Three Blind Mice!

Three Blind Mice!                                                                   16 December 2022

The 2,882 real estate and properties transactions totalled US$ 2.51 billion, during the week, ending 16 December 2022. The sum of transactions was 199 plots, sold for US$ 362 million, and 2,011 apartments and villas, selling for US$ 1.26 billion. The top two transactions were for land in Palm Jumeirah, sold for US$ 13 million, followed by land that was sold for US$ 11 million in Me’Aisem First Al Hebiah Fifth recorded the most transactions, with ninety-two sales worth US$ 67 million, followed by Jabal Ali First, with twenty-one sales transactions, worth US$ 40 million, and Al Hebiah Fourth, with sixteen sales transactions, worth US$ 79 million. The top three transfers for apartments and villas were all for apartments in Palm Jumeirah at US$ 22 million, US$ 17 million and US$ 272 million. The mortgaged properties for the week reached US$ 545 million, with the highest being for land in Al Qusais Industrial First, mortgaged for US$ 189 million, whilst 157 properties were granted between first-degree relatives worth US$ 136 million.

Property Finder indicated that Dubai property sales transactions – at 10,941 – reached their highest for the month of November since 2011, and 51.1% higher, compared to the same month last year; at US$ 8.3 billion, the monthly value was up 70.8% on the year. The consultancy noted that, “we see positive sentiments for investment opportunities, following various governmental reforms and initiatives, making Dubai’s properties one of the most preferred investment assets for the long term.” The volume of off-plan properties recorded a significant increase of 62.8%, year-on-year, with 5,116 transactions. More significantly, there has been a massive 88.9% Q3 hike in luxury properties on the year, as October prices climbed a further 1.8%, with a similar rise expected for November.

Zoom Property also noted that average property prices in Dubai have reached US$ 292 per sq ft, as YTD price rises have risen by 13.0% and 8.5% for villas and apartments. The marked influx of HNWIs and foreign investors has seen a Q3 88.9% increase in the luxury property sector, compared to the same period a year earlier. This rise is well ahead of its closest international ‘rivals’, Miami and Tokyo, at 30.8% and 17.0%. Some analysts see no immediate end to this trend going into 2023.

Jumeirah and Palm Jumeirah were the two most popular areas for villas with price increases of 3.5% and 3.0%, followed by District One, MBR City, Dubai Hills, and The Meadows. The three most popular locations for apartments continue to be Jumeirah, Downtown Dubai, and Palm Jumeirah, with. price increases of 3.3%, 2.5%, and 2.0%, followed by the likes of DIFC, MBR City, Dubai Hills, and Business Bay. For the future, Zoom is forecasting that Dubai’s prime areas will continue to attract HNWIs and millionaires, and prices are expected to sustain an upward trend in 2023, perhaps topping 15%, whilst the mainstream residential market may see around a 7% price hike.

Knight Frank also reported big price hikes in Dubai’s prime property market which it expects will surpass 50% for 2022 – with a more moderate 13.5% hike expected in 2023. It also noted that Palm Jumeirah villas had risen by 2.6% last month and had seen 4%+ rises in four of the last seven months and boasting the most expensive per sq ft in the city at US$ 1.03k, after a 2.6% monthly rise in November. Over the past twelve months to November, Dubai average prices in Dubai increased by 9.5%, with apartment prices up 9.0% and villas 12.7%., with apartment prices at US$ 316 per sq ft and average villa prices standing at US$ 374 per sq ft – but still 22.0% and 4.9% lower than the peaks of 2014. Average asking prices for rentals rose 27.3% on the year – split 27.6% and 25.4% for apartments and villas. No surprise to see the highest prices were seen in Palm Jumeirah with rents of US$ 66.3k for apartments and US$ 267.6k for villas.

Iman Developers has launched of its latest project, valued at US$ 53 million, ‘The Grove’ in Dubai Hills – the developer’s eighth project in its residential development portfolio.  The nine-storey development, comprising 121 units, ranging from studio, (covering up to 477 sq ft), to 3 B/R units, (up to 2.6k sq ft), with “every square foot to be a luxurious experience.” It will also boast a contemporary lobby, with double-height ceilings, and will also include the usual accoutrements, such as a 25 mt recreational pool, a rooftop adults’ pool with a jacuzzi, club lounge and games area, as well as rooftop barbeque facilities.

This week, HH Sheikh Mohammed bin Rashid released details of developing a ’20 minute city’, as part phase two of the government’s 2040 Urban Master Plan. Announcing plans to allow residents access to 80% of their daily needs and destinations within twenty minutes on foot or by bicycle, the Dubai Ruler noted that “today, we have a clear vision for the development of Dubai’s urban infrastructure and housing sector until 2040,” and adding that “our goal is for Dubai to be an eco- and pedestrian-friendly city, and a city with a high yield from urban agriculture.”

Merex Investment has announced a major redevelopment plan for La Mer which has been closed for further construction work and set to reopen late next year; the location will be rebranded as J1 Beach, with the addition of three new beachfront experiences – Gigi Rigolatto, Bâoli and Sirene Beach by Gaia – and ten upscale restaurants. Connectivity will be further enhanced with the introduction of “valet services, parking, golf cart shuttle services, green pathways and the framed waterfront reception”, with visitors having the option of arriving by land or sea.

Compared to the same period last year, Dubai hosted a 134% increase in overnight visitors, to 11.4 million, in the first ten months of the year; however, the figure is still 15% lower than the same period in pre-Covid 2019. YTD, the top five source countries are India, Oman, Saudi Arabia, UK and Russia with numbers of 1.4 million, 1.1 million, 993k, 832k and 548k. Region-wise, the largest source of visitors was GCC, Western Europe, South Asia and Mena with 22%, 20%, 17% and 12%. Interestingly, the Israel market expanded 239% YTD to reach 171k, placing it in fourteenth place.

The knock-on impact can be seen in the increase in occupancy levels by 7.8% to 71.5% – but still below the pre-Covid 73.8% level; October 2022 levels were only 2.4% less than pre-pandemic levels despite the 18% increase in room inventory. Revenue per Available Room topped US$ 92 in 2023, above the levels of last year and pre-Covid of US$ 66 and US$ 80. Many expect that the tourism sector will be boosted, in the last two months of the year, because of the Qatar World Cup but surprisingly the November PMI survey for Dubai, the travel and tourism sector index fell to 53.2, the lowest reading since January. Perhaps the sector, (and the economy), is beginning to feel the cold winter winds of tighter monetary policy and slower global growth weigh on the local economy

Today, Dubai Harbour welcomed the arrival of the ‘Costa Toscana’ for the first time since its March 2022 launch. The liner will be used throughout the 2022/23 season for seventeen different cruises – ranging from three to seven days – around the Arabian Gulf, with Dubai as its base. There is no doubt that Costa Cruises is consolidating its presence in the region and enhances Dubai’s reputation as a global cruising hub.

Emirates has announced that it expects to return to full capacity by the end of 2023, as demand for air travel continues to head north; currently, it is at 80% capacity, with its network returning to 95% of its pre-Covid position. The carrier currently operates eighty-five of its 116 A-380s and is using this hiatus to carry out maintenance and retrofitting work, (at a cost of US$ 2 billion), before the industry returns to normality after international borders have reopened and Covid-19-related restrictions eased. The airline is aiming to hire an additional four hundred pilots and up to 6k cabin crew by the end of H1 2023, recruiting to the maximum capacity of its training facilities, which would see its payroll expanded to 4.9k pilots and 23k cabin staff.

Dubai has retained its second position in Euromonitor’s Top City Destinations Index 2022, just behind Paris. The ranking considers several factors, including the location’s economic and business activity, with thriving tourism infrastructure and performance that show great potential for investment and operation amid increased digitalisation, technological advancement and sustainability developments. With the further exception of New York, the other ten positions are dominated by European contenders.

Sharaf Retail announced that it plans to expand its global footprint and announced that it would inaugurate twenty-three new stores in 2023, across the Middle East and Far East. This will include three new openings of its flagship brands — Forever 21, Cotton On and BODY – at Silicon Central Mall, encompassing 23.2k sq ft. Over the past twelve months, the UAE retailer, which specialises in retail development and brand building, has opened fourteen stores across Malaysia, Indonesia, UAE, Bahrain and Oman.

November’s S&P Global PMI shows that the Dubai economy remains “robust”, with output levels continuing to head north, although the seasonally adjusted index dipped 1.1 to 54.9 – a level still in positive territory, with 50 being the mark that differentiates between expansion and contraction. An increase in new business volumes, progress on current contracts and the impact of the Qatar FIFA World Cup were the main factors behind business activity moving higher. Although at a slower pace, headcounts increased in November, with the rate of jobs growth still at near three-year highs. In order to attract new business, companies reduced their output prices for the fourth consecutive month, with business confidence towards future output positive due to stronger expectations in the wholesale and retail category. It will be interesting to see December results as interest rates go higher at a time when inflationary pressures appear to be easing.

Agri Hub by URB is a new agritourism project in Dubai’s desert that is expected to become the biggest in the world of its type, creating 10k jobs. The company noted that the project will promote a new experience, with food security, entertainment and adventure, and that “Dubai’s rural and agricultural rich communities are best positioned to become a global benchmark for agritourism.” The development will allow farmers to directly sell their produce to consumers. Some of the project’s environmental features include 100% renewable energy, 100% water recycling, bio-saline agriculture, green transit systems and on-site zero waste management. Its exact location is yet to be decided but it is expected to start construction in 2025, with completion slated for 2030. In September, it posted plans for the Dubai Urban Tech District, to be located on the Creek side of Al Jaddaf district and will create 4k jobs in green urban technology, education and training.

Sheikh Hamdan bin Mohammed confirmed that Dubai’s September GDP expanded 4.6%, year on year, to US$ 83.8 billion. The Crown Prince pointed to several factors for this marked improvement, including the efforts of various government and private entities, and the emirate’s responsive and efficient economic framework, along with its ability to track and anticipate demand trends in both the short and long terms. He also noted that the government’s strong partnership with the private sector, both locally and internationally, was a key enabler, along with “Dubai’s economy is founded on strong principles of income diversification by developing strategic sectors, promoting future-focused economic activities, implementing prudent fiscal policies, and constantly upgrading regulatory and legal frameworks to encourage investment and support business”.

Some sectors posted spectacular growth levels in the first nine months of the year, most notable being wholesale/retail trade accounting for 24.1%, equating to US$ 20 billion of Dubai’s GDP – the top contributor to the emirate’s economy – and the hospitality/F&B services, with a year-on-year 28% increase. In tandem, transport/storage accounted for 2.5% of the 4.6% growth in Dubai’s GDP and contributed to 11.6% of Dubai’s economy. The fact that the sector’s contribution to the overall GDP stood at just 11.6%, during the period, underscores the dynamism of Dubai’s economy. Meanwhile, the emirate’s real estate activity posted a 2.5% increase in the period, accounting for a 9.1% share of the emirate’s GDP and contributed 5% to the overall GDP growth, as real estate sales were up 76%, on the year. Financial/insurance activities, at US$ 8.94 billion, grew by 1.2%, and accounted for a 10.7% share of Dubai’s GDP and a 3% share of GDP growth during the nine months.

The Central Bank has announced that all September Money Supply aggregates had increased, month on month:

  • M1 – 0.5% to US$197.0 billion, due to US$ 191 million rise in Currency in Circulation Outside Banks and US$ 790 million growth in Monetary Deposits
  • M2 – 1.1%, to US$ 448.4 billion, due to an expanded M1 and a US$ 3.90 billion hike in QuasiMonetary Deposits
  • M3 – 1.6% to US$ 558.1 billion, due to an augmented M2 and US$ 3.84 billion increase in Government Deposits

Because of a 30.9% decrease in Banks & OFCs’ Current Accounts & Overnight Deposits of Banks at CBUAE, offset somewhat by increases in Currency Issued and Reserve Account by 1.7% and 29.5%, and Certificates of Deposit & Monetary Bills remaining constant, the Monetary Base contracted by 1.9% falling from US$ 127.1 billion. Gross Banks’ Assets, including bankers’ acceptances, rose by 1.7%, to US$ 960.1 billion by the end of September, with Gross Credit 1.2% higher at US$ 510.4 billion due to a 1.0% rise in Domestic Credit and 3.2% in Foreign Credit. There was a year-on-year increase of 1.4% in loans and a 4.9% rise in deposits on the back of a 1.1% decrease in interest rates on loans and a 15% decrease in interest rates. The value of September gold reserves of the Central Bank of the UAE increased by 13.0% to US$ 3.47 billion. All its gold reserves were sold before 2015, but it began to re-constitute its gold reserves during the same year, and the balance is still relatively low to its total assets

Following the Federal Reserve raising rates by 0.5%, the Central Bank of the UAE raised its Base Rate applicable to the Overnight Deposit Facility by 50 bp– from 3.9% to 4.4%, effective from Thursday, 15 December 2022.

According to Thani Al Zeyoudi, the UAE Minister of State for Foreign Trade, the country and Israel have ratified their comprehensive economic partnership agreement, first signed in May. The CEPA will remove or reduce tariffs on 96% of goods traded between the nations and will inevitably boost bilateral non-oil trade that has already risen to US$ 2 billion – up 114% in the nine months to September.

The DFM opened on Monday, 12 December, 20 points (0.6%) higher on the previous fortnight, nudged up 4 points to close on 3,329 by Friday 16 December. Emaar Properties, up US$ 0.06 the previous fortnight, shed US$ 0.07 to close the week on US$ 1.59. DEWA, Emirates NBD, DIB and DFM started the previous week on US$ 0.64, US$ 3.56, US$ 1.53, and US$ 0.43 and closed on US$ 0.65, US$ 3.60, US$ 1.55 and US$ 0.41. On 16 December, trading was at 380 million shares, with a value of US$ 328 million, compared to 92 million shares, with a value of US$ 52 million, on 09 December 2022.

By Friday, 16 December 2022, Brent, US$ 26.59 (25.8%) lower the previous five weeks, regained US$ 2.64 (3.3%) to close on US$ 79.24.  Gold, US$ 2 (0.1%) lower the previous week, shed US$ 6 (0.3%), to close at 1,803, on Friday 16 December. Oil prices rallied earlier this week amid reports that China, the world’s biggest importer of crude, had eased its zero-Covid restrictions., but dipped again as the world’s major economies saw interest rates being notched higher by their respective central banks. The sector continues to be impacted by the “stop-start” reopening of China’s economy, as well as ongoing uncertainty regarding future global demand.

Binance, the world’s biggest crypto exchange, reported that the business had seen US$ 1.9 billion in withdrawals last Monday – its largest movement out since June – as the company “temporarily paused” withdrawals of the USDC stablecoin. This accounted for most of the US$ 2.2 billion in Ethereum-based withdrawals during the previous seven days. Last week, Binance issued a so-called proof-of-reserves report, showing its holdings of bitcoin exceeded customer deposits on a single day in November. The company also reaffirmed that, “User assets at Binance are all backed 1:1 and Binance’s capital structure is debt free.” In September, the exchange reported that it would automatically convert user balances and new deposits of USD Coin, and two other stablecoins, into its own stablecoin, Binance USD.

Twitter has undergone seismic changes since its new owner took over the reins in October, including the introduction of an edit button, whilst blue-tick subscribers will also see fewer ads have their tweets amplified above others, and be able to post and view longer, better quality videos. This comes after the platform had a chaotic initial launch in November, when people started impersonating big brands and celebrities and paying for the blue-tick badge in order to make them look authentic. At the time, Elon Musk noted that the firm was losing US$ four million every day and retrenched half of its workforce; he also initiated bedrooms at Twitter HQ in San Francisco for the remaining staff working long hours, and begun re-instating controversial banned accounts, including former US president Donald Trump. He has also decided to delete accounts which have been inactive for a certain some time.

The temporary suspension of its Shanghai factory is yet another factor that has sent Tesla’s shares lower – and even dipped its market value below US$ 500 billion earlier in the week. It later recovered somewhat to close the week on US$ 150.23, (having started the week on US$ 175.75). Since the end of September, the EV maker has seen its share value tank by over 40%, compared to an average 12% rise in the S&P 500 Index. The fact that its founder Elon Musk seems to be preoccupied with his new ‘baby’, Twitter, along with concerns over universal EV demand, are worrying investors. However, Tesla is not the only member of the NYSE FANG+ to be impacted by a raft of drivers, including soaring inflation, an almost certain recession, an aggressive Federal Reserve pushing rates higher by the month, and general geopolitical turmoil, (but particularly the Ukraine war) make stable investments look more attractive. Such stocks, which have high PE ratios, with ‘hopes’ relying on future success, have seen share values decline by an average 20%. They have fared worse with the likes of Rivian Automotive and Lucid Group tanking by 76% and 79% YTD.

On the first three days of the week, it is reported that Elon Musk divested a further twenty-two million Tesla shares, worth US$ 3.58 billion; this follows the 19.5 million shares, worth US$ 3.95 billion, he sold last month – so far this year, his sale of Tesla shares has netted him almost US$ 40 billion.

There are reports that Air India is expected to place mega orders for as many as four hundred narrow-body jets and one hundred or more wide-bodies, including dozens of Airbus A350s and Boeing 787s and 777s; the deal will be worth tens of billions of dollars and the announcement may come as early as the end of December. This could also become the biggest single order in aviation history surpassing four hundred and sixty Airbus and Boeing jets from American Airlines over a decade ago. The potential order comes days after Tata announced the merger of Air India with Vistara, a JV with Singapore Airlines, to create a fleet of two hundred and eighteen aircraft, making it India’s largest international carrier and second largest in the domestic market after leader IndiGo.

IATA reported that international airlines are owed US$ 2 billion, (25% higher over the past six months), from the governments of more than twenty-seven countries and territories. Accounting for over 63% of this total are five countries – Nigeria, Pakistan, Bangladesh, Lebanon and Algeria with debts of US$ 551 million, US$ 225 million, US$ 208 million, US$ 144 million and US$ 140 million, respectively. These blocked remittances have troubled the sector for years, with the situation further exacerbated by the pandemic, and are a driver behind the expected US$ 6.9 billion 2022 deficit, following a US$ 9.7 billion 2021 loss.

Goldman Sachs is planning further job cuts – that could be as high as 8% of its current 49k workforce – as it grapples with a sharp downturn in business. The investment bank, in line with its peers, has seen a dramatic downturn, with revenues slumping on the back of economic uncertainty and a market downturn putting the skids on mergers and stock listings. Overall revenues fell 20% in the first nine months of the year, as margins slumped even further; there is no immediate improvement on the immediate horizon.

In Australia, Star Entertainment Group has been fined US$ 68 million (AUD 100 million) following “major failings” at its two Queensland casinos, as well as having a special manager, Nicholas Weeks, appointed to oversee its operations. The state’s Attorney General, Shannon Fentiman, warned Star that it “has twelve months to get their house in order”, or else have its Queensland casino licences temporarily suspended. The company’s casino licences – for Treasury Brisbane and The Star Gold Coast — will also be suspended for ninety days, however that action has been deferred until 01 December 2023. Star is also a key backer of the US$ 2.4 billion Queen’s Wharf casino development, which is still under construction. It was found that Star had “actively encouraged” patrons – who were banned interstate — to gamble at its Queensland casinos, demonstrating a “lively disregard” for the law, and that it was also “less than forthcoming” with its banker about the use of China UnionPay and there were “serious deficiencies” in its anti-money laundering/counter-terrorism financing program. In October, the NSW Independent Casino Commission imposed a US$ 67 million fine on Star and handed the casino’s licence to a special manager for similar offences.

An extraordinary “conference of presidents” met on Tuesday and decided to cancel the term in office as one of the EU parliament’s vice-presidents. of the MEP Eva Kaili, who is embroiled in a corruption probe allegedly involving Qatar. Along with the Greek politician, who has already been stripped of her responsibilities as one of the parliament’s vice-presidents, three others have been charged of receiving cash or gifts to influence decision making. It is reported that the Belgian police made fresh raids including one on a European parliamentary office and that IT resources of ten parliamentary staffs had been “frozen” to prevent the “disappearance of data necessary for the investigation”. Not surprisingly, the bloc’s top politicians have strongly condemned the corruption scandal that is shaking the EU legislative body. It will be no surprise that this will not be the only case that will tarnish the bloc’s reputation.

Noting that it would continue to keep rates high, the Federal Reserve, as expected, moved them 50 bp higher – the seventh interest rate rise this year. Rates were at near zero last March and after this hike, rates are now in the range of 4.25%-4.50%, as the central bank continues its fight to curb soaring inflation; it confirmed that the Federal Open Market Committee “expects that continued increases in the target range will be appropriate to attain a monetary policy stance that is sufficiently restrictive to return inflation to 2% over time.” Readers will note that this time last year, Jerome Powell had incorrectly predicted that the high level of inflation was ’transitory’ and the Fed went MIA for almost six months, as inflation eroded public confidence, with the economic news worsening every month. There are two factors in play that have hindered the Fed in its belated efforts to combat inflation – the resilience of the US jobs market, and wage growth, along with Russia’s war in Ukraine.

The ECB, the central bank for the nineteen-country euro zone, raised its interest rates by a further 50 bp to 2.0% – its fourth consecutive rise – and also posted plans on to cut back on QE in a bid to counter runaway inflation. Just like the Fed, it had misread the impact and how high inflation would surge to 10.6%, well above its 2.0% target; it is now likely that it will not return to the bank’s target until 2025. For the past decade, the bank had followed its policy of easy money, but it now expects to stop replacing maturing bonds from its US$ 5.3 trillion, (Eur 5 trillion euro) portfolio, finally putting an end to asset purchases that have seen the ECB become many governments’ biggest creditor. We are now entering an era of QT (quantitative tightening) taking over from QE (quantitative easing).

With a 50 bp rise, the benchmark rate rose to 3.5% – the ninth consecutive hike over the past twelve months, and the highest rate in fourteen years. The obvious outcome to most is that mortgage and loan rates will move higher, with more rises on the 2023 horizon to at least 4.5%.  It is estimated that up to four million households, (with about 33% of households having a mortgage), will face higher mortgage repayments next year. Compared with pre-December 2021, average tracker mortgage customers will be paying about US$ 406 more a month, and variable mortgage holders about US$ 256 more. Having done little to reduce inflation, when it started moving higher over the past twelve months, indicating that it was transitory, the BoE is still in trouble of its own making; with inflation rates currently at 10.7%, it has a lot to do to return that level to its own 2.0% target. Maybe the three governors of these central banks should be in pantomime, as principals in this year’s production of Three Blind Mice!

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