Missed Opportunity                                                                                17 June 2022

For the past week, ending 17 June 2022, Dubai Land Department recorded a total of 2,423 real estate and properties transactions, with a gross value of US$ 1.82 billion. A total of 213 plots were sold for US$ 280 million, with 1,652 apartments/villas selling for US$ 1.04 billion. The top two transaction sales were for plots of land – one in Palm Jumeirah for US$ 15 million, and another sold for US$ 12 million in Al Barsha First. The three leading locations for sales transactions were Al Hebiah Fifth, with 75 sales worth US$ 44 million, followed by Jabal Ali First, with 37 sales transactions worth US$ 33 million, and Al Merkadh, with 30 sales transactions, worth US$ 82 million. The top three apartment sales were one sold for US$ 119 million in Marsa Dubai, another for US$ 117 million in Burj Khalifa, and third at US$ 116 million in Palm Jumeirah. The sum of mortgaged properties for the week was US$ 455 million, with the highest being for land in Al Karama, mortgaged for US$ 50 million. One hundred properties were granted between first-degree relatives worth US$ 64 million.

Posting the highest volume of transactions for the month of May in the past decade, Mo’asher noted that the emirate posted 6,652 May transactions, valued at US$ 5.01 billion. Dubai’s official sales and rental performance index showed a 51.6% increase in volume and a value growth by 66.1%, compared to May last year. The index was launched in January 2012, with the monthly index starting on 01 January that year and the base quarter being Q1 2012. The May 2022 index was at 1,296, and an index price of US$ 343.7k, with villas and apartments showing 1.338 (US$ 586.0k) and 1.368 (US$ 320.3k). Mo’asher recorded a 0.962 monthly index for rentals at an index price of US$ 141.7k, with villas and apartments showing 0.867 (US$ 36.1k) and 0.966 (US$ 13.1k). The secondary market accounted for 58.5% in terms of volume and 66.3% in terms of value, with the balance from the off-plan sector. Apartments accounted for 82.3% of total transactions, with villas/townhouses representing the 17.7% balance. On a comparison with the first five months of 2021, YTD transactions, at 34,126, were up 64.8%.

This week, Damac Properties has launched its second high-rise tower, Safa 2, at its twin-tower project near Safa Park, with the developer again teaming up with Swiss jeweller de Grisogono on the luxury project, with more than eighty floors. March saw the unveiling of Safa 1, also in partnership with de Grisogono, which the developer acquired last month for an undisclosed fee. No price deals were given. Both towers will be interlinked at the base, middle and crown by unique defining features, including a “ruby heart” at the centre and a floating pool on the 60th floor. It will also have a “Fog Forest” at the crown of the tower, featuring lush landscape and man-made fog.

The latest CBRE report shows Dubai property prices, (and transaction volumes), continuing their upward trend into May, as the emirate’s real estate market makes a strong rebound post the Covid-induced slowdown. The consultancy reported that property prices in the twelve months to May jumped 10.9% on the year, with villas up 19.8% and apartments 9.6% higher; on the month, the rises were 1.2% and 0.4% respectively, with the May volume of transactions, at 5.5k, 33% higher on the year. The five-month YTD figure of 30.9k transactions was the highest return since records started in 2009. It also noted that “price growth has also remained robust, despite the rate of growth slowing marginally from a month earlier.”

Meanwhile Allsopp & Allsopp recorded the fact that there was a 50% May dip in the ultra- prime properties coming to the market, compared to a year earlier, and that whilst demand was on the up, the supply chain remained dull. Following similar increases of 4.2%, (apartments), and 5.0% villa increases in April, last month saw similar staggering monthly growth levels on Palm Jumeirah. There were also May prices increases in Meydan City and Jumeirah Golf Estates. The highest average sales rate per sq ft for apartments and villas were at Downtown Dubai – US$ 557 per sq ft – and Palm Jumeirah at US$ 874 per sq ft. Interestingly, the average per sq ft prices for apartments, at US$ 300, and US$ 356 for villas, were still 25.9% and 9.5% lower than witnessed at the 2014 peak.

This week, Damac Properties launched its second high-rise tower, Safa 2, at its twin-tower project near Safa Park, with the developer again teaming up with Swiss jeweller de Grisogono on the luxury project, with more than eighty floors. March saw the unveiling of Safa 1, also in partnership with de Grisogono, which the developer acquired last month for an undisclosed fee. No price deals were given. Both towers will be interlinked at the base, middle and crown by unique defining features, including a “ruby heart” at the centre and a floating pool on the 60th floor. It will also have a “Fog Forest” at the crown of the tower, featuring lush landscape and man-made fog.

Good news for the country and for the local property market is a forecast in the Henley Global Citizens Report that 4k millionaires, (compared to 1.3k in 2019) will migrate to the UAE this year, surpassing the big traditional big players such as Australia, Canada, Israel, Singapore, Switzerland, UK and USA; it is set to attract the largest number of millionaires in the world in 2022.  Its HNWI migration figures only count those who have truly moved to the country and reside here for at least half of the year. It estimated that the total private wealth in the country stood at US$ 966 billion, including 92.6k millionaires, with over US$ 1 million wealth, 251 centi-millionaires with over US$ 100 million-plus wealth and 4k individuals with US$ 10 million wealth. Three drivers behind this impressive growth are the success of the recent six-month Expo, the introduction of longer-term visas and the government’s exemplary handling of the Covid protocol. Furthermore, other factors that have pushed figures higher include UAE’s low crime rates, competitive tax rates, and attractive business opportunities, not to mention the likes of world-class shopping malls and restaurants, excellent international schools, many beaches with yachting, water sports, and other leisure activities, a first-class healthcare system, renowned luxury hub, with top-end apartments and villas and its position as a regional (and global) hub.

Official data sees Dubai inflation reaching 4.6% in April, compared to 2.5% registered at the end of last year, and if this is the case, Knight Frank were right to post that the level is “relatively tame compared to the rest of the world”. In a bid to contain rising inflation, the country’s Central Bank raised its interest rates by 50 bp last month – and a further whopping 0.75% on Wednesday, in line with the Federal Reserve’s similar move. Knight Frank said it does not expect rate increases to affect the stability of the Dubai residential market, noting that YTD to May, mortgage buyers accounted for about 18% of the residential market, by value of deals, compared to about 40% last year and 52% in 2007. It estimates that at the higher end of the market, cash sales are still dominant as investors from a myriad of countries continue to pile into the emirate. The consultancy sees 2022 mainstream property price growth slowing to between 5% – 7%, with more than double that increase for prime properties.

May witnessed a 28.3% hike in the value of exports and re-exports of Dubai Chamber members to US$ 6.3 billion in May 2022 – its highest level since August 2018. YTD, members’ exports and re-exports climbed 15.8%, to US$ 28.4 billion, as more than 291k certificates of origin were issued by the Chamber – a year on year growth of 7.1%. In the first five months of 2022, Chamber member exports and re-exports to GCC markets increased by 11.1% to US$ 15.1 billion, and by 12.1% to US$ 3.4 billion, on the month, equating to 55% of the total exports and re-exports of the members in May.

At its latest meeting, the Federal National Council approved a US$ 335 million increase in the 2022 federal budget which will be covered by the federal government’s general reserves. The UAE general budget revenues for this fiscal year are estimated to increase by US$ 102 million while the general budget expenses for are estimated to increase by US$ 335 million

A survey, by the US online education company’s Global Skills Report, places the UAE the world’s leading country for business skills; the study assessed more than 100 million learners in more than one hundred countries over a twelve-month period. Coursea rated the UAE highly in several areas such as leadership and management, strategy and operations, communication, human resources and entrepreneurship., noting that the country “has been preparing for the post-oil era with a more diversified, high-skill economy,” However, it did advise education leaders to “focus on addressing gaps in technology and data science skills, which are a strategic imperative to accelerate digital transformation.”

The UAE Central Bank has fined an unnamed financial company, operating in the UAE, and ordered it reform after it had missed its deadline to submit its audited financial statements and failed to abide by their guidelines. It gave the company one month to rectify its shortcomings.

With the introduction of two new equity futures contracts on individual stocks, DEWA and GFH Financial Group, it brings the total number of companies that the DFM provides futures’ contracts on their individual stocks to twelve listed companies; all have tenures of between one and three months. This is part of the DFM’s strategy to attract more business and boost liquidity, by diversifying investment opportunities strategy. Earlier in the month, Oman crude oil futures began trading on the emirate’s stock market.

Dubai’s road toll operator Salik is now a Public Joint Stock Company, as it prepares to become the third government body entering the DFM via an IPO; this came with HH Sheikh Mohammed bin Rashid Al Maktoum approving Law No. (12) of 2022. The Salik Company, with all shares owned by the Dubai government, will have legal, financial and administrative autonomy to carry out its activities and achieve its objectives; it will have a term of ninety-nine years, with the term renewing automatically for the same period as per the company’s articles of association. The MoA states that, in case of an IPO, the government should continue to own at least 60% of the capital, and that the Executive Council of Dubai is authorised to decide the percentage of shares that can be offered for subscription either through an IPO or private placement.

The DFM opened on Monday, 13 June, 10 points (0.3%) lower on the previous week, and shed 115 points (3.4%), to close on Friday 17 June, on 3,377. Emaar Properties, US$ 0.01 lower the previous week, lost US$ 0.12 to close on US$ 1.45. Dewa, Emirates NBD, DIB and DFM started the previous week on US$ 0.71, US$ 3.69, US$ 1.60 and US$ 0.54 and closed on US$ 0.71, US$ 3.68, US$ 1.54 and US$ 0.50. On 17 June, trading was at 225 million shares, with a value of US$ 139 million, compared to 53 million shares, with a value of US$ 37 million, on 10 June 2022.

By Friday 17 June 2022, Brent, US$ 11.61 (10.5%) higher the previous four weeks, tanked and lost US$ 11.55 (9.5%) to close on US$ 110.16.  It had started the trading Friday morning on US$ 118.75 but contracted on growing concerns that the US Federal Reserve’s plans to continue with interest rate hikes could lead to an economic downturn. Gold, US$ 65 (3.6%) higher the previous four weeks, shed US$ 33 (1.8%), to close Friday 17 June, on US$ 1,842.  

Hybrid Air Vehicles has received a ten-plane order from European-based Air Nostrum Group for its ten Airlander airships for delivery from 2026. Currently operating out of an airfield in Bedfordshire, it expects to move its manufacturing base to South Yorkshire, which will create some 1.8k jobs. The airships, which could hold one hundred passengers, will use helium and electricity to stay afloat and will cut flight emissions by up to 90% for journeys across Air Nostrum’s regional routes in Spain.

At this August’s AGM, it is reported that Tesla will submit thirteen proposals, one of which is to introduce a three-for-one stock split, making Tesla more accessible for its retail investors; two years ago, the tech giant voted for a five-for-one stock split and since then its share value has climbed 43.5%. The company also noted that this “would help reset the market price of Tesla’s common stock so that its employees will have more flexibility in managing their equity”. Tesla also posted that its success has relied on attracting and retaining excellent talent, by offering outstanding benefits and highly competitive compensation packages, and that every employee is offered an option to receive equity.

The US$ 6.17 billion, (AUD 8.9 billion), takeover of troubled casino operator Crown Resorts, by the Blackstone Group, the world’s second biggest private equity firm, has been approved by the Australian Federal Court. With a 37% stake in the firm, James Packer will pick up US$ 2.33 billion (AUD 3.36 billion). The sale will mean that, with Crown Resorts becoming a private, it will no longer trade on the ASX. In recent years, the company has been beset by various scandals including being fined for illegally promoting gambling in China, (where fourteen staff were jailed), as well as several damaging inquiries which found that the casino operator enabled money laundering and had links to criminal gangs. Blackstone’s takeover paves the way for Crown’s US$ 1.52 billion, (AUD 2.2 billion) Sydney casino at Barangaroo to fully open and be able to take bets for the first time. The US firm owns the MGM Grand, Mandalay Bay and Bellagio hotels and casinos in Las Vegas, as well as Spanish company Cirsa, which operates 147 casinos in Spain, Italy and Latin America.

Cryptocurrency investors are having sleepless nights as the likes of Bitcoin sink to values last seen in December 2020; by early Tuesday trading, it was values at US$ 20,987, and closed on Friday at US$20,422, way down on the US$ 64,400 mark of last November. An early casualty of the current crisis sees major US cryptocurrency lending company Celsius Network freezing withdrawals because of “extreme market conditions” and transfers between accounts, “to stabilise liquidity and operations while we take steps to preserve and protect assets”. Only last November, it raised US$ 750 million in funding when the company was valued at the time at US$ 3.25 billion. Questions are being asked about the sustainability of crypto lending firms which have boomed in an era of low interest rates and booming crypto markets. Celsius Network posted that it had US$ 11.8 billion in assets, down by more than half from October. This week, it was reported that it was offering interest rates of up to 18.6%. Last month, the crypto industry was shaken by the collapse of the so-called stable coin terraUSD and its sister token luna, with mounting pressure on markets driven by panic, surging and seemingly unstoppable inflation and mounting interest rates. Meanwhile, cryptocurrency exchange Coinbase Global is laying off about 18% of its workforce because of the slump in prices of digital tokens and a wider stock market sell-off.

In contrast to the terms of both the Good Friday Agreement and the Brexit agreement, the Johnson administration announced that it would be overriding international law, as it claims that the protocol’s implementation has damaged trade within the United Kingdom and has threatened political stability in Northern Ireland. Initially, the agreement effectively kept Northern Ireland in the EU single market and customs union to preserve the open border with Ireland specified in the Good Friday peace agreement. The EU argue that any unilateral change could breach international law, and if this were to happen, they would launch legal action and introduce sanctions such as increased tariffs. The plan is for a “green channel” for goods moving from Britain to Northern Ireland, as well as scrapping rules that prevent the province from benefiting from tax assistance and ending the role of the European Court of Justice as sole arbiter. To add to Boris Johnson’s tribulations, many of which have been self-inflicted, the House of Representatives Speaker Nancy Pelosi has said there will be no US-UK trade deal if London scraps the protocol.

Sunday saw the big hitters in a titanic battle contending for the 2023-2027 digital and television rights for the media rights to the IPL matches. The next period will see an additional two teams to expand the IPL to a ten-team tournament. Among them were the likes of Disney (the current provider), and India’s Reliance all wanting the action from the world’s richest cricket league. There is no doubt that it will still remain a bonanza for the winning bidder, Sony Network, and remain a certainty to draw high TV ratings and growth in India’s booming online streaming space. Disney paid US$ 2.09 billion for the IPL rights from 2017-2022, and as expected the successful bid was more than double that at US$ 5.10 billion.

Covid was a godsend for the wealthier people in the world, as their fortunes soared and the world’s population of high-net-worth individuals (HNWIs) rose about 8%. The latest report by Capgemini World Wealth indicates that much of that gain is now disappearing, mainly because of the impact of soaring inflation, that could easily top 10% by the end of Q3, and rising interest rates. Now, it is reported that the five hundred wealthiest people in the world have lost a combined US$ 1.4 trillion this year, including US$ 206 billion on Monday alone, according to the Bloomberg Billionaires Index.  It estimates that the four richest people in the world – Elon Musk, Jeff Bezos, Barnard Arnault and Bill Gates – have lost a cumulative US$ 219.5 billion YTD – US$ 73.2 billion, US$ 65.3 billion, US$ 56.8 billion and US$ 24.0 billion; they are now worth US$ 197.0 billion, US$ 127.0 billion, US$ 121 billion and US$ 144.0 billion. The current crypto meltdown will inevitablysee these figures continue to head south.

The new Albanese administration has lifted the Australian minimum wage by US$ 0.73 an hour, a 5.2% increase from its $20.33 base, from 01 July, a 5.2% increase to US$ 14.82 (AUD 21.38) an hour. Workers on award rates will go up 4.6%, (a cut in real wages), with a minimum US$ 27.72 weekly increase for workers on award rates below US$ 602.72 per week. Estimates are that these latest rises will add US$ 5.48 billion (AUD 7.9 billion) in costs to the affected businesses which will obviously result in higher prices for the consumer and lower margins for businesses affected. There are some businesses that have been against the pay rise as they have to battle a combination of supply claim problems and cost pressures, but some analysts argued that the current labour market was strong enough that the pay increase would not have a “significant adverse effect” on the economy.

Last year, the Australian government angered the French when it pulled out of a US$ 36.82 billion deal to build a fleet of diesel-powered submarines, after belatedly deciding to build up to eight nuclear-powered vessels with the US and the UK in the so-called Aukus deal. (Aukus is a security pact between the three nations, allowing for a greater sharing of intelligence, and is seen as a response to the growing power of China in the region). Now the new administration, following the defeat of Scott Morrison, headed by Labour’s Anthony Albanese, has announced a US$ 585 million settlement package with France’s Naval Group, saying it was a “fair and an equitable settlement”. The new Prime Minister noted that the failed French submarine contract will have cost Australian taxpayers US$ 2.4 billion, with almost nothing to show for it.

As trade relations with China sank to historic lows in the latter years of the Liberal Coalition government, the new administration has begun tentative steps to conduct ministerial-level talks with China. The relationship deteriorated after the then government riled Xi Jinping by calling for a probe into the origins of coronavirus and banning Chinese firm Huawei from building its 5G network. Retaliation was quick and sanctions saw the introduction of trade barriers, increased duties and other measures that badly hit Australian barley, wine, lobster timber, coal and other sectors’ exports. Defence Minister Richard Marles commented that “Australia values a productive relationship with China. China is not going anywhere. And we all need to live together and, hopefully, prosper together.”

The Fed raised its interest rates by 0.75% this week – its third rate hike in three months and the biggest since 1994 – and confirmed that more rate increases are on the horizon. It comes at a time when inflation had reached a new 40-year high, at 8.6%, with its chairperson, Jerome Powell, belatedly saying that “my colleagues and I are acutely focused on returning inflation to our 2% objective.” It may be too late to stop an inevitable major downturn in financial markets and a mini global recession.

The Institute of Grocery Distribution has forecast that UK prices will soar at a rate of 15%, as households pay more for staples such as bread, meat, dairy and fruit and vegetables, leaving the people that already skip meals the most vulnerable. In line with this blog, it estimates that prices will rise faster for longer than Bank of England estimates. The body also sees the Ukraine crisis as the main driver placing the country into facing the highest cost of living pressures since the 1970s, mainly because the protagonists supply over at third of global wheat supplies as well as other grain products. On top of that, current high energy costs have also pushed food prices northwards, whilst fertiliser prices have also nearly tripled since last year.  Furthermore, as much of the foil and wood pulp normally comes from Russia, this has seen high increases in the packaging prices of those materials, as well as plastic packaging, which is made from oil, becoming more expensive. The other problem facing the UK is that it is estimated that over 67% on the Seasonal Agricultural Workers scheme come from Ukraine, and now men between 18 – 60 have to stay at home to fight.

Further dismal economic news from the UK is that regular pay is falling at the fastest rate in more than a decade with real pay, (after adjusting for inflation), and excluding bonuses, 2.2% down in the quarter to April; when bonuses are included, pay is 0.4% higher. Rishi Sunak said the latest figures showed the UK’s jobs market “remains robust”, with redundancies at an all-time low, but there is no doubt that many UK households are reeling from the triple whammy of soaring inflation, record high energy costs and increased taxes. In the three-month period to May, the number of job vacancies in the UK rose to a new record of 1.3 million, with the unemployment rate nudging slightly higher to 3.8%, and the employment rate steady at 75.6% – still lower than before the pandemic.

UK Chancellor, Rishi Sunak, has to deal with claims by the National Institute of Economic and Social Research that he failed to insure against interest rate rises, and that he could have saved billions of taxpayers’ money that has been used to pay interest on government debt. QE saw the Bank of England create US$ 1.1 trillion (GBP 895 billion) of money, with most of this being utilised to buy government bonds from pension funds and other investors. According to the think tank, Mr Sunak’s failure to act had left the country with “an enormous bill and heavy continuing exposure to interest rate risk”, and that by not taking out insurance, when the rate was at 0.1%, on the cost of servicing this debt against the risk of rising interest rates, the loss over the past year could have been as high as US$ 13.6 billion. With rates rising even further this year, this omission could cost the taxpayer hundreds of billions. Maybe an expensive case of a Missed Opportunity?