al Masaood Power Division, signed an MoU that could see the country become a manufacturing base for flying boats. There is every chance that X-Pearl crafts, powered by a hybrid hydrogen-electric propulsion system and retractable foils, could be on UAE waters before next year’s COP28. Both parties have agreed to pilot and assess the performance of hydrogen-powered flying boats, and to manufacture and maintain operations in the UAE; the operation will also retrofit existing boats with SeaBubbles’ sustainable powertrain system. SeaBubbles’ flying boats, able to carry up to twelve passengers, plus the pilot, and travel up 50 kph, make them versatile for a range of water mobility solutions, whilst ensuring 100% reliance on renewable energy sources. It will also be 35% more power-efficient than a regular boat, with its foils reducing wetted surface area and thus power usage. By producing minimal wake and water disturbance, it also provides a solution for eco-tourism sightseeing tours in the UAE protected areas. Virginie Seurat, Vice President of SeaBubbles, commented that “the MoU agreement marks another step forward in terms of driving hydrogen mobility in the UAE.”

Thursday proved an eventful day for 800 staff working for P&O Ferries, being told that the day was their “final day of employment”, and that they would be replaced buy cheaper agency workers. It appears that the company would be suspending services for “a week to 10 days while they locate new crew” on the Dover to Calais, Larne to Cairnryan, Dublin to Liverpool and Hull to Rotterdam routes.  The DP World-owned P&O said it was a “tough” decision, but it would “not be a viable business” without the changes and that its survival was dependent on “making swift and significant changes now”. The company commented that it had been making “a £100 million, (US$ 132 million) loss year on year”. There was no surprise to see the UK media “hanging Dubai out to dry”, in a feeding frenzy, and giving one side of the story, as seems the routine when this emirate is involved.

e& has made an offer to increase its stake in Saudi telecoms company Etihad Etisalat (Mobily) to 50% plus one share from its current 28.0% shareholding; it has made a proposed price of US$ 12.53 (47 Saudi riyals) per Mobily share through a pre-conditional partial tender offer. The UAE company, formerly known as Etisalat, is the biggest telecoms operator in the UAE, and this bid is in line with its “strategic objectives to expand and optimise its portfolio by pursuing opportunities within its existing footprint”.

This week, an e& consortium has acquired a controlling equity stake of around 57% in STARZPLAY ARABIA, with this expansion, leveraging STARZPLAY ARABIA’s reach across twenty global telcos. The investment is based on a post-money valuation of US$ 420 million, while also investing E-Vision’s existing stake and secondary investments to join the other existing shareholders, including STARZ and SEQ Investors.

As expected, DEWA will be the first of ten initial public offerings among state-linked companies aimed at reviving the DFM. The Dubai government is planning to offer a 6.5% stake in the utility, equating to 3.25 billion shares, at the end of the month, ready to go live on the local bourse next month. Shares will be offered in two tranches – to institutional investors and retail investors – from 24 March. DEWA expects to pay a minimum annual dividend of US$ 1.69 billion over the next five years, starting this October, with dividends planned twice a year, in April and October.

Emaar Properties has advised the DFM that it plans to increase its stake, by up to a further 3%, in Emaar Development, its UAE build-to-sell property business; as of 31 December 2021, the parent company held an 80% stake in Emaar Development and its subsidiaries. In November 2017, Emaar Properties raised US$ 1.31 billion from the sale of a 20% stake in its development business.

The DFM opened on Monday, 14 March 27 points (3.7%) lower on the previous week, shed 52 points (1.5%) to close on Friday 18 March, at 3,350. Emaar Properties, US$ 0.09 higher the previous fortnight, was US$ 0.03 higher at US$ 1.47. Emirates NBD, DIB and DFM started the previous week on US$ 4.06, US$ 1.63 and US$ 0.61 and closed on US$ 3.76, US$ 1.64 and US$ 0.63. On 18 March, trading was at 275 million shares, with a value of US$ 505 million, compared to 94 million shares, with a value of US$ 67 million, on 11 March 2022.

By Friday 18 March 2022, Brent, US$ 5.34 (4.6%) lower the previous week, had shed a further US$ 4.74 (4.2%), to close on US$ 107.93. Gold, US$ 102 (4.5%) higher the previous fortnight, shed US$ 73 (3.7%), to close Friday 18 March on US$ 1,919.  

After four companies had applied for the National Lottery’s next licence, the current holder, Camelot lost its bid but is named as the “reserve applicant”; it had run the National Lottery since its 1994 launch. To date, it has raised more than US$ 59 billion for 660k causes across the country. The Gambling Commission awarded Allwyn Entertainment Ltd, a UK-based subsidiary of Europe’s largest lottery operator Sazka, the lottery’s next licence, starting in 2024. Owned by Czech oil and gas tycoon Karel Komarek, Sazka has a bit of ‘Wasta’, with the likes of former members of the London 2012 Olympics organising committee, Lord Coe and entrepreneur Sir Keith Mills, sitting on its advisory board.

In its first year as a public company, Deliveroo has slipped further into the red by posting a US$ 392 million 2021 pre-tax loss, compared to a US$ 280 million deficit a year earlier. The food delivery company noted that one of the main drivers for this increase was down to marketing and technology investment as it sought to maintain momentum after being boosted by the lifting of the restrictions. However, in 2022, it forecasts an increase of up to 25% in the value of its transactions on its platform, well down on the 70% registered last year, when activity was boosted by lockdowns. Its founder, Will Shu, noted that there will be further problems in Europe, with the triple whammy of the geopolitical/economic impacts of the Ukraine crisis, inflation that is still heading north and the phasing out of government stimulus measures. It was only last March that the food delivery company debuted on the London Stock Exchange and saw its share price sink 30% on the first day, wiping out US$ 2.63 billion off its US$ 10 billion valuation. Although its share price lifted 6% in early Tuesday morning trading, it was still 44% lower YTD.

Fast-food giant McDonald’s has again defended its long-standing practice of paying hundreds of millions of dollars of royalties offshore, which reduces its local tax bill in Australia, and other global locations. McDonald’s Australia paid a service fee of US$ 600 million to related entity, McDonald’s Asia Pacific in 2020 – this helped reduce its Australian tax bill to US$ 130 million. No surprise to see the company confirming that it complies with all tax laws in the countries it operates in. It appears that McDonald’s paid its head entity a “service fee” amounting to hundreds of millions of dollars; previously the company indicated this as a royalty fee. As part of a global restructure announced in 2017, McDonald’s head entity is still registered in Delaware, but tax residency is now in the UK rather than Singapore.

Even if they wanted to close their Russian-linked operations there are some Western brands still unable to do so. It seems that the likes of M&S, (with 48 shops), Burger King (800 restaurants), Marriott (28 hotels) and Accor (57 properties) are restricted by complex franchise deals preventing them from withdrawing; they do not own the operations bearing their name, since they have all been outsourced to Russian third parties. Even if a brand managed to succeed in getting a UK court judgment against a franchise in Russia, there is no chance of a Russian court enforcing the order in the present political climate.

However, the four brands listed have taken other measures to show their displeasure at the Russian action. M&S has pledged more than US$ 2 million to support refugees and is donating 20k coats and thermals, whilst Burger King is redirecting its profits from franchised operations in Russia to humanitarian efforts. Marriott has also halted hotel developments and investments and have closed their corporate offices – which they own themselves and so have control over – in Moscow, whilst Accor has suspended all future hotel openings and has stopped services and distribution to hotels affected by sanctions.

Today, Russia’s Central Bank warned of a looming economic contraction, (that could top 8% this year), and an imminent spike in inflation, that could reach 20% by year end; earlier in the week, the inflation rate stood at a seven-year high of 12.5%. It also announced that it would keep its key interest rate at 20% and that it would start buying local OFZ government bonds. Although trading on the Moscow Exchange has been suspended since 28 February, currency trading has continued, with the rouble hitting a record low of 120 against the dollar on 06 March 6 but has since improved to today’s rate of 108.

With nearly 47%, (equating to US$ 300 billion out of a total of US$ 640 billion) of its gold and foreign currency reserves frozen, Russia will have to count on China to help it withstand the economic battering it faces because of the sanctions. It is interesting to note that the two countries have tightened co-operation in recent times and that the Olympics presented a chance for the two countries’ leaders, Vladimir Putin and Xi Jinping, to meet in Beijing on 04 February to announce a strategic partnership, aimed at countering the influence of the US, describing it as a friendship with no limits. Twenty days later, on 24 February, Russia started its invasion of Ukraine. Russia has maintained that it would be able to withstand sanctions thanks to abundant reserves and that it would be able to fulfil its state debt obligations and pay roubles to its debt holders until the state reserves are unfrozen.

To the surprise of nobody, the US Federal Reserve raised interest rates by 25 bp, to 0.5%, and signalled six more such increases this year, in a belated attempt to tackle the fastest inflation in four decades, despite increased risks to economic growth. The vote was 8-1, with St Louis Fed President James Bullard dissenting in favour of a 50 bp increase, the first vote against a decision since September 2020. Fed Chair, Jerome Powell believes that the economy will remain sturdy enough to carry out a series of rate increases, without causing a downturn; the best guesses going forward are a 1.9% rate by the end of the year, and 2.8% a year later. Without giving any details, the Fed confirmed it would start allowing its US$ 8.9 trillion balance sheet to shrink at a “coming meeting”, but it realises that it faces a fine balancing line as it tries to secure a soft landing for the economy – too slow, and inflation will run out of control, too fast could wreak havoc on the markets and push the global economy back into recession. (Following the Fed raising rates, the Central Bank of the UAE has, as usual, followed suit).

When the Russian army launched its attack against Ukraine on 24 February, food prices worldwide were already at record highs. The war is likely to push them even higher. February global food prices reached record highs, 24% higher than a year earlier, following February 4.0%, and 3.5% January month-on-month rises. These sharp rises have been attributed to a variety of factors, mainly energy and transport which continue to sky-rocket. The direct impact of Putin’s decision to invade Ukraine saw wheat prices 50% higher and other food products’ prices fast moving higher; Russia and Ukraine, once known as the breadbasket of the world, produce about 30% of global food commodities such as wheat and maize. Even Ukraine provides 16% and 12% of the world’s wheat and maize respectively. As the crisis has escalated, Ukraine has decided to ban exports of food staples, with Russia chiming in by banning exports of wheat to some neighbouring counties until the end of June. 

It seems that eurozone finance ministers have finally seen some sense by deciding, after three years of printing money, to agree to tighten fiscal policy next year. Noting that “the fundamentals of the euro area economy are strong,” they have realised that with the Ukraine crisis, soaring inflation, (almost quadruple their 2% target), rising energy prices and continuing supply chain problems, “uncertainty has increased significantly”. After three years of pumping billions into the economy, due to the coronavirus pandemic, it seems that 2023 will see EU governments reverting from a supportive fiscal stance to a neutral one, as, the economy has grown, and the member states have large debts as a result of the pandemic. The ECB has cut 2022 growth forecast by 0.5% to 3.7%, with next year’s at 2.8%, whilst it expects inflation to average 5.1% this year and fall to 2.1% in 2023.

The OECD is yet another global body that has stated the obvious – the Ukraine invasion is a major humanitarian and economic shock that is set to derail the global recovery from the Covid-19 pandemic; it also noted that it will be of “uncertain duration and magnitude”, and that it will see growth outlook decline and inflation rise. It expects that the 38-developed country bloc will see growth decline from its earlier estimate of 4.5% to 3.0%, and that its inflation forecast will be 50% higher at 7.5%. There is some concern that other global problems – climate objectives and global supply chain problems, whilst ensuring energy, food and digital security. On top of that will be the need to offer humanitarian aid to a marked increase of refugees from the various global trouble spots. We are fast becoming A World Without Love.