Forgive Them Father!                                                                        15 April 2022

For the past week, ending 15 April 2022, Dubai Land Department recorded a total of 1,968 real estate and properties transactions, with a gross value of US$ 2.13 billion. A total of 246 plots were sold for US$ 406 million, with 1,312 apartments and villas selling for US$ 807 million. A total of 66 land plots and 264 apartments and villas were mortgaged for US$ 292 million and US$ 490 million respectively. Eighty properties were granted between first-degree relatives, worth US$ 136 million.

Dubai recorded its strongest ever Q1 in terms of residential transactions, at 19k, with the total volume of deals reaching 7.9k in March 2022, up 83.4% from a year earlier. Of that total, off-plan sales increased by 94.6% and secondary market sales by 76.1% in the quarter. Prices continue to head north but seem to be growing at a slower rate, ahead of the inevitable rate hikes and a further tightening of payment plans. Dubai’s residential market has yet to see this impact on transactional activity.

One interesting feature is that rents, that seem to have lagged somewhat behind the marked increase in prices, seem to have started catching up; in Q4, average apartment rents in Dubai rose by 4.0% – the steepest increase since 2014. Average annual rents in the twelve months to March 2022 have increased by 13.1%, with average apartment and villa rents increasing by 11.7% and 22.5% respectively, with rents at US$ 21.8k and US$ 65.0k. The latest data from CBRE also notes that March average prices were 11.3% higher on the year – both villa and apartment up 20.2% and 10.0%, with prices per sq ft at US$ 345 and US$ 305; based on this, the consultancy indicates that current prices are 26.2% and 12.3% lower than late 2014 record highs. Palm Jumeirah recorded both the highest average annual rents for apartments – at US$ 54k – and the villas segment of the sales market, at US$ 793 per sq ft. Downtown Dubai recorded the highest apartment average sales rate per square foot at US$ 551, with Al Barari the highest for rents at US$ 219k.

Month on month, March prices for apartments in the thirty-three locations surveyed rose in twenty-one areas, with the biggest rises noted in Green Community (4.9%), Dubai Sports City (4.3%), Arjan (4.2%), Jebel Ali (4.2%), Remraam (4.0%), Business Bay (3.9%), Downtown (3.0%) and Palm Jumeirah (3.0%).  The worst performing were Liwan (-2.9%), Dubai Silicon Oasis (-2.6%), Dubai Production City (2.5%), Dubai Science Park (-1.9%) and Discovery Gardens (-1.6%). Thirty locations for villas saw March price increases in twenty areas, with the six biggest seen in Palm Jumeirah (4.8%), Jumeirah (4.8%), District One (3.8%), Jumeirah Islands (2.9%), Jumeirah Golf Estates (2.9%) and The Meadows (2.7%). The biggest monthly losers were Al Barari (-2.6%), Jumeirah Village Triangle (-2.5%), Jumeirah Park (-2.0%), Victory Heights (-2.0%), Green Community (-1.9%) and The Springs (-1.8%).

Official data indicates that the number of residential units in Dubai, at the end of 2015, stood at 508k and had grown by 245k (48.2%) in the ensuing six years to end 2021 on 753k. Over that period, the population expanded by 960k (38.9%) to 3.43 million. If that trend were to continue – and the probability is that this is on the conservative side – 344k additional residential units will be added to make the total of Dubai residences to 1.087 million, whilst the population by the end of 2027 could be 4.76 million.

Two points to note is that the population expansion stalled in 2020, because of Covid, growing by just 0.4% from 3.19 million to 3.32 million in that year, whilst the number of residential units rose 38k (5.6%) to 712k, (581k apartments and 131k villas/townhouses). Last year, a probable 41k units, (5.8% higher), were added to the emirate’s portfolio, whilst the emirate welcomed only 110k (3.3%) new net residents. There have been reports that the current high property prices could be 20% down on 2015. This should be taken with a pinch of salt because this blog believes that current prices – on a like for like basis – are markedly higher. Since 2015, there has been an almost 50% hike in property numbers so these units did not exist six years ago. Furthermore, it is more than likely that the size of new units have become smaller, so distorting any direct comparison between the two periods.

Since the beginning of March, Azizi Developments announced that it had sold 50% of phase 1 of its three building Park Avenue project in MBR City, and that it would release the remaining, and previously unseen, units in the coming weeks. The development comprises 372 residential and 29 retail units, with each of the three buildings having its own fully equipped gym and swimming pool. Work on all three towers is progressing well, with the structure work on Park Avenue l, ll and lll 66%, 77% and 79% complete.

Hotel occupancy in Dubai reached a 15-year high last month, last recorded in March 2007, on the back of Expo 2020, reporting 91.7% occupancy, driven by the final weeks of Expo 2020, which had attracted over twenty-four million visits over the six months ending 31 March 2022. It must be remembered that in 2007 the emirate’s room portfolio was 80k lower. The latest STR figures confirmed average daily rates hit US$ 243 and revenue per available room at US$ 223, which was the highest since December 2015. Last month, there were twenty-five days when occupancy topped 90%, with 96.0% posted on 24 March. The consultancy also indicated that in January there were forty-eight – to a total of 759 – hotels and hotel establishments accounted for in Dubai.  January guest nights were 14.7% higher, compared to a year earlier, with a total of 3.04 million.

2021 witnessed DMCC’s best ever year by attracting nearly 2.5k new companies to a total of over 20k, with Q1 adding a new record, with a further 665 companies joining the world’s flagship Free Zone – its best ever since the free zone’s formation twenty years ago. This was 13.0% higher on the year and up 25% compared to the five-year average. Ahmed Bin Sulayem, Executive Chairman, noted that “looking ahead, we will keep up the momentum and go further and faster to attract the world’s most ambitious firms looking to set up and do business in Dubai.” Key markets such as India, UK, Germany and France performed stronger than the same period in previous years, whilst there was a 34% hike in new Chinese companies joining DMCC, and a 350% increase in Israeli businesses.

In Q1, the Department of Economy and Tourism noted that 24.7k new business licenses were issued, a 58.3% growth compared to the same period in 2021. The main drivers continue to be the robust fundamentals, resilience and sustainability of Dubai’s economy, investor/business confidence and Dubai’s growth potential across various sectors. The growth is in line with HH Sheikh Mohammed bin Rashid’s vision to support productivity, growth, economic diversification, sustainability and competitiveness in the emirate, as well as to build strategic economic sectors and provide high-quality services that meet the highest international standards. 57% of the new business licences issued during Q1 2022 were professional and 43% were commercial, with Bur Dubai accounting for 16.0k of the new licences and Deira’s 8.1k. With regard to legal entity, 33% of the licences were Sole Establishments, Civil Companies – 26%, and LLCs – 19%. Business registration and licensing transactions were 36% higher at just over 136k.

The Federal Tax Authority has introduced, ‘Raqeeb’, a whistle-blower programme for tax violations and evasion, which will allow the FTA to receive reports from individuals on tax dodges, tax-related fraud, and violations of tax legislation, and, in certain cases, monetary rewards may be involved.  The Authority noted that the highest confidentiality standards will be met and that whistle-blowers’ identity will not be disclosed to any party as well as providing them with full protection and immunity.

HH Sheikh Mohammed bin Rashid Al Maktoum has issued a decree subjecting public-interest entities to the regulatory supervision and control of Dubai’s Community Development Authority which will see its Director General issue a decision about the scope of the Authority’s regulatory oversight of the entities. In future, public entities will have to maintain current financial and administrative records so that they can be reviewed, when required. All government entities must cooperate with the Community Development Authority in Dubai and provide the information and documents necessary for the Authority to perform its legal duties. If any entity fails to adhere to the provisions, the DG is authorised to take appropriate action.

The Dubai Ruler also made changes to Dubai Next, the digital crowdfunding platform for young innovators which has 398 contributors and 62 campaigns approved and running, while the total number of campaigns registered to date is nearly 1.6k.  The aim of the strategy is to boost business, after government and private sectors were given the go-ahead to back crowdfunded projects. Crowdfunding has had a significant impact in ushering in a new generation of entrepreneurs in the UAE. His son, and Dubai’s Crown Prince, launched the campaign last May to attract entrepreneurs into the emirate. In Q1, campaigns have increased by 50%, while contributors have increased by 60%, with 16% of all company registrations being for crypto-related activities. Anyone, with an innovative idea or project, can create a campaign on Dubai Next and seek funds from contributors and there is no doubt that this is one avenue that Dubai can use to its advantage to draw in in a new generation of entrepreneurs.

The headline March S&P Global Dubai PMI, 1.4 higher on the month to 55.5, was at its highest level since June 2019, as the emirate’s non-oil private sector improved at a rate faster than the average in more than twelve years of the survey data. The two main positive factors in March were the last month of Expo 2020, (creating strong tourism demand.), and new orders increasing as pandemic restrictions lessened; however, new business growth was slightly weaker than the recent highs recorded at the end of 2021. Increased client demand headed north, as restrictions were lifted at the back end of the impact of the Omicron wave. Output growth, in both the travel and tourism and construction sectors, were at their highest level since June 2019, with the latter driven by a strong push among contractors to complete outstanding projects.

Emicool was formed in 2003, with a JV between Dubai Investments and Union Properties. The former took 100% ownership after paying UP US$ 126 million for their 50% stake in 2018, This week, investment firm Actis purchased a 50% stake in Dubai Investment’s wholly-owned subsidiary Emirates District Cooling at a corporate valuation of US$ 1 billion and equity valuation of US$ 653 million. Considered to be one of the largest transactions in the district cooling industry in the MENA, the new structure will help Empower in its regional expansion strategy. According to Khalid bin Kalban, chief executive of Dubai Investments, “this divestment deal [is] … a part of the company’s robust plans towards implementing a prudent approach to asset management, facilitating efficient recycling of capital to invest in future growth.” Over the next six years, the size of the Middle East’s district cooling sector is projected to grow at more than 9.0%, CAGR, (compound annual growth rate), having been valued at over the US$ 4 billion-mark last year.

Tuesday saw the debut of Dubai Electricity and Water Authority (DEWA) on the Dubai Financial Market, with a share value starting the day on US$ 0.676 (AED 2.48) and ending 15.7% higher at US$ 0.782 (AED 2.87); by Friday’s close, it was trading 16.1% higher  at US$ 0.78 (AED 2.88).The energy conglomerate’s IPO saw nine billion shares (18%) of it being issued to the public, at its initial value of US$ 2.48 which valued the entire company at US$ 33.8 billion the IPO itself, which raised US$ 6.1 billion; this made it the largest IPO in the UAE and the largest in Europe, Middle East and Africa region so far in 2022. The IPO was oversubscribed by 37 times (excluding cornerstone and strategic investors).

The DFM opened on Monday, 11 April 192 points (5.7%) up on the previous three weeks, moved 60 points (1.7%) higher to close on Friday 15 April, at 3,602. Emaar Properties, US$ 0.30 higher the previous six weeks, nudged US$ 0.1 higher to US$ 1.66. DEWA, Emirates NBD, DIB and DFM started the previous week on US$ 0.68, US$ 1.68 and US$ 0.77 and closed on US$ 0.78, 4.03, US$ 1.71 and US$ 0.71. On 15 April, trading was at 187 million shares, with a value of US$ 108 million, compared to 170 million shares, with a value of US$ 142 million, on 08 April 2022.

By Friday 15 April 2022, Brent, US$ 3.36 (3.4%) higher the previous week, was US$ 8.92 (8.7%) higher, to close on US$ 111.70. Gold, US$ 19 (1.5%) higher the previous week, gained US$ 29 (1.5%), to close Friday 15 April on US$ 1,975.

Two years ago, on 20 April 2020, oil prices tanked and moved into negative territory, with WTI futures starting the day on US$ 56 a barrel and ended at minus US$ 37. On that day, it was alleged that the twelve UK traders were responsible for 29.2% of the total volume in WTI crude oil futures. It has been claimed in a Chicago court that this group, known as the “Essex Boys”, made US$ 700 million and, associating with Vega Capital London, manipulated markets and broke antitrust laws by colluding to push the market down. Trading data shows that several of their transactions on that day, were “highly correlated,”, with between 96.2% and 99.7% moving “in the same direction at the very same time.” The suit was brought by Mish International Monetary who claimed they had lost money on that day, whilst the defendants claimed that, as independent traders, they were following “blaring” market signals. In August 2020, the judge had approved a class-action lawsuit filed against them and, with the ruling unsealed on Tuesday, rejected a motion by the traders to dismiss the case, saying it could proceed against eight of the twelve; he dismissed the case against four of the traders and against Vega Capital,  

The Airports Council International has confirmed Dubai International’s 2021 position as the world’s busiest international hub, 12.7% higher on the year, with 29.1 million passengers; as air travel demand continues to recover, rankings by the Airports Council International (ACI) show Istanbul, Amsterdam, Frankfurt and Paris makig up the top five, as, according to the ACI, “most of the recurrent busiest airports pre-Covid-19 are back at the top.” Hartsfield-Jackson Atlanta led the rankings by overall passenger traffic last year, with a 76.4% year-on-year increase in traffic to 75.7 million travellers, followed by Dallas/Fort Worth, Denver, Chicago’s O’Hare and Los Angeles, all buoyed by a massive domestic market. The world body also noted that “although we are cautious that recovery could face multiple headwinds, the momentum created by reopening plans by countries could lead to an uptick in travel in the second half of 2022.”Total global passenger numbers are estimated at almost 4.5 billion – 25% higher on the year but still 50% lower on pre-pandemic 2019. Air cargo jumped 15% In 2021, to a record 124 million metric tonnes, driven by “continued increase in demand for online consumer goods and pharmaceutical products.”

Despite Air Asia X cancelling sixty-three of the A330-900 version of the A330neo, (an upgrade of the long-established A-330 wide-body model), as well as ten smaller A321neo aircraft, Airbus still managed to pick up sales from other carriers for more than one hundred of its smaller jets. In Q1, the plane-maker delivered 142 planes – over 13% higher on the year – but confirmed that the production of the narrow-body 321neo will increase to sixty-five a month by summer, as demand for that model is booming. At the same time, it has been cleaning up its books on the A330neo orders – at the beginning of March, there were 265 on the books, now only 200 because of closer analysis of orders deemed it unlikely to come to fruition; these include 28 for Iran under a nuclear deal that collapsed in 2018. It also confirmed that it had sold a total of 253 jets in Q1 or a net total of 83 after cancellations.

In the UK, Noel Corry, a former Coca-Cola Enterprises manager has admitted taking more US$ 2.0 million in bribes in exchange for helping three favoured companies – Boulting Group, Tritec Systems, and Electron Systems – win lucrative contracts in a nine-year period to 2013. It was claimed that Corry received at least US$ 1.25 million from Boulting, (via its former contracts manager, Peter Kinsella), with the company benefitting by US$ 17 million from the bogus contracts, whilst Tritec System, (whose director was Gary Haines) and Electron Systems paid more than US$ 800k in bribes. Corry was forced to sell his family home and hand over his pension pot to repay Coca-Cola Enterprises Ltd US$ 2.2 million, when his nine-year scam was discovered.  All three were given suspended sentences of up to twenty months and ordered to do two hundred hours of voluntary work, with the companies involved being fined for failure to prevent bribery. There is nothing special for what seems to be a routine and common case of using bogus invoices or inflated prices to defraud a company. What is different in this case is that it is the first time the Met has charged and convicted a company with failure to prevent bribery.

Despite many problems, including stiff union opposition, and being grounded for three years this month, Jet Airways 2.0 is ready to fly again, probably in Q3.  At one time touted as India’s favourite airline, it is now hoping to operate proving flights using a leased Boeing 737 aircraft and expects to get the AOC (air operator’s certificate) revalidated by early May. Burdened by a huge debt in 2019, that forced its closure, the carrier is being backed by the Jalan-Kalrock consortium of promoters led by Dubai-based entrepreneur Murari Lal Jalan. In its first year, it will utilise only leased aircraft and start with domestic operations so will not use much of the wide body aircraft fleet that is left with the airline until starting international flights in 2024.

Under the guise of protecting staff from potential “retaliation”, the French beauty brand L’Occitane says it will keep its shops operating in Russia, as it continues its online sales open. Whilst many other brands, such as L’Oréal and Estee Lauder, have closed all Russian operations, the brand, which is sold at almost 3.1k global retail outlets, with 2021 sales of US$ 1.7 billion, remains open. Other international outlets, including Burger King and the hotel groups Marriott and Accor, still remain open in Russia claiming that they are unable to shut stores due to complex franchise deals preventing them from withdrawing.

A Jersey court confirmed that it had frozen US$ 7 billion worth of assets linked to Russian oligarch and former Chelsea FC owner, Roman Abramovich, who had been sanctioned by the UK earlier in the month. On Tuesday, Jersey Police searched premises, suspected to be connected to Mr Abramovich’s business activities, with the Royal Court of Jersey imposing. a “formal freezing order on 12 April, known as a saisie judiciaire, over assets understood to be valued in excess of US$ 7 billion which are suspected to be connected to Mr Abramovich and which are either located in Jersey or owned by Jersey incorporated entities.” It has been estimated that US$ 1.2 billion worth of super yachts are currently berthed in SW Turkey – outside the jurisdiction of the EU and the UK.

The last time the Bank of Canada hiked interest rates by 50bp was in May 2000, with BoC governor, Tiif Macklem commenting that “we are committed to using our policy interest rate to return inflation to target and will do so forcefully if needed.” The bank is also proposing to reintroduce quantitative tightening, by allowing Covid-related government bonds to roll off as they mature from 25 April. The money is on for another 50bp rise as early as June. The Reserve Bank of New Zealand also hiked rates by 50 bp (to 1.5%) this week, whilst the Fed is expected to deliver two back-to-back half-point interest rate increases in May and June. In comparison, Australia’s cash rate target is much lower and has been at a 0.1% record low 0.1% low November 2020, whilst it is expected that there will be no rate movement until wages rise at a much faster pace. South Korea also lifted its benchmark interest rate hike —by 25bp to 1.5% – its highest level since August 2019, with rates expected to top 2.0% by 31 December.

The latest World Bank report expects the MENA economy to grow at its fastest pace since 2016, driven by higher energy prices but bearing in mind the impact of the Ukraine crisis, continuing supply chain problems, surging inflation and the possibility of more Covid variants. The recovery will be uneven, with the main beneficiaries being the oil-producing nations and those that have a successful Covid regime in place. The Washington-based lender estimated that the GCC economies will see a 4.5% hike in GDP growth, whilst middle income oil exporters, will expand 3.0% and oil importers 2.4%. It estimates that eleven of the seventeen countries in the survey will not have recovered to pre-pandemic levels by end of 2022.

Facing its worst economic crisis in more than seventy years, since its 1948 independence from the UK, Sri Lanka said it will temporarily default on its foreign debts, with Fitch Ratings lowering its assessment, indicating “a sovereign default process has begun”, and S&P Global Ratings noting a default is now a “virtual certainty”. On Monday, it is due to make US$ 78 million of interest payments on its international sovereign bonds, as the country is beset by mass protests over major power cuts and the soaring cost of food and fuel. The finance ministry cited the impact of the pandemic and that the war in Ukraine made it “impossible” to pay its creditors, but there are many internal – and probably some dubious – factors at play.

Last month, US inflation figures hit a forty-year high, with consumer prices surging 8.5%, driven by a double-digit rise in energy prices, 32% higher on the year, after President Joe Biden banned all imports of oil and gas from Russia following the invasion of Ukraine. Food prices were 8.8% higher, partly down to both Russia and Ukraine being big exporters of widely used goods such as wheat and sunflower oil. Matters have been made even worse by the supply chain issues. Recent figures show that average hourly earnings in the US rose by 5.6% in the year to March, well below the latest 8.8% rise in the cost of living, indicating a decline in future consumer spend. On Tuesday, Russian President Vladimir Putin said that inflation and rising food and petrol prices in Western countries would start to put pressure on politicians there – he may well be right!

Following a 0.8% rise in January, UK’s GDP only nudged 0.1% higher in February, as the cost-of-living crisis took hold; with Omicron cases declining, there was growth noted in the hospitality and leisure sectors, but slowdowns in construction industries, as business confidence took a knock, driven by the cost-of-living crisis and high energy bills, making companies uneasy about deciding on significant investments. It is almost inevitable that these two factors, plus the recent tax increases, and the onset of the Ukraine war, will continue to be a drag on the UK economy in the coming months. Whilst the services sector was only 0.2% higher in the month, there was a noticeable 33.1% uptick in travel agency, tour operator and other reservation services, and 8.6% expansion in accommodation and food services.

With group sales, (excluding fuel), rising 2.5% to US$ 71.8 billion Tesco posted a more than tripling of annual profits in 2021, to US$ 2.67 billion. However, the UK’s largest supermarket chain warned of “significant uncertainties” and said performance would be affected by the investment needed to keep prices down. The company is trying to keep costs as low as possible and would keep the rise in the cost of living a “bit under the number for the overall market”. It was also aware that many of its customers’ household budgets were under severe pressure, and they would be trading down to own-label brands, switching retailers and scaling back on premium purchases.

This time last year, the BoE was still preaching their inflation target would continue at 2.0%. Twelver months later, UK inflation has risen at its fastest rate, 7.0%, since 1992, (and 0.8% higher than the 6.2% posted in February), driven by surging energy prices; average petrol prices were US$ 0.157 higher on the month. Since the end of 2021, prices have been rising faster than wage levels, as pandemic restrictions have been lifted and firms facing higher energy and shipping costs – on top of this double whammy, along comes the Russian invasion of Ukraine, pushing energy and other commodities’ prices even higher. The cost of living is expected to rise even further after the energy price cap was increased, driving up gas and electricity bills for millions, with the latest figures not including the US$ 914, (GBP 700) increase in energy bills. It is evident that nothing is getting significantly cheaper and that the cost-of-living crisis will get even worse over the next six months.

We end the week, with news of the UK Home Secretary in Rwanda, cutting a deal that will see some asylum seekers who cross the Channel to the UK being given a one-way ticket to Rwanda under new government plans. It is reported that the US$ 160 million scheme, (part of a US$ 1.8 billion plan), will focus on single men arriving on boats or lorries. In 2021, it was estimated that 28.5k illegally crossed the Channel to claim refugee status in the UK – more than triple the 2020 figure of 8.4k. Prime Minister commented that the number of people who can be relocated will be “unlimited”, and that Rwanda will have the “capacity to resettle tens of thousands of people in the years ahead”, including those who have arrived “illegally” since the start of the year. There is no doubt that Rwanda is a poor country and relies heavily on agriculture, although its service sector has shown recent growth. Latest trade figures show that it exports about US$ 1.4 billion and imports total US$ 3.1 billion. In 2019, the World Bank noted that GDP, at current prices, stood at US$ 10.36 billion, and with a population of 12.6 million, its per capita GDP is a relatively low US$ 818, compared to the UK’s US$ 40.3k.

It seems that Rwanda signed a similar deal with Israel, between 2014 and 2017, and that most of the 4k detainees involved left the country fairly soon after arrival. It is somewhat ironic that many of them then undertook the perilous journey to Europe, some of whom are understood to have fallen prey to human traffickers en route, notably in Libya. Even the UK government recently condemned Rwanda for failing to investigate human rights violations – and now just months later Boris Johnson agrees to deport thousands of asylum seekers there. The Refugee Council posted that, “far from enabling people to rebuild their lives, we know from where this has been done by other countries [that] it only results in high levels of self-harm and mental health issues and can also lead to people ending up back in the hands of people smugglers.” With Easter upon us, and the most important and oldest festival of the Christian Church Forgive Them Father!