Rich World, Poor World!                                                            07 April 2023

The 3,035 real estate and properties transactions totalled US$ 2.83 billion, during the week, ending 07 April 2023. The sum of transactions was 222 plots, sold for US$ 490 million, and 2,086 apartments and villas, selling for US$ 1.24 billion. The top two transactions were for plots of land, one in Business Bay, sold for US$ 124 million, and the other for a plot in Al Thanayah Fourth for US$ 41 million. Al Hebiah Fifth recorded the most transactions, with ninety-three sales, worth US$ 67 million, followed by thirty-three sales in Madinat Hind 4 for US$ 12 million and thirty sales in Al Hebiah Fourth, valued at US$ 71 million. The top three transfers for apartments and villas were all for apartments – the first in Wadi Al Safa for US$ 46 million and the other two in Island 2 – US$ 37 million and US$ 35 million. The mortgaged properties for the week reached US$ 1.08 billion, whilst seventy-six properties were granted between first-degree relatives worth US$ 19 million.

Last month, the booming Dubai property market posted a 53% year on year growth, to US$ 9.3 billion, as transactions topped 12k – up 45% compared to March 2022. Most notably, the market saw a marked 95% annual growth in the volume of off-plan transactions, with 6.4k transactions recorded last month; these accounted for 52.8% of total March sales and 36.8% of the total value. Dubai Creek Harbour and Dubai Marina contributed 12.0% and 11.7% of off-plan sales value and 10.0% and 3.7% of sales. The three main contributors to the ongoing rise in the local property market continue to be progressive government initiatives, higher oil prices and  the increase in the number of Chinese and Russian buyers. Demand continues to outstrip supply and whilst this trend keeps up, prices) (for bath sales and rentals) will continue to edge higher. There are fears that with the increased number of new projects being launched, the “pendulum” may turn with an oversupply; however, this seems unlikely to happen until at least 2025 (when a lot of this new supply is ready for occupancy); even then, the expected population increase could more than meet this increased supply.

In March, there were both monthly and annual hikes in the value of ready property transactions by 34.0% to US$ 5.89 billion and by 13.0% to over 5.7k. According to Property Finder, 59.7% of people, who want to buy property, prefer apartments, (up 2.5% on the year), and the balance villas/townhouses. In the rental market, 80% of tenants were looking for apartments, with 29.4 % of that number preferring a studio, 33.3% – 1 B/R unit and 30.4% – a 2 B/R apartment. The top-searched areas in March, for rented apartments, were Dubai Marina, Downtown Dubai, Business Bay, Palm Jumeirah and Jumeirah Village Circle. In the villa/townhouse sector, 42% of tenants were looking for 3 B/R and 35.5% for a 2 B/R villa. Dubai Hills Estate, Palm Jumeirah, Arabian Ranches, Damac Hills and Mohammed Bin Rashid City were most preferred among those looking to own and rent villas or townhouses.

The luxury market sector continued to boom in Q1, topping US$ 1.63 billion, with eighty-eight villas, at a value of AED 10 million plus (US$ 2.72 million). This sector of the market continues to show much higher price increases than the rest of the market. Three locations – Palm Jumeirah, Emirates Hills and Jumeirah Bay – accounted for 64% of the total, with average transaction prices at US$ 2.4k per sq ft. Knight Frank posted that, in 2022, on the global stage, Dubai ranks the fourth most active market in this sector. Last year,  Dubai registered the sale of 219 homes, priced above $10 million, valued at US$ 3.8 billion; only New York (244 sales), Los Angeles (225 sales) and London (223 sales) were ranked above Dubai.  In the prime market segment, average transaction prices rose by 15.8% to US$ 1,971 per sq ft.

Dubai International Airport retained its title, for the ninth consecutive year, as the world’s busiest international airport for passengers last year; London, Amsterdam, Paris and Istanbul followed DXB in its tracks. The airport witnessed passenger traffic more than doubling over the year to 66.1 million, with this number expected to top 78 million in 2023, returning to pre-pandemic levels by the end of the year. Latest ACI data shows that 2022 global passenger traffic rose 53.5% to almost seven billion – equating to 73.8% of 2019 levels. As Dubai has no domestic traffic to count on, it is only ranked fifth in the list of the world’s top ten busiest airports behind Hartsfield-Jackson Atlanta, Dallas/Fort Worth, Denver International Airport and Chicago’s O’Hare; these US airports have significant domestic passenger traffic shares of between 75% to 90%.

With summer holidays on the horizon, the main point of conversation for most expats is the cost of air fares from the UAE. Hardest hit seems to be those travelling to the sub-continent with reports that fares may triple in the coming months, made worse because Indian national carriers have cancelled flights to some busy routes last month, and that airlines have deployed smaller aircraft on the routes which has exacerbated the situation, resulting in an increase in airfares. For example, Air India and Air India Express have started cancelling and realigning flights to different cities from the UAE including Kozhikode, Indore and Goa. Basic economics come into play – when supply is reduced, so that demand cannot be met, prices will inevitably go higher.

With new orders and employment rates, (rising at their fastest rate in seven years), on the up, March business activity in the UAE’s non-oil private sector expanded at the strongest pace in five months, up 1.6 on the month to 55.9; new orders were at their highest level in five years with employment reaching an eighty-month high. Stronger market demand and increased tourism were the main drivers behind the rate of new order growth, assisted by stronger domestic sales, with exports staying flat after three months of declines. Overall, this was the largest monthly increase since October 2021, with all five sub-components moving northwards. These figures are in line the UAE Central Bank’s forecast that the country’s economy would expand 3.9% and 4.3% over the next two years, following a 7.6% growth spurt in 2022. Non-oil GDP growth, at 6.6%, was driven by the property, construction, manufacturing and travel and tourism sectors, with that trend continuing into this year with a forecast 4.2% move upwards. In 2022, non-oil foreign trade hit a record US$ 607.1 billion which is expected to double by 2030.

Later in the week, the Dubai Court of Appeal decided that the South African government’s extradition request, concerning Atul and Rajesh Gupta, cannot be carried out. They had been accused by South African authorities in relation to two cases of money laundering, fraud, and corruption, The court found that the request did not meet the strict standards for legal documentation as outlined in the 2021 extradition agreement between the UAE and South Africa. It seems that the rejection could be on a technicality since the law stipulates that the extradition request shall be accompanied by “a copy of the arrest warrant order, whereas the submitted documents are free of the arrest warrant”. Following the decision, it appears that the South African authorities will be able to resubmit the extradition request with new and additional documentation.

The UAE Central Bank has announced that the new AED 1k banknote will come into circulation from this Monday. The new note, made of polymer, will feature advanced security features and prominent symbols in Braille, while the current AED 1k note will continue in circulation. The currency is designed to pay tribute to the UAE’s major achievements in space exploration and climate action.  

Because of sanctions risks, the UAE Central Bank has cancelled the licence of Russia’s MTS Bank in Abu Dhabi, with the bank winding down its operations “within six months from the date of the decision”, under UAECB’s supervision. It was only last year that the Russian financial institution received approval from the Central Bank to operate in the country. In February, it came under western sanctions, as part of the broader package of sanctions by the UK, the US and their allies against Russian companies, the country’s financial institutions and people in the inner circle of President Vladimir Putin following the start of the Russia-Ukraine war. MTS Bank is a FinTech unit of Russia’s largest mobile operator Mobile TeleSystems.

DMCC started the year the way it ended 2022, by posting a Q1 708 increase in member numbers – its best Q1 figures since it started in 2002, 8.4% higher year on year and an average annual increase of 13.7% since 2018. This increase was a reflection on the current state of Dubai’s booming economy, driven by strong local macroeconomic conditions and the ease of doing business. It is estimated that DMCC contributes roughly 10% to Dubai’s GDP, and with over 90% of our registered companies coming from outside the UAE, DMCC is the business district of choice for global companies setting up in the emirate, with the five leading sources being India, the UK, Germany, China, and France.

Ahead of a possible IPO, Dubai-listed Amanat Holdings is consolidating its healthcare assets in the ME into a single platform. The new company, Amanat Healthcare, will have assets across the UAE, Saudi Arabia and Bahrain, with an expected capacity of 1k beds by 2026, The parent company, listed on the DFM since 2014, with a paid up capital of US$ 681 million, posted a 14% hike in 2022 adjusted net profit, driven by higher revenue. Its current healthcare division has a mixed portfolio of assets including Cambridge Medical and Rehabilitation Centre in the UAE and Saudi Arabia, Sukoon, a provider of long-term and post-acute care services in Jeddah, Al-Malaki Specialist Hospital in Bahrain and the real estate assets of CMRC in Abu Dhabi.

The DFM opened on Monday, 03 April 2023, having gained 58 points (1.7%) the previous week, nudged 4 points higher to close on 3,411 by Friday 07 April. Emaar Properties, US$ 0.09 higher the previous fortnight gained US$ 1 to close the week on US$ 1.54. DEWA, Emirates NBD, DIB and DFM started the previous week on US$ 0.68, US$ 3.51, US$ 1.43, and US$ 0.34 and closed on US$ 0.67, US$ 3.62, US$ 1.44 and US$ 0.35. On 07 April, trading was at 65 million shares, with a value of US$ 37 million, compared to 92 million shares with a value of US$ 640 million.

By Friday, 07 April 2023, Brent, US$ 6.09 higher (8.2%) the previous fortnight, gained a further US$ 5.18 (6.5 %) to close on US$ 79.94.  Gold, US$ 7 (0.3%) higher the previous fortnight, closed up US$ 39 (2.0%) at US$ 2,026 on 07 April 2023. On Wednesday, gold had risen to its highest level in a year as it touched US$ 2,025, whilst silver was trading at US$ 24.86.

Last Monday, the 48th Meeting of the Joint Ministerial Monitoring Committee occurred, with it reviewing crude production for the first two months of the year and how members confirmed to their quotas made in the Declaration of Cooperation. At the online meeting, members reaffirmed their commitment for the rest of the year and were urged to keep to their commitment to maintain full conformity and adhere to the compensation mechanism. The various cuts by members, (totalling 1.66 million bpd), agreed a day earlier, were confirmed as from 01 May until 31 December 2023; they included Saudi Arabia (500k bpd), Iraq (211k bpd), United Arab Emirates (144k bpd), Kuwait (128k bpd), Kazakhstan (78k bpd), Algeria (48k bpd), Oman (40k bpd) and Gabon (8k bpd).

When Johnson & Johnson was first hit by thousands of lawsuits alleging that talc in its iconic Baby Powder, and other products, caused cancer, it initially agreed to a settlement offer of US$ 2.0 billion; this week. It agreed to settle for US$ 8.9 billion. This came after January’s court decision, that had invalidated J&J’s Texas two-step bankruptcy manoeuvre, in which it sought to offload the talc liability onto a subsidiary that immediately filed for Chapter 11. Despite settling some 60k claims, the company still maintained that its talc products were safe, claiming that its Baby Powder and other talc products do not cause cancer and do not contain asbestos. In 2018, a Reuters report claimed that J&J knew for decades about tests showing its talc sometimes contained carcinogenic asbestos but kept that information from regulators and the public. In 2020,  it said it would stop selling talc Baby Powder in the U.S. and Canada – due to what it called “misinformation” about the product – and three years later posted its intent to discontinue it globally. Despite this landmark legal decision, the company still faces further clams.

After almost twenty years in the UK, it is reported that Amazon is to close its online store Book Depository, as part of its recently announced plans to slash 18k of jobs, as it shakes up its businesses globally; it was founded in 2004 by former Amazon employee Andrew Crawford and his business partner Stuart Felton and acquired by the tech giant seven years later. It has offices in London, Gloucester, Madrid, Cape Town and Chennai – with fulfilment centres in the UK and Australia. Sales had boomed during the pandemic but have markedly slowed, with consumers cutting back spend due to the cost-of-living crisis. Other tech giants are in similar positions – all trying to cut costs to remain competitive.

Apple’s main Irish-registered company posted pre-tax profits of US$ 69.3 billion in 2022, surpassing the previous year’s return of US$ 67.7 billion; 2022 revenue came in on US$222.8 billion, with operating expenses at US$ 26.9 billion. The tech giant paid dividends totalling US$ 20.7 billion, compared to US$ 25.3 billion in 2021. There was a 4k increase in payroll numbers to 56.6k, with the prospect of a further 1.3k if plans to expand its Cork campus go ahead. Furthermore, the EC is to appeal against a tax payment of US$ 13.1 billion that it had levied on Apple but was later annulled. The company maintains a US$ 12.7 billion in an escrow account, pending the conclusion of all legal proceedings.

After price tweaks over the past six months, Tesla has marked down prices again on all its vehicle range, with its chief executive, Elon Musk confirming that the company will sacrifice its profitability to keep growing amid rising interest rates and a possible recession.  Its models 3 and Y have been discounted by US$ 1k with the more expensive Models S and X by US$ 5k; it has also added a new base version of the Model Y starting at US$ 49,990. Tesla has higher margins than many of its competitors and is in a better position to “play” with its prices. Last year, the company fell short of its target for a 50% average annual increase in vehicle deliveries, expanding by 40%, with its Q1 growth rate dipping to 36%.

Although the International Air Transport Association noted that February 2023 global air cargo markets showed that air cargo demand rose above pre-pandemic levels, ME carriers experienced an 8.1% year-on-year decrease in cargo volumes – slightly improved on January’s -11.8%; capacity increased 9.3% on the year. Global demand, measured in cargo tonne-km, dipped 7.5% over the twelve months, compared to -14.9% and 15.3% over the previous two months; it was 2.9% higher than pre-pandemic levels. The supply (capacity) side saw a 8.6% increase compared to February 2022. International belly-capacity grew by 57.0% on the year equating to 75.1% of the 2019 pre-Covid capacity. The main driver behind this increase was an improvement in China’s economic outlook, as its manufacturing PMI rose above 50 – the threshold between expansion and contraction.

Although sale prices in the Australian property market are edging lower, it seems that it is becoming more expensive for renters across the nation, as the cost-of-living crisis starts to bite. Real estate website Domain noted that “the country is experiencing the longest stretch of continuous rental price growth on record, as house rents rise for the eighth consecutive quarter and unit rents for the seventh.”  Its latest report points to the fact that house rents are at a record high across all capital cities, and unit rents are at a record high across all capital cities except Canberra and Darwin. It is reported that house rents surged by US$ 90 a week over the March quarter, and unit rents rose by US$ 93 across the combined capital cities since the pandemic low. There seems to be no early end to these hikes for renters; for example, Sydney median weekly rentals broke into the AUD 700, (US$ 466), territory for the first time. The post-Covid international travel boost added a net overseas migration gain hit of 304k in the twelve months to September 2022, and this is one of the main drivers behind the rise in rental properties, as is the fact that the “proportion of overseas migrant arrivals that were temporary visa holders is now sitting at 61%.” It is self-evident that supply is not keeping up with demand, with a recent study warning of a shortfall of 106k new dwellings by 2027, and 79k over the next decade.

Pakistani consumer price inflation rose to a record 35.37% on the year, and 3.87% higher on the month, as food, beverage, and transport prices surged up to 50% over the past twelve months. Last month, annual food inflation was at 47.1% and 50.2% for urban and rural areas, respectively, whilst core inflation, which strips out food and energy, stood at 18.6% in urban areas and 23.1%% in rural areas. It is expected that these elevated inflation rates will continue well into this year. The country has been in economic turmoil for months, with an acute balance of payments crisis, whilst its foreign exchange reserves have fallen to cover barely four weeks of imports. The country had agreed bailout terms with the IMF in 2019, subject to certain conditions; talks to secure a much-needed US$ 1.1 billion in funding as part of the US$ 6.5 billion still continue.

Latest figures from the US Labor Department, indicate that the recent jobs boom has slowed, with March figures showing that employers added 236k new jobs in the month, (326k jobs in February); it is estimated that the economy only needs 100k jobs a month to keep up with growth in the working-age population. These figures are an indicator that the national economy is still resilient despite interest rate hikes and the cost-of-living crisis. The jobless rate remained at near historic lows – 3.5%. Because of the continuing tightness in the labour market, it is all but inevitable that a Fed rate hike is on the cards this month. Like other central banks, such as the BoE and the ECB, the Fed were negligently slow in raising rates after consumer prices started to move higher two years ago, then advising people not to worry because inflation was only temporary.  Now its number one target is to tame inflation which obviously would not be such a major problem if action had been taken a lot earlier.

In March, there was a marked slowdown in Eurozone’s economy, down on the month by 1.6% to 6.9%, whilst US witnessed an easing in the ongoing price increases, with annual personal consumption expenditures price index down 0.3% to 5.0% – a possible indicator that a light has appeared at the end of the tunnel. This presents a conundrum for central banks that have to balance whether to continue to hike rates to curtail inflation, (which nudged 0.1%, on the month, to 5.7%), or not to rise them that could be a forerunner for a deflationary cycle. The two central banks will one day explain why they failed to act quicker when it became apparent that inflation was speeding away from their respective 2.0% targets. Undoubtedly, the coming weeks will see both central banks increasing rates again, as the Fed Reserve considers its tenth rate, and probably not the last, hike since March 2022.

Last year, there was a massive US$ 470 billion deficit in the EU trade in goods balance – its lowest level ever since records started in 2002.  According to Eurostat, the main driver was down to a steep rise in the value of energy imports, which started towards the end of 2021 and continued through most of 2022. Last year also witnessed increasing prices in extra-EU imports and exports by 41% and 18% respectively. The highest share of intra-EU imports was recorded in Luxembourg (90% of its total imports), while the highest share for intra-EU exports was recorded in Czechia (82% of its total exports) – on the flip side were Ireland (35%) and Cyprus (26%), the former because its main trading partner is the UK. Netherlands imported 61% of its goods from outside the EU but exported 71% of that total within the EU.

Major European economies reported welcome slowing in inflation last month with the likes of Germany, France and Spain posting monthly declines of 1.3%, 0.7% and 3.3% to 7.4%, 5.6% and 3.3%. Among the twenty euro countries, Luxembourg had the lowest inflation rate in February at 3.0%. Additionally, the unemployment rate in the eurozone remained stable in February at 6.6%.

With China opening up, growth in developing East Asia and the Pacific is forecast to jump 1.6% to 5.1% this year. China is expecting the economy to expand by 2.1% to 5.1% in 2023 but, elsewhere in the region, most will see slower growth at 4.9%, compared to 5.8% in 2022. The World Bank warns that growth could be slightly derailed by the negative impacts of a slowing global growth, high commodity prices, and tightening financial conditions in response to persistent inflation. It is expected that Indonesia, the Philippines, and Vietnam, will have more modest growth in 2023, compared to last year, whilst most Pacific Island countries are forecast to grow faster this year. Although this century has seen countries in the region performing better than most in other regions, it is perhaps significant to note that productivity growth and the pace of structural reforms have slowed.

Most countries in the EAP region have seen two decades of higher and more stable growth than economies in other regions. The result has been a striking decline in poverty and, in the last decade, also a decline in inequality. However, the catch-up to the per capita income levels of advanced economies has stalled in recent years as productivity growth and the pace of structural reforms has slowed. Addressing the significant “reform gap,” especially in services, could magnify the impact of the digital revolution and boost productivity in sectors from retail and finance to education and health. The World Bank has noted that “de-globalisation, aging, and climate change are casting a shadow over the growth prospects of a region that has thrived through trade and is growing old fast. However, promoting trade, addressing population dynamics, and enhancing climate resilience could strengthen growth.”

Undoubtedly, the Ukraine war and the cost-of-living crisis have had a bigger impact on the world’s poorer people, as most of their dependence is on food and energy – the two sectors hit the worst. Consequently, the World Bank is rightly concerned that this will deteriorate, resulting in a first-ever increase in the global extreme poverty rate – people getting by on less than US$ 1.90 per day, which, because of the pandemic, has risen 0.9% to 9.3% from 8.4% to 9.3%.

Once again, the Chinese “invasion” of Africa rears its ugly head, with David Malpass noting his concern of loans being made to developing economies in Africa. The president of the World Bank mentioned the likes of Ghana, Tanzania and Zambia, which are all struggling to repay their debts to Beijing. Such nations are being hit by the double whammy of rising interest rates on existing debts and consolidating their forex reserves needed to bankroll more expensive imports, requiring even more funding. A recent study indicated that globally China lent US$ 185 billion in bailouts to twenty-two countries between 2016 and 2021. It does seem that China is learning much from the US$ shenanigans in South America and Indonesia, more than fifty years ago, when it used one-sided loans in a most unethical fashion. This week, US Vice-President Kamala Harris was in Africa with offers of major commitments of financial support initially in Tanzania and Ghana. To the cynical observer, the growing rivalry between the two leading global economies will only result in these two nations exploiting and profiting, whilst the “beneficiaries” will become increasingly poorer. Rich World, Poor World!