Up, Up and Away!                                                             09 December 2022

The 3,186 real estate and properties transactions totalled US$ 2.48 billion, during the week, ending 09 December 2022. The sum of transactions was 419 plots, sold for US$ 610 million, and 2,233 apartments and villas, selling for US$ 1.26 billion. The top three transactions were for land in Marsa Dubai, sold for US$ 72 million, followed by land that was sold for US$ 17 million in World Islands, and land sold for US$ 10 million in Palm Deira. Al Hebiah Fifth recorded the most transactions, with 200 sales worth US$ 169 million, followed by Jabal Ali First, with seventy-nine sales transactions, worth US$ 70 million, and Al Yufrah 2, with twenty-five sales transactions, worth US$ 9 million. The top three transfers for apartments and villas were all for apartments in Jumeirah Second at US$ 15 million, US$ 14 million and US$ 10 million. The mortgaged properties for the week reached US$ 477 million, with the highest being for land in Me’Aisem, mortgaged for US$ 98 million, whilst 129 properties were granted between first-degree relatives worth US$ 136 million.

Damac Properties has revealed a branded development by Italian fashion house Cavalli, located along the Dubai Canal. Cavalli Couture will be a 14-storey tower, comprising seventy residential units ranging from three, four and five-bedroom duplex sky villas and duplex penthouses. Each unit will have its own infinity pool and terrace garden overlooking Dubai Canal, with their interiors inspired by the Amazon jungle. Penthouses will have access to private sky gardens and a party terrace with infinity pools. This latest development will only further enhance Dubai’s number one global position for branded residences.

Union Properties has launched its latest project – called Takaya, and at a cost of US$ 435 million – with 788 units across three towers, including thirty-nine townhouses, five villas, 744 apartments and 55k sq ft of retail space. The townhouses, villas and apartments will be linked to a 450 mt podium level sky garden. The project, currently undergoing regulatory approvals, is expected to commence construction in Q3 2023, with a slated completion date of Q4 2025.

HH Sheikh Mohammed bin Rashid has approved both the emirate’s 2023 and its three-year budgets. The former indicates a US$ 409 million (AED 1.5 billion) surplus, with revenue of US$ 18.8 billion, (AED 69.0 billion), and expenditure at US$ 18.4 billion (AED 67.5 billion).  Expenditure for the 2023-2025 budget was set at US$ 55.9 billion (AED 205 billion). As part of efforts to transform Dubai into one of the world’s best cities to live, work and visit, the Dubai government has allocated 20% of total expenditures to the security, justice and safety sector. The budget shows that the government continues to focus on social services and the development of the health, education and culture sectors. It also focuses both on the housing sector, via Dubai’s Housing Programme, as part of a plan for the next twenty years, and the development of the social benefits fund to support families, people of determination and those with limited income.

The revenue forecast is 20% higher on the year, as Dubai recovers well from the impact of the pandemic and the fact that tourism, travel and the economy are well ahead of expected forecasts. It is interesting to note that oil revenues represent only about 5% of the total expected revenues for the year 2023, which confirms the financial sustainability of the emirate. Dubai Crown Prince, Sheikh Hamdan bin Mohammed, commented that the budget reflects Dubai’s commitment to meet the city’s future aspirations and that the Government aims to ensure availability of best services for everyone.

On Tuesday, HH Sheikh Mohammed bin Rashid Al Maktoum toured the 43rd edition of the Big 5, the region’s largest construction event. The Dubai Ruler commented that the emirate’s strong events and exhibitions sector offered a platform to forge new partnerships and opened up several growth opportunities. He also noted that technological advances were disrupting the construction sector, and that some aspects of the fourth industrial revolution, including AI, had already been introduced. Along with the inaugural Everything Architecture, the Big 5 hosted 55k professionals and 2k participants, (from sixty countries), along with twenty national pavilions.

The UAE has finally officially announced a 9% corporate tax on businesses for profits exceeding US$ 100k (AED 375k) from next year, with the first firms being those whose financial year starts on 01 June 2023. A company with a year-end of 31 December will start paying tax on profit as from the year ending 31 December 2023. Companies, whose annual profit is below US$ 100k, will be taxed at a 0% rate to support small businesses and start-ups. There are not that many exemptions from this tax, but they include natural resource extraction activities in the country, (although they remain subject to existing local emirate-level taxation). Other exemptions are available to organisations such as government entities, pension funds, investment funds and public benefit organisations, due to their vital importance and contribution to the social fabric and economy of the UAE. Furthermore, existing free zone entities will be eligible to benefit from a 0% Corporate Tax rate on qualifying income. There will also be generous relief for intra-group transfers and restructurings and allows group companies to use each other’s available tax losses.

According to Dubai World Trade Centre, October’s GITEX GLOBAL, generated over US$ 700 million, (AED 2.6 billion, worth of total economic output, of which 57% of that total was retained in the emirate’s economy. The five-day event was estimated to have supported 9.6k jobs, generating disposable household income of US$ 126 million – up 55% from pre-pandemic 2019 figures; of the 170k visitors, 40% were from overseas.

Next month, Dubai will host The World of Coffee Dubai 2023 which will see 1k international, regional, and local companies and brands from over thirty countries. Last year, the exhibition welcomed over 6k trade visitors, with more than 12k expected this time, due to increased global participation and the relaxation of travel restrictions. The three-day event, organised by DXB Live and the global Specialty Coffee Association, will be held at the DWTC, and is an annual meeting for the coffee industry’s leaders and experts, including farmers, merchants, brewers, distributors, SMEs, café owners, breweries, hotels, baristas/coffee enthusiasts and connoisseurs. Between 2015-2020, it is estimated that the value of retail coffee sales in the UAE nearly topped US$ 1.0 billion, growing at an 8.3% CAGR, with the volume reaching 28.4k tonnes, reflecting a 7.2% annual rise over the period. There are an estimated 615 coffee trade companies in Dubai – a 148% increase in licences issued in 2021.

Ahead of the 3rd edition of the two-day Dubai Equestrian Forum, which opened today at the Meydan Racecourse, the Minister of Economy, Abdullah bin Touq Al Marri, noted that US$ 572 million had been spent on training racehorses and that the average annual expenditure of equestrian clubs in the country had reached US$ 100 million. The main aim of the event, hosted by Dubai Racing Club and Dubai Equestrian Club, is to meet with various equestrian suppliers from around the world and to give them a chance to showcase their products to what remains a huge regional market.

The UAE has launched The Future 100 initiative to support the top one hundred start-ups in numerous sectors such as space, renewable energy and emerging technology, which will shape the country’s future economy. This is one of many initiatives that the government has introduced to enhance the country’s position as one of the most proactive governments worldwide, and to keep it ahead in a fast-changing landscape defined by digital transformation. The Future 100 also aims to boost the UAE’s ranking in global indices, particularly in criteria such as competitiveness, entrepreneurship and investment.

The sixth and latest auction of the government’s treasury bonds was 4.5 times over-subscribed, with bids totalling US$ 1.83 billion; as with previous issues, the total raised was US$ 409 million (AED 1.5 million) and split equally between three-year and five-year tranches, with an 18-basis point (bps) over US Treasuries for three years, and a spread of 30 bps for five years. This is the final issue of 2022 and is part of an official strategy to enhance a local currency bond market and diversify its financial resources. In 2021, the country raised US$ 4.0 billion through the issuance of multi-tranche sovereign bonds, the first time it had issued bonds at the federal level.

Cavendish Maxwell confirmed that it will acquire a majority stake in Property Monitor, with no financial details readily available. The Dubai-based property consultancy, established in 2008, is looking to this move, with the real estate technology and market intelligence firm, to establish a “real estate innovation hub aimed at bridging the gap between traditional expertise and artificial intelligence-enabled disruptive solutions”. Cavendish Maxwell is the largest firm of independent property consultants in the region and employs more than one hundred staff in the region.

With the aim of driving innovation in the fields of aviation and logistics, Dubai Future Labs has signed three preliminary deals with Emirates Airline, Dnata and DP World, with Sheikh Hamdan bin Rashid, tweeting that the partnerships will help to “deploy future technologies to drive innovation in our aviation and logistics sectors”. The three partnerships aim to activate the Dubai Robotics and Automation Programme to support the development of the technologies as part of the emirate’s move towards the future economy. Dubai’s Crown Prince also noted that “we continue to advance Dubai’s leadership in robotics and automation technologies”. So far this year the government has taken steps to support the development of its future economy, including unveiling a metaverse strategy, to create 40k jobs and add US$ 4 billion to the emirate’s economy in the next five years, and formed a higher committee for the future technology and digital economy which aims to help shape the future of AI. There is no doubt that these initiatives will see Dubai in the top ten cities that will shape the emerging technology’s future globally, as the emirate aims to double the number of blockchain companies and the metaverse by five times.

Deyaar Development announced that it had received an initial sum of US$ 54 million (AED 200 million), following an agreement that finally settled its ongoing dispute with master developer Limitless. The developer’s board had approved a US$ 136 million (AED 500 million) cash settlement, along with some land, in June 2021. At the time, the company announced that the deal takes into account that “any proposed land [has] the necessary infrastructure and master plan approvals from the relevant authorities, and that such land [is] to be valued by independent external valuers appointed jointly by the two parties”. In 2019, a UAE court ordered Limitless, to pay US$ 112 million to Deyaar in a dispute related to the purchase of land, and also to pay fees, as well as US$ 17 million in compensation to Deyaar. There were no details about when the remaining US$ 82 million (AED 300 million) would be paid.

The DFM opened on Monday, 05 December, 19 points (0.6%) higher on the previous week, nudged 1 point higher to close on 3,325 by Friday 09 December. Emaar Properties, up US$ 0.05 the previous week, gained US$ 0.01 to close the week on US$ 1.66. DEWA, Emirates NBD, DIB and DFM started the previous week on US$ 0.64, US$ 3.61, US$ 1.55, and US$ 0.44 and closed on US$ 0.65, US$ 3.56, US$ 1.53 and US$ 0.43. On 09 December, trading was at 92 million shares, with a value of US$ 52 million, compared to 393 million shares, with a value of US$ 213 million, on 30 November 2022.

By Friday, 09 December 2022, Brent, US$ 16.52 (16.0%) lower the previous four weeks, slumped by US$ 10.07 (11.6%) to close on US$ 76.70.  Gold, US$ 59 (1.2%) higher the previous fortnight, shed US$ 2 (0.1%), to close at 1,809, on Friday O9 December.

TotalEnergies is expected to take a major hit to its Q4 financials, with a US$ 3.7 billion impairment charge for losses related to its stake in Novatek, Russia’s largest producer of liquefied natural gas. The French energy giant had a 19.4% stake  and has had to withdraw its two nominee representatives from the Russian company’s board. TotalEnergies signed an agreement to sell its 49% stake in Terneftegaz, one of the largest Russian oil companies, to Novatek.  Following the exclusion of Novatek’s assets, it confirmed that its reported proved reserves will decrease by 1.7 billion barrels.

Because of the Sunak government extending the windfall tax on oil and gas firms in the UK, TotalEnergies has said it will cut North Sea investment by 25% in 2023, as the French oil giant plans to reduce US$ 120 million of spending on new wells in the region. The UK’s Energy Profits Levy was raised from 25% to 35% in last month’s Autumn Statement and will now stay in place until March 2028, with the government stating that the tax “strikes a balance between funding cost of living support while encouraging investment”.

According to IATA, the global aviation sector is set to return to profitability in 2023 for the first time since the early 2020 onset of Covid-19. Passenger traffic in North America and Europe is expected to come in slightly lower than the 2019 pre-pandemic levels by just 3% and 11%. This year, it is expected that the total loss will be US$ 6.9 billion, down on the massive US$ 138 billion deficit in 2020 and the US$ 42.0 billion loss posted last year.  However, its forecast 2023 net profit of US$ 4.7 billion will be well down on the US$ 26.4 billion posted four years earlier in 2019. The profit levels on a regional global basis are mixed, with North America posting profits of US$ 9.9 billion and US$ 11.4 billion, in 2022 and 2023, with Europe’s return being minus US$ 3.1 billion and a US$ 621 million profit, and losses of US$ 10.0 billion and US$ 6.6 billion for both years in the Asia-Pacific region. Whilst ME airlines are also expected to return marginally to the black, Latin American and African airlines will continue in the red for both years.

A new report reckons that the poorer countries, numbering over seventy, eligible to borrow from the World Bank’s International Development Association are spending more than 10% of their export revenue to pay off debts – the highest rate this century. To be eligible for IDA support in 2023, a country’s GNI per capita is set at US$ 1,255. Further analysis sees that in 2021, those countries’ debt-service payments, on long-term public and publicly guaranteed external debt, reached US$ 46.2 billion — equivalent to 10.3% of their exports of goods and services and 1.8% of their GDP, and well above that of the 2010 figures of 3.2% and 0.7% respectively. This year, the debt service payments are forecast to jump 35% to US$ 62.0 billion, with China expected to account for 66% of payments to be made by IDA countries on their official bilateral debt. By the end of 2021, the external debt of all developing economies — low as well as middle-income economies — stood at US$ 9 trillion, more than double the amount a decade ago, with the total external debt of IDA countries nearly tripling to US$ 1 trillion.

In a bid to bolster its faltering economy, China announced that it would issue US$ 108 billion (750 billion yuan), worth of three-year special treasury bonds next Monday, 12 December. The Ministry of Finance confirmed that the issue will only involve particular banks in the interbank bond market, and that the People’s Bank of China, the country’s central bank, will also conduct open market operations with relevant financial institutions.

Because of “distortions” created by a US$ 430 billion US plan to incentivise climate-friendly technologies, President Ursula von der Leyen has indicated that the EU should “adjust our own rules”. Some member nations are concerned that the US Inflation Reduction Act, that seems to incentivise climate-friendly technologies, could be the start of a new trade war and lure away EU businesses. Under the legislation, Americans will get incentives to purchase new and second-hand electric cars, to warm their homes with heat pumps and even to cook their food using electric induction. US President Joe Biden, has commented that there could be “tweaks” made to make it easier for European firms to benefit from the subsidies package and that “we will continue to create manufacturing jobs in America, but not at the expense of Europe.”

For the 28^th consecutive month, hyperinflation in Lebanon continued, increasing by a massive 186.4% in the first ten months of 2022, with October’s inflation, at 158.5% higher compared to the same month in 2021, and up 14.6% on the month. Lebanon has yet to carry out some IMF reforms – including the formation of a new government, the election of a new president and consensus among the country’s political elite – so as to receive a US$ 3 billion assistance package.  Securing IMF backing will help to unlock a further US$ 11 billion of assistance that was pledged at a 2018 Paris donor conference, which is also tied to a string of reforms. It is estimated that its economy has the second highest inflation rate in the world behind Sudan. Some of the sectors that have been badly hit include healthcare and water, electricity, gas/other fuels – four times and 350% higher over the past twelve months – whilst the likes of communication and food/non-alcoholic beverages more than tripled over the same period. The economy will see an improved 5.4% contraction this year, compared to a 58% slump over the three previous years. Meanwhile, the Central Bank Governor Riad Salameh indicated that it plans to devalue the pound officially to 15k Lebanese pounds to the US dollar, with the aim of unifying the country’s multiple exchange rates and abandon the 25-year peg of 1,507 pounds to the greenback.

According to the ECB’s Chief Economist Philip Lane on one hand consumer-price growth is probably near its peak, but on the other that borrowing costs will be raised again, and that it “would be reasonably confident in saying that it is likely we are close to peak inflation.” The bureaucrat noted that consumer price increases could not be ruled out but opined that “in the spring or summer, we should see a sizeable drop in the inflation rate”, but that it will take time – maybe two years – to return to the bank’s 2.0% target. He said that the inflation rate might drop to 6%-7% in 2023, with a further reduction to follow, but that “we do think there will be a second round of inflation;” this will be the result of bigger-than-usual pay increases over the next three years. However, any reports by the ECB should be taken with a pinch of salt, as twelve months ago, as inflation started to creep above their target level, they were slow to act. In July 2021, inflation was hovering at 2.16% and had risen to 4.96% by the end of December 2021; when it had almost doubled to 8.64% in June 2022, the ECB finally acted. Until July, after it had maintained rates at below zero for eight years, it lifted rates by 0.75% to its highest level since 2009. By the end of October, the base rate was 2.0% higher, with inflation at 10.62%. The authorities have definitely lost their way when it comes to its management of inflation; this time, last year, as inflation moved higher, no positive action was taken and the general feeling was that the upward trend was ‘transitory’. Since then, incompetence and inactivity  has seen inflation only go Up, Up and Away!