Don’t Dilly Dally On The Way! 09 September 2022
The 2,594 real estate and properties transactions totalled US$ 2.56 billion during the week ending 09 September 2022. The sum of transactions was 209 plots, sold for US$ 258 million, and 871 apartments and villas, selling for US$ 1.06 billion. The top two transactions were for land in Island 2, sold for US$ 13 million, and the other for US$ 7 million in Al Barsha South Third. Al Hebiah Fifth recorded the most transactions, with 73 sales transactions, worth US$ 53 million, followed by Naad Al Shiba First with 25 sales transactions, worth US$ 40 million, and Jab Ali First First, with 24 sales transactions, valued at US$ 24 million. The top three transfers for apartments and villas were all apartments, one sold for US$ 181 million in Al Wasl, another for US$ 125 million in Marsa Dubai, and the third sold for US$ 114 million in Business Bay. The sum of the amount of mortgaged properties for the week was US$ 932 million, with the highest being for an apartment in Nadd Hessa, mortgaged for US$ 545 million. 100 properties were granted between first-degree relatives worth US$ 272 million.
According to Property Finder, the Dubai August real estate market posted 9,720 total sales worth US$ 6.62 billion – the highest performing month, in terms of sales transactions volume and value, in twelve years. Compared to August 2021, both volume of transactions and values came in 37.1% and 69.6% higher. On comparisons with the previous month, and August 2021, volumes were 27.4% and 67.5% higher, as values rose 6.7% and 57.4%. The off-plan market transacted 4,392 properties worth US$ 2.32 billion. With regard to the transactional volume, the off-plan market was higher for volume and value, up 51.1% and 72.1%, and 38.5% and 76.5%, – both presenting a significant increase In terms of value. When it comes to mortgages, volumes were 15.7% higher, compared to June 2021, and 21.2% higher on the year, as rentals recorded a 10.6% rise on the monthwhereby rental contracts dipped to 9.3% on the year due to the decrease of the renewal rate by 18.9%.
Valustrat has reported that Dubai August property figures showed the slowest monthly growth, rising 1.0% to 83.1 points – still well down on the 100 base points set in January 2014. Villa prices were up 1.3%, month on month, as apartments were 0.7% higher – a sign that the bull market may have almost run its course. The residential ValuStrat Price Index for villas and apartments were both higher – 28% to 101.9 and 8.0% to 71.4.
To be developed on a 68k sq ft of land in Arjan, Danube Properties has appointed Naresco Contracting, as the main contractor for the construction of Skyz Tower, with a development value of US$ 129 million. The Mediterranean-themed high-rise residential tower is the latest in the developer’s current development portfolio, comprising 8.3k residential units, with a combined development value exceeding US$ 1.54 billion. Completion date is slated for Q3 2024. It has so far delivered almost 4.6k units, with a combined sales value of US$ 969 million.
At the end of the month, there will be the two-day Dubai Metaverse Assembly at the Museum of the Future and Emirates Towers, organised by the Dubai Future Foundation. Launched by HH Sheikh Mohammed bin Rashid Al Maktoum, the convention will host over three hundred global experts and more than forty specialised organisations – such as World Economic Forum, Meta, Mastercard, Emirates Airlines, and Accenture – discussing, exploring and shaping the future of the metaverse. The two main aims of the assembly are to leverage metaverse technologies and improve global readiness for the metaverse across key sectors.
It is reported that a new urban technology district – Dubai Urban Tech District – has been unveiled that is expected to create 4k jobs in green urban technology, education and training. Located on the Creekside of Al Jaddaf district, it will cover 140k sq mt of built-up area. The mastermind behind this new concept is UBR, whose founder and chief executive, Baharash Bagherian, noted that “Dubai is best positioned to lead the urban tech transformation than any other city in the world,” and that it will become the world’s largest urban tech district, The project is estimated to commence by 2024 and will be completed over the ensuing six years in two phases. UBR is involved in several international projects including Xzero City in Kuwait, (a sustainable net zero city for 100k residents), Alnana Smart City in Riyadh – housing 44k people – and Nexgen Sustainable City in Egypt, with a population of 35k across 580 hectares.
Launched last February, the Dubai Can initiative has witnessed a reduction, equivalent to more than 3.5 million 500 ml single-use plastic water bottles. over the past six months, during which time, it has overseen the installation of forty-six fountains at public parks, beaches and tourist attractions. The sustainability movement has extended its reach,encouraging the population to purchase refillable bottles for use at the fountains and in their homes and hotels. The momentum for sustainability change is speeding up, with the latest being a ban on all single-use plastic bags, as from 01 June.
Emirates has decided to invest US$ 350 million in the new Thales’ AVANT Up system for its next-generation inflight entertainment solutions. Its introduction, to its new fleet of fifty Airbus A350s, with delivery starting in 2024, will maintain the airline’s position as probably offering the best in the sky. Ever since it became the first airline to put personal screens onto every single seat, thirty years ago, it has remained the best in class when it comes to in inflight entertainment content and experience; since 2008, it has always won best-in-the-sky awards and with this spend will continue to lead the field for many years to come.
On 17 September, the RTA has arranged an auction for some ninety premium car number plates, including two, three, four and five-digit plates, highlighted by Super Plates AA 13 and U 70. Registration of bidders starts next Monday, with each bidder requiring a Dubai traffic file, a US$ 6.8k security deposit cheque and a non-refundable auction fee of US$ 33.
UAE and Israel H1 trade surged 117%, on the year, with the Israeli Ambassador to the UAE, predicting that the UAE will be among Israel’s top ten trading partners within three years. Speaking on the second anniversary of the Abraham Accords, he noted that in the seven months to July, bilateral trade at US$ 1.2 billion had already surpassed the whole of 2021 returns to the tune of $1.4 billion. He also reported that the Comprehensive Economic Partnership Agreement, signed between the two countries on May 31, 2022, after six-month long negotiations, was the “fastest negotiations Israel did” for any similar free trade agreement with other countries. Estimates expect the UAE-Israel CEPA to advance bilateral trade beyond US$ 10 billion, within five years, and add $1.9 billion to the UAE’s GDP, with total UAE exports up 0.5% by 2030.
The DIFC reported that the number of new companies in H1 rose 11.0%, 537 businesses, on the year, to just over 4k. DIFC is currently home to seventeen of the top twenty global banks, twenty-five of the world’s top thirty global systemically important banks, five of the top ten insurance companies, five of the top ten asset managers and a number of leading global law and consulting firms. Dubai is now considered a leading global hub for financial institutions, Fintechs and innovation firms, which is in tandem with DIFC’s Strategy 2030; according to the latest Global Financial Centres Index ranking, DIFC is the largest financial centre in the MEA and the 19th biggest worldwide. Dubai’s Deputy Prime Minister, Sheikh Maktoum bin Mohammed commented, “DIFC has created a strong platform for financial companies across the spectrum including global majors, regional players and promising entrepreneurial ventures to innovate, scale their business and add value to the economy,”
August’s UAE PMI continued to trend higher, reaching a 38-month high of 56.7 – a sure indicator that the recent upturn in the non-oil sector, is more than a mirage to signal a vibrant upturn in business conditions in the non-oil sector. The main drivers behind the impressive monthly return were lower fuel prices and growing demand, despite global nervousness related to concerns about a looming global recession. Purchasing growth topped a seven-year high, as lower fuel prices helped reduce companies’ expenses, whilst stimulating price drops for other items. Sales growth picked up even further, supported by additional efforts to provide discounts to clients. Total new orders rose at the quickest pace in ten months, driven by improving client demand, higher exports, and a broad recovery in economic conditions since the pandemic. The canary in the coal mine was that confidence for 2023 was at its lowest level in seventeen months, with the growing concern of a global recession as early as the end of Q4.
Latest figures from the Central Bank noted that last year, the UAE economy grew 3.8% and forecast growth at 5.4% and 4.2% over the subsequent years; the IMF and Emirates NBD project 2022 economic growth at 4.2% and 5.7%. Meanwhile the country’s hospitality sector is fast recovering from the impact of the pandemic, as occupancy rates are expected to top 75% in the coming months and to benefit greatly from a surge in numbers because of the FIFA World Cup Qatar 2022.
DEWA posted that it had received four proposals relating to a consultancy contract for the sixth phase of the Mohammed bin Rashid Al Maktoum Solar Park., with a production capacity of 900 MW ,which will bring the project’s total capacity to 5k MW by 2030. The largest single-site solar park in the world is part of the emirate’s strategy to use clean energy sources to meet all of its power requirements by 2050. It is estimated that clean energy accounts for 11.5% of Dubai’s clean energy production which will increase to 14.0% by the end of the year; its current capacity stands at over 1.6k MW.
With four months of the year remaining, Dubai Duty Free YTD sales more than doubled to US$ 1.06 billion, already surpassing last year’s full total; it has every chance of beating its full-year US$ 1.6 billion sales target. For the whole of 2021, total transactions and units sold topped nine million and twenty-six million – to date, the figures show ten million and 29.3 million. It is estimated that DDF’s business has risen to 80% of pre-pandemic levels, whilst staff numbers at 4.4k, boosted by the recall of 2k laid-off workers, are slowly reaching 2019 figures. The top five ‘value’ performers remained perfumes, liquors, gold, tobacco and electronics at US$ 186 million, US$ 168 million, US$ 106 million, US$ 98 million and US$ 81 million. Online sales at US$ 29 million accounted for 3.0% of total sales.
The RTA posted that there are over 1.3k car rental companies in Dubai at the end of H1 – up 23.7% from a year earlier, whilst the number of rental vehicles rose 11.8% to 78k over the same period. In the first six months of the year, the RTA introduced six new initiatives that included exempting new vehicles from testing, limiting the number to ten vehicles per car rental license, extending the lifetime of vehicles in use from two to four years, and abolishing the surcharge on car rental vehicles.
As expected, Salik Company, announced that one billion five hundred million shares ,each with a nominal value of AED0.01 will be made available in a DFM IPO, representing 20% of its total issued share capital. Dubai’s exclusive toll gate operator posted that there will be three tranches – Individual Subscribers, Professional Investors and Eligible Employees. The subscription period will be open from 13 September 2022 and is expected to close on 20 September for UAE Retail Investors and a day later for Qualified Investors. Two entities – Emirates Investment Authority and Pensions and Social Security Fund of Local Military Personnel – will each have 5% of the IPO reserved. The share capital of the Company has been set at AED75 million, divided into seven billion, five hundred million paid-in-full. Shares. Dividends are expected biannually and Salik expects to pay out 100% of the net profit, after deduction of statutory reserve.
The DFM opened on Monday, 05 September, 69 points (4.4%) lower on the previous week, shed 33 points (1.0%), on Friday 09 September, at 3,361. Emaar Properties, US$ 0.21 higher the previous four weeks, shed US$ 0.03 to close the week on US$ 1.65. Dewa, Emirates NBD, DIB and DFM started the previous week on US$ 0.70 US$ 3.53, US$ 1.58 and US$ 0.47 and closed on US$ 0.70, US$ 3.50, US$ 1.58 and US$ 0.45. On 09 September, trading was at 61 million shares, with a value of US$ 45 million, compared to 71 million shares, with a value of US$ 54 million, on 02 September 2022.
By Friday 09 September 2022, Brent, US$ 7.36 (5.3%) lower the previous week, dipped US$ 0.60, to close on US$ 92.84 Gold, US$ 87 (3.2%) lower the previous fortnight, nudged US$ 5 (0.3%) higher, to close Friday 09 September, on US$ 1,728.
There were encouraging numbers emanating from Iata’s latest passenger data for July, showing that ME carriers recorded a 193.1% jump in revenue passenger kilometres, on the year, while globally the traffic growth was 58.8%, or at 74.6% of pre-Covid levels. ME passenger capacity and load capacity both came in higher on the year at 84.1% and 82.0%. Domestic traffic was 4.1% higher, compared to July 2021, and at 86.9% of the July 2019 level, as international travel was 150.6% higher, compared to a year earlier and at 67.9% of the July 2019 return. Meanwhile, global air cargo market demand neared pre-pandemic levels, at just under 3.5%, but was 9.7% lower on the year levels. ME carriers posted a 10.9% decrease on the year. Although the war in the Ukraine has impacted on cargo capacity, global goods trade continued to recover in Q2 and the additional easing of Covid-19 restrictions in China will further boost recovery in the coming months.
As UNCTAD readies itself for this week’s second Illicit Trade Forum, it has released some harrowing facts, as the world loses more than US$ 2 trillion annually due to illicit trade. This sees mainly the poorer countries losing the true value of their resources, which, in turn, impedes their future development. The UN body defines illicit trade as the transaction of any goods that fail to comply with legislative and regulatory frameworks, including in the ways in which they are produced, transported, certified or sold. Examples include trade in endangered species and falsified medicines, illicit financial flows related to drug trafficking, terrorist financing, trade misinvoicing and aggressive tax avoidance. Nations suffering from this growing trend are hit by a double whammy of cutting out legitimate economic activity and depriving governments of much-needed fiscal revenues. It is estimated that in Africa alone, the average value of customs seizures of counterfeit and stolen medicines grew by 5% in 2020; in 2021, more than twelve million illicit health products were seized. The worrying statistic is that up to 169k children may die from pneumonia every year, after receiving counterfeit drugs, and 116k may die from taking fake anti-malarial medication.
The cryptocurrency market has tanked recently, with the sector’s valuation, dipping US$ below 1.15 trillion (GBP 1.0 trillion). Bitcoin has shed more than 6% this week and was trading at US$ 18.8k, but by the end of today’s trading was at US$ 21.3k, driven by surging real interest rates – seen as the true cost of borrowing. In June, it was trading at its year low of US$ 17.6k.
Aston Martin has announced a US$ 660 million rights issue, backed by the likes of Saudi Arabia’s Public Investment Fund, Mercedes-Benz and the Yew Tree Consortium. It will issue 23.3 million new shares to PIF, at US$ 3.86 a share, giving it a 17% stake in the luxury car maker. The money raised will be used to “repay existing debt, strengthen financial resilience and improve its cash flow generation by reducing its interest costs”. YTD, its share price has tanked – down by around 65% – and it shed more than 6% on Monday.
The recent release of the 2021 Australian Census data revealed a shocking “one million homes were unoccupied”, at a time when Australia, and many other developed countries, have reported a marked housing shortage. On the surface, an extra one million homes to the country’s residential portfolio would make a big difference for the homeless, ease the rental affordability and help first-time buyers. There are the inevitable rumours that some of the major reasons behind this include overseas millionaires buying up housing, (and leaving it as an empty investment), Airbnb becoming more popular or cashed-up Gen-Xers double-consuming by living in one house while renovating another. Although they have an impact on why there are 1.04k residences, it is relatively negligible, with latest statistics noting that at the previous census in 2016, almost 11% of private dwelling stock was classified as unoccupied, with the latest figure at under 10%. A major cause behind the conundrum is that the Australian Bureau of Statistics defines occupancy “is determined by the returned census form”; if a form was not returned, and the ABS had no further information, the dwelling is often deemed to be unoccupied. 647k dwellings were sold last year, and at one time, they would be empty awaiting transfer and the final sales process. Another reason is that latest estimates indicate that two million Australians own one or more properties, other than their own home. It is estimated over 346k of these properties may be listed on Airbnb; with the census taking place mid-winter – 10 August 2021 – many holiday homes would have been unoccupied. The Australian property sector illustrates Benjamin’s famous quote, ‘there are three types of lies – lies, damn lies and statistics.
Driven by higher food prices, Egypt reported a further rise in inflation, which climbed to 14.6% last month, bringing President Abdel Fattah El Sisi under the spotlight and criticism for his handling of the economy. Inflation in urban areas climbed 14.6% – the highest level in four years. Yesterday, the President warned against what he called a campaign by unnamed parties to cast doubt on the government’s handling of the economy and ordered Prime Minister Mustafa Madbouly to organise an economic conference by the end of the month to discuss the country’s economic problems. It was reported that food and beverage costs, which make up the largest single component of the inflation basket, jumped 23.1% on a monthly basis. Following the appointment of Hassan Abdalla, as governor of the Central Bank on 18 August, the Egyptian pound has been allowed to weaken against the greenback by less than EGP 0.01, (US$ 0.0005) on a daily basis. There is a feeling that the overvalued Egyptian currency will continue its slow but definite decline so as to secure a much-needed IMF loan after the country lost US$ 20 billion, following the Russian Invasion of Ukraine; at times of any crisis, the emerging markets are usually the first to suffer in times of economic uncertainty.
In 2014, it was ranked tenth, (accounting for 2.6% of global GDP), and over the past eight years, there has seen a structural seismic shift, as India now becomes the fifth largest economy, at 3.5%, overtaking the UK. By 2029, it could surpass both Germany and Japan to become the third biggest global economy. In Q1, the country posted a 13.5% growth and is destined to be the fastest growing economy – at an estimated 7.5% – in the world by the end of December. The Indian economy could also benefit by an apparent Chinese slowdown in terms of new investment intentions. For example, Apple has just moved part production of its flagship iPhone 14 model for worldwide shipping from India, and this could result in other conglomerates following suit.
Germany has announced a US$ 65 billion relief package – including one-off payments to the most vulnerable, caps on energy bills and tax breaks to some 9k energy-intensive businesses, (receiving some US$ 1.7 billion) – to ameliorate the surging energy prices arising from Russia continuing to reduce supplies to Europe. This third relief package, the largest to date, brings the total spend on relief from the energy crisis to almost US$ 100 billion – about a third of the Covid total package. The Ukraine President, Volodymyr Zelensky spoke about Russia trying to destroy the normal life of every European citizen said that it was preparing a “decisive energy attack on all Europeans”, and only unity among European countries would offer protection. Meanwhile EU officials have warned of an upcoming crunch point when countries start to feel acute economic pain while also still being asked to help the Ukrainian military and humanitarian effort; small signs of disconnect have already been seen in several European capitals. German Chancellor, Olaf Scholz, confirmed that an energy company windfall tax will be used to boost flagging public revenue. Over the weekend, Sweden and Finland also announced multi-billion dollar packages to support energy companies.
Royal Mail workers have been on strike over the past two days, and have voted to walk out again on 30 September and 01 October in a dispute over pay and conditions. The Communication Workers Union noted that its 115k members did not support an “imposed” 2% pay rise, although the Royal Mail says the union rejected an offer worth up to 5.5%. The company, that claims that it is losing US$ 1.15 million (GBP 1 million) a day, posted a US$ 466 million in the year ending 31 March 2021. A range of workers, including Openreach engineers, BT call centre staff, railway workers and barristers, have walked out in recent weeks, as remunerations fall further behind the soaring inflation of about 10%.
After unveiling its US$ 50 billion plan to build up the local semiconductor industry, the Biden administration has advised US tech companies that if they receive federal funding, they will be barred from building “advanced technology” facilities in China for ten years. The US Commerce Secretary, Gina Raimondo, commented that “we’re going to be implementing the guardrails to ensure those who receive CHIPS funds cannot compromise national security… they’re not allowed to use this money to invest in China, they can’t develop leading-edge technologies in China…. for a period of ten years.” It is interesting to know that the US currently produces roughly 10% of the global supply of semiconductors, compared to 40% in 1990.
Monday early trading saw the Dutch month-ahead wholesale gas price, a benchmark for Europe, 30% higher, whilst UK prices jumped even more, by 35%, before settling at just under US$ 5.75 per therm. On the same day, Russia confirmed that it would not reopen the Nord Stream 1 pipeline, after it was shut for three days for maintenance, until sanctions are lifted.
Coincidentally, the Gazprom announcement came shortly after the G7 nations agreed to cap the price of Russian oil in support of Ukraine. There is no doubt that Russia is involved in an economic war, which it appears to be winning, but it seems to be tit for tat because of the EU sanctions.
With cost-of-living skyrocketing, and the pressure on household increasing by the day, many Europeans worry that high inflation, due to the current energy crisis, could fuel social unrest, protests, with strikes already causing concern. A YouGov poll in four countries – France, Germany, Poland and the United Kingdom – posted that 40% of those polled in France said they wanted to see a return of the Yellow Vests protest movement. 20% of the study commented that they were drawing down from their savings, with one in ten skipping meals. What stood out– as shown by the majority of those polled – was that it will not be a short crisis, with many seeing no end in sight. Unsurprisingly, the survey also showed that Europeans in the four countries had low trust in their governments’ ability to handle the crisis.
Whilst signalling further rises, the ECB belatedly lifted its key interest rates, by an unprecedented 75 bp, as it fights against surging inflation, at a half-century high. Rates are now at their highest level since 2011 and even with further rises pencilled in for the next two months, the bloc is almost certain to see double digit inflation by the end of the year along with the onset of a continental recession. The ECB raised its deposit rate to 0.75% from zero and lifted its main refinancing rate to 1.25% but it has a long way to go to return inflation to its long-standing 2.0% medium-term target which it now forecasts to occur by 2025, with expectations of it falling to 5.5% next year and 2.3% a year later. Worryingly, it has amended its growth forecast for this year and next to 3.1% and 0.9%. Many still have lost confidence in the ECB and balk at its bank’s inflation-targeting framework.
Assisted by London recording its strongest growth in six years, UK average house prices rose 0.4%, on the month, to US$ 338k; according to UK bank Halifax, there had been a 0.1% dip in July. The annual 11.5% rate of house price growth was slightly down on the previous month’s 11.8%, with London and Wales being the strongest regions for sales, as prices jumped 8.8% and 16.1%, Wales’ fastest rate in eighteen years, on the year. Mortgage rates are now at their highest in six years, after six interest-rate increases since December, with another 0.50% rise on the cards next week. The market showed its resilience in the face of the triple whammy of the cost-of-living crisis, soaring inflation and rising mortgage rates, at a time when many analysts had forecast a marked slowdown in the sector. However, what is certain is that for the rest of the year and into 2023, the market will soften, demand will decrease, and prices will head south.
As expected, new Prime Minister Liz Truss has capped a typical annual household energy bill at US$ 2.8k, (£2,500) until 2024 – a move that could cost up to US$ 173 billion (£ 150 billion)
will limit energy bill rises for all households for two years, as the new prime minister tries to prevent widespread hardship. The cap had been expected to rise to US$ 4.1k next month – and even higher in January. Meanwhile, businesses, (including public sector groups like schools and charities), will see prices only capped for six months, whilst energy firms will be compensated for the difference between the wholesale price for gas and electricity they pay and the amount they can charge customers. Some will criticise the move for its “scattergun” approach and that the new measures are not targeted to the sections that require the assistance more urgently and will be in fuel poverty if they do not receive added help. Experts and charities have been warning for some time that lives would be at risk if financial help was not forthcoming without help, as people will still struggle to afford basic day-to-day living costs. In addition, the government will:
- scrap green levies
- continue with a previously announced US$ 463 (£400) energy bills discount for all households.
- launch a new oil and gas licensing round to boost production in the North Sea
- try to negotiate lower-priced long-term contracts with renewable and nuclear power companies
- with the BoE, introduce a plan to provide emergency support to struggling UK energy firms
- lift the ban on fracking
Downing Street estimates that these changes to the price cap would boost economic growth and curb inflation by as much as 5%, and that the inevitable recession will not be as steep as it would have been. However, if the UK demand is greater than the current supply pipeline this winter, then the Truss administration may have to follow France’s latest move by the introduction of rationing.
Both the EC President, Charles Michel, and Belgian Prime Minister, Alexander De Croo, have reproached the EU’s tardy response to the worsening energy crisis. This blog has often been critical on the apparent laissez-faire of the bloc’s administration, with regard to their marked unhurried approach to rate hikes and a dilatory reaction to soaring electricity bills. In short, if this approach continues, there will be widespread industrial paralysis and insolvency, as businesses and consumers buckle under the financial strain. For some time, the European Commission president by Ursula von der Leyen, has been promising to unveil a proposal to tackle the crisis, and although no policy has yet been finalised, it seems that it will include a price cap on the excess revenues obtained by non-gas producers (renewables, nuclear, coal) and a plan to gradually cut down electricity demand. The message to the EC is Don’t Dilly Dally On The Way!