Things Can Only Get Worse!                                              02 December 2022

The 1,600 real estate and properties transactions totalled US$ 1.31 billion, during the shortened three-day week, ending 30 November 2022, because of the National Day holidays. The sum of transactions was 176 plots, sold for US$ 272 million, and 1,052 apartments and villas, selling for US$ 632 million. Jabal Ali First recorded the most transactions, with 110 sales worth US$ 78 million, followed by Al Hebiah Fifth, with fifty sales transactions, worth US$ 39 million, and Al Yufrah 2, with six sales transactions, worth US$ 2 million. The top three transfers for apartments and villas were for an apartment, valued at US$ 10 million, in Jumeirah Second, followed by one in Palm Jumeirah for US$ 10 million and in Al Barsha First for US$ 9 million. The mortgaged properties for the week reached US$ 373 million and 38 properties were granted between first-degree relatives worth US$ 31 million.

The latest Knight Frank report has indicated that Dubai’s prime residential market is set for the world’s strongest growth in 2023 among its twenty-five-city ranking. The consultancy has forecast that global growth in this sector will be just 2.0%, as Dubai is expected to expand at almost seven times this average at 13.5%; six months ago, the global prediction was 2.7%. Dubai is well ahead of the likes of Miami (5%), Los Angeles (4%) and Paris (4%). The report noted that “Dubai’s prime residential market has and continues to be a global outlier, with record price growth in 2022, albeit this has been from a low base.” The emirate continues to be one of the most “affordable” luxury residential markets in the world, with prices trailing the 2014 peak levels by a staggering 21.4%. Knight Frank also expects that 2023 will see 13.5% price hikes in Palm Jumeirah, Emirates Hills and Jumeirah Bay Island because of “prime values are being fuelled by Dubai’s safe-haven status, an exceptionally diverse range of international ultra-high-net-worth individuals in search of luxury second homes, combined of course with the government’s world-leading response to the pandemic, which has spurred business confidence.” There is also a marked shortage in the supply of new high-end homes, with just eight villas in Dubai’s prime precincts expected to be delivered by 2025, whilst the main supply of apartments will be Bulgari Lighthouse on Jumeirah Bay Island, (thirty-one apartments), and Aloago’s Palm Flower on The Palm Jumeirah, (eleven apartments). It does not take a genius to see that there is a clear demand-supply imbalance.

Orla, Dorchester Collection, Omniyat’s new development on Dubai’s Palm Jumeirah, is expected to see the developer pull in over US$ 1.36 billion (AED 5 billion) in sales revenue. The luxury developer has posted that over 60% of its eighty-six units, designed by Foster + Partners, with prices starting at US$ 6.0 million, have either been booked or sold. The Orla project will also include three sky palaces and Omniyat’s first mansion, which will sit on a dedicated beach frontage of about 50 mt which will have the Dorchester Collection service as well. Construction will start imminently and is slated for completion by H1 2026.

Emirates Airline is confident of returning to 100% capacity, and network, by the end of 2023; currently they stand at 80% and 95%. Meanwhile, the carrier is carrying out a major retrofit of the aircraft, having announced last month a massive multi-billion-dollar two-year retrofit programme with work starting on the first of 120 aircraft earmarked for a full cabin interior upgrade and the installation of the airline’s latest Premium Economy seats. It is estimated that global airlines have added over 110k seats to on Dubai route in November to accommodate the increased flow of tourists and FIFA World Cup football fans.

The Ministry of Energy always adjusts fuel prices in the UAE by the first day of every month. According to the government, the UAE liberalised fuel prices help to rationalise consumption and encourage the use of public transport in the long run and incentivise the use of alternatives. The UAE Fuel Price Committee marginally decreased December retail petrol prices:

• Super 98: US$ 0.899 – down by 0.067% on the month and up 24.51% YTD from US$ 0.722  
• Special 95: US$ 0.866 – down by 0.069% on the month and up 25.69% YTD from US$ 0.689
• Diesel: US$ 1.019– down 0.586% on the month and up 46.20% YTD from US$ 0.697
• E-plus 91: US$ 0.847 – down by 0.700% on the month

The Investment Corporation of Dubai posted marked increases in both H1 revenue and net profit – 61.0% higher, at US$ 33.0 billion, and more than ten times higher at US$ 4.03 billion – driven by improvements in all sectors. ICD, the principal investment arm of the Government of Dubai, posted increases in both its assets and liabilities to US$ 309.5 billion, attributable to a much higher level of activity overall, and US$ 241.8 billion, as borrowings and lease liabilities slightly declined. Its share of equity increased by 4.8% to US$ 54.4 billion.

The DFM opened on Monday, 28 November, 102 points (3.0%) lower on the previous fortnight, gained 19 points (0.6%) to close the shortened week, (because of the National Day holidays), on 3,324 by Wednesday 30 November. Emaar Properties, US$ 0.13 shy the previous fortnight, gained US$ 0.05 to close the week on US$ 1.66. DEWA, Emirates NBD, DIB and DFM started the previous week on US$ 0.65, US$ 3.60, US$ 1.57, and US$ 0.42 and closed on US$ 0.64, US$ 3.61, US$ 1.55 and US$ 0.44. On 30 November, trading was at 393 million shares, with a value of US$ 213 million, compared to 170 million shares, with a value of US$ 70 million, on 30 November 2022.

For the month of November, the bourse had opened on 3,332 and, having closed the month on 3324 was 8 points (0.1%) lower. Emaar traded US$ 0.01 higher from its 01 October 2022 opening figure of US$ 1.65, to close the month at US$ 1.66. Four other bellwether stocks, Dewa, Emirates NBD, DIB and DFM started the month on US$ 0.68, US$ 3.50, US$ 1.60 and US$ 0.47 and closed on 30 November on US$ 0.64, US$ 3.61, US$ 1.55 and US$ 0.44 respectively. The bourse had opened the year on 3,196 and, having closed November on 3324, was 128 points (4.0%) higher, YTD.  Emaar traded US$ 0.33 higher from its 01 January 2022 opening figure of US$ 1.33, to close at US$ 1.66. Four other bellwether stocks, Dewa, Emirates NBD, DIB and DFM started the year on US$ 0.00, US$ 3.69, US$ 1.47 and US$ 0.72 and closed on 30 November on US$ 0.64, US$ 3.61, US$ 1.55 and US$ 0.44 respectively.

By Friday, 02 December 2022, Brent, US$ 14.77 (14.4%) lower the previous three weeks, was down a further US$ 1.75 (2.0%) to close on US$ 86.77.  Gold, US$ 3 (1.2%) higher the previous week, gained US$ 56 (3.2%), to close at 1,811, on Friday O2 December.

Brent started the year on US$ 77.68 and gained US$ 9.09 (11.7%), to close 30 November on US$ 86.77. Meanwhile, the yellow metal opened January trading at US$ 1,831 and has shed US$ 38 (2.1%) during 2022, to close on US$ 1,793. For the month, Brent opened at US$ 94.83 and closed on 30 November, US$ 8.06 lower (8.5%) at US$ 86.77. Meanwhile, gold opened November on US$ 1,642 and gained US$ 151 (9.2%) to close at US$ 1,793 on 30 November.

SIngapore Airlines is in line to take a 25.1% stake in Air India, which will result in its Vistara full-service airline having a JV with Tata Sons, into India’s national carrier; SIA will invest US$ 250 million in the venture. Tata Group currently owns a 51% in Vistara, and the remaining 49 per cent shareholding is with SIA. After sixty-nine years as a government-owned enterprise, Air India and Air India Express were welcomed back into the Tata Group last January after a US$ 2.4 billion deal with the Modi government. The new set-up will see Air India becoming the country’s leading domestic and international carrier, with a combined fleet of 218 aircraft, making it India’s largest international carrier and second largest domestic carrier.

With delivering sixty-six planes last month, to bring its YTD total to 563, Airbus will probably not meet its 700-plane target, having delivered an estimated sixty-six jets in November, leaving itself a near-record challenge of 137 in December. However, it did manage to turn out a monthly record of 138 planes in pre-Covid December 2019, but this will probably not be replicated this year because of ongoing supply chain problems, which are said to continue for at least a further six months However, it was reported that eleven aircraft left the Toulouse factory on 01 December.

It is reported that Jaguar Land Rover will reduce output at the Solihull and Halewood factories, due to ongoing problems obtaining enough computer chips for new vehicles. This will impact its Jaguar F-Pace and Land Rover vehicles, whilst it will focus on more profitable models such as the Range Rover Discovery; it is estimated that there is a one-year waiting list for this US$ 120k vehicle.

In a US$ 41 million deal, Joules has been rescued from administration by retail giant Next, and founder Tom Joule, that will see about one hundred Joules stores remaining open and save 1.45k jobs; six years ago, the company was valued at US$ 162 million, when it was floated on the London Stock Exchange. The new set-up will see Next with 74% of the equity. There is no doubt that the retailer, founded in 1989, had lost its way in the sector and even when struggling spent US$ 24 million on a new head office, as well as acquiring an online furniture accessories business; Next bought the head office for US$ 9 million. However, the clothing chain has announced that nineteen stores will be closed, with immediate effect, with the loss of 133 posts. Next will continue to operate Joules’ website but will also sell Joules-branded clothing through its own e-commerce platform from 2024.

A report by the Economist Intelligence Unit, which compares the prices of more than 200 products and services in 172 global cities, ranks New York and Singapore as the world’s most expensive cities, overtaking last year’s top-placed Tel Aviv. The remaining top leading places are Hong Kong, Los Angeles, Zurich, Geneva, San Francisco, Paris, Copenhagen and Sydney.  The other end of the chart is taken by Damascus and Tripoli. A strong greenback ensured that US cities moved higher, whilst most European cities fell because of fall in the value of the euro and other local currencies. The average 8.1% price rise across the 172 cities is the strongest seen in the twenty years, driven by several factors including the war in Ukraine, supply chain problems, rising interest rates, exchange rate shifts, and the cost-of-living crisis.

The World Travel and Tourism Council has ranked Dubai, ahead of Doha and London, as the city with the highest spending by international visitors this year. The report, covering eighty-two cities, indicates that the emirate has raked in US$ 29.4 billion in international visitor spending so far this year, well ahead from its two main competitors with spends of US$ 16.8 billion and US$ 16.2 billion. It was also noted that the three cities to recover fastest from the pandemic were Doha, Orlando and Antalya, with spend increases of 21%, 19% and 15%. The study concluded that ten of the cities would have surpassed pre-pandemic levels, in term of direct travel and tourism GDP to their economies, before the end of the year. Paris, Beijing and Orlando are the three cities with the largest direct travel and tourism contribution to GDP of US$ 36 billion, Beijing (US$ 33 billion) and Orlando (US$ 31 billion)., Within a decade, it is estimated that the sector will directly generate up to 8% of all jobs, (126 million jobs), by 2032 in the cities analysed, compared to 6.6% in 2019 and 5.1% in 2020.

Last year it is reported that the EU spent on imports of cars:

• non-plug in hybrid – US$ 12.4 billion (40.5% of extra-EU imports of hybrid/electric cars)
• full electric – US$ 12.0 billion (39.2%)
• plug-in hybrid – US$ 6.2 billion (20.3%)

and earned export sales revenue of:

• non-plug-in hybrid – US$ 24.1 billion (54.5%)
• full electric – US$ 13.0 billion (29.3%)
• plug-in hybrid – US$ 7.2 billion (16.2%)

Between the years of 2017 to 2021, total extra-EU exports and imports both rose significantly by almost 800% to US$ 44.3 billion and by 400% to US$ 30.6 billion respectively

The World Bank estimates that the world’s poorest countries now owe US$ 62 billion, with a 35% year on year increase, in annual service charges to official bilateral creditors, as its president David Malpass warning that the rising cost is increasing the risk of default. Over 67% of the debt is owed to China. He is also concerned that the growing debt in advanced economies, such as the US, is drawing more capital away from developing countries, as well as the fact that when rates head north, debt service charges go up in tandem, with the knock-on impact that more money is required to service the debt and less to invest.

The International Labour Organisation is concerned that H1 global monthly wages fell 0.9% in real terms – the first time this century that negative growth has occurred. It noted that the purchasing power of middle-class families has been reduced, while low-income households have been badly impacted, placing “tens of millions of workers in a dire situation as they face increasing uncertainties”. It is obvious that if the purchasing power of the lowest paid is not maintained, any post-Covid recovery will be further delayed and the danger of social unrest increases. Their latest Global Wage Report estimated that H1 real wages declined 2.2% in the advanced G20 countries but grew by 0.8% in emerging G20 countries – down by 2.6% compared to pre-Covid. Furthermore, inflation rose at a higher rate in the developed countries compared to poorer nations, with the knock-on effect that real wages dipped. For example, in Canada and the United States, average real wage growth dropped to zero in last year, and then fell by 3.2% in H1 and by 1.4% and 1.7% in Latin America and the Caribbean. However, the comparative figures in Asia and Pacific see growth levels of 3.5% and 1.3%.

The World Bank has indicated that 2022 remittance flows to low and middle-income nations are set to rise by 5% to US$ 626 billion, including a record US$ 100 billion to India, on the year – and this despite the global macroeconomic malaise; this is less than half the 2021 growth figure of 10.2%, when such flows to poor and middle-income countries grew to US$ 589 billion.  Location-wise the remittances grew 9.5% in in Latin America and the Caribbean, 3.5% in South Asia, 2.5% in the MENA region, to US$ 63 billion, and 0.7% in East Asia and the Pacific.  The study noted that the five most common remittance destinations were India, China, Mexico, the Philippines and Egypt, and that “migrants help to ease tight labour markets in host countries, while supporting their families through remittances”. The global average cost of sending US$ 200 remained high at 6.0% in Q2 2022.

The International Labour Organisation is concerned that H1 global monthly wages fell 0.9% in real terms – the first time this century that negative growth has occurred. It noted that the purchasing power of middle-class families had been reduced, while low-income households have been badly impacted, placing “tens of millions of workers in a dire situation as they face increasing uncertainties”. It is obvious that if the purchasing power of the lowest paid is not maintained, any post-Covid recovery will be further delayed and the danger of social unrest increases. Their latest Global Wage Report estimated that H1 real wages declined 2.2% in the advanced G20 countries but grew by 0.8% in emerging G20 countries – down by 2.6% compared to pre-Covid. Furthermore, inflation rose at a higher rate in the developed countries compared to poorer nations, with the knock-on effect that real wages dipped. For example, in Canada and the United States, average real wage growth dropped to zero in last year, and then fell and by 3.2% in H1 and by 1.4% and 1.7% in Latin America and the Caribbean. However, the comparative figures in Asia and Pacific see growth levels of 3.5% and 1.3%.

Recording the biggest drop since June 2020, the average UK house price fell by 1.4% in November,  with the annual price growth slowing to  4.4%, compared to 7.2% a month earlier in October; the average UK house is now at US$ 320k.The sector is still recovering from the financial debacle of the Liz Truss mini-budget which spooked markets and which still sees new mortgages remaining elevated, with  the market having lost a significant degree of momentum. Four factors that, despite the imminent recession, may see the housing sector keeping its head above water are that borrowing costs have fallen back in recent weeks, lack of supply, unemployment levels are at a near-fifty year low and that household balance sheets remain in good shape, with significant protection from higher borrowing costs, as about 85% of mortgage balances are on fixed interest rates. Knight Frank expect average house prices to be 10% lower two years from now, but others argue that this figure could come in higher.

US October jobs growth remained strong, with a further 263k jobs added, while wages climbed sharply, as the average hourly pay rose 5.1% on the twelve months; the unemployment rate remained at 3.7%. These figures surprised the market, at a time when the Federal Reserve is making concerted efforts to slow the economy and stabilise prices by raising interest rates, which many had thought would weaken the country’s job creation growth. Wages are not rising as fast as price, with November Inflation hitting 7.7% and though the rate has eased since June’s 9.1%, it still remains near a forty-year high.

Earlier in the week, the President of the ECB warned that Eurozone inflation had yet to peak and that there was the possibility of it rising even higher than the record 10.6% recorded last month. Christine Lagarde also indicated that there could be possible interest rate hikes in the future, fuelling speculation that the bank would not take the gentler path to curb inflation. She commented that “we do not see the components or the direction that would lead me to believe that we’ve reached peak inflation and that it’s going to decline in short order.” There is no doubt that the main driver behind these figures is the war in Ukraine, causing the cost of energy to spike and that the bank will push rates higher at their next meeting later in the month; the only point of discussion whether this will be at 0.5% or 0.75%. The market is also expecting further rate hikes into the new year, whilst inflation rates, which reached double digits in October, will remain high in the short term driven by soaring energy/food prices, and supply shortages. The euro zone faces a grim winter as a recession bites, with the bloc’s economy shrinking now and which will continue to contract into the new year. Things Can Only Get Worse!