It’s Time To Go!                                                                             28 June 2024

Omniyat plans to boost investment and more than double the value of its property portfolio to U$27.3 billion, (AED 100 billion), in the next five years, as it seeks to capitalise on the sustained demand in the UAE real estate market; 50% of this base will be its portfolio of ultra-luxury properties, including two set to launch in H2, with a combined value of US$ 2.72 billion, (AED 10 billion). The other 50% will be across the real estate chain and include residential, commercial and hospitality projects in the UAE and the broader GCC region. The luxury and ultra-luxury sectors have bounced back since the pandemic slowdown and has managed to post robust price rises over the past two years. In the first five months of 2024, Dubai registered nine hundred and forty-eight sales of properties worth more than US$ 4.09 million, (AED 15 million), mainly in areas such as Palm Jumeirah, Mohammed bin Rashid City, Dubai Water Canal, Tilal Al Ghaf and Dubai Hills Estate. Undoubtedly, the upward trend will continue, aided and abetted by Dubai’s policies of attracting top global talent, and an expanding number of millionaires.

Ahmadyar Developments’ latest project is The Palatium Residences, featuring G+4P+12 floors, in Jumeirah Village Circle. It offers a diverse range of studio, 1, 2, and 3-bedroom apartments, with breathtaking community views and lush parks. Construction, already started this month, is expected to be completed by Q2 2026.

Some industry players have indicated that, in H1, prices have risen by up to 10%, with more of the same in H2, with more handovers due in the third and fourth quarters. Allsopp & Allsopp noted that average rents across the city have seen a 15.7% annual increase, with apartments and villas/townhouses rising by just under 15.0% and 18.0%. Betterhomes reckoned that the average price of rental contracts increased by 8.0% in H1 2023 and a further 8.0% in H2 2023; the highest returns were seen in Jumeirah Beach Residence, Town Square, Dubai Production City, Dubai Healthcare City 2 and Meydan, which all saw a 21% to 22% jump in rentals. Additionally, Dubai South’s average rents increased by about 38.0%, compared to H1 2023, aligning with the expected increase in demand following the announcement of the new Al Maktoum Airport earlier this year. Jumeirah Island and Al Barari witnessed impressive H1 growths of 43.0% to US$ 136k, and 39.0% to US$ 109k. Furthermore, rents grew by 21%, 14%, 12% and 11% in Tilal Al Ghaf, Dubai Hills Estate, The Villa Project and Dubai Creek Harbour.

An agreement between the Dubai Land Department and Bayut has resulted in the launch of TruEstimate, an AI-powered property valuation tool, which utilises Bayut’s data with DLD’s property databases. It aims to offer accurate property valuations and data-driven insights and is designed to enhance transparency and trust in Dubai’s real estate market. Furthermore, it will benefit stakeholders in making informed decisions and optimising investment strategies. Information, as indicated below, is input into the platform, which then generates a detailed report.

The Asia Pacific Cities Summit, founded in 1996, has grown into an important event promoting economic collaboration and urban innovation across the Asia-Pacific region. Expo City Dubai, which has been selected to host the three day event next year (between 27 -29 October) follows the likes of Brisbane, Seattle, and Incheon which have hosted previous events. The Asia Pacific Cities Summit and Mayors Forum 2025 represents a platform for cities to showcase projects, exchange ideas, and drive positive development, and will bring together mayors, city leaders, entrepreneurs, and experts from Asia-Pacific, the ME, Africa, and South Asia. The event will be held at the Dubai Exhibition Centre, and will be the first time that the exhibition has been held in the ME.

To the surprise of many, Dubai only ranked seventy-eighth globally, up two places from the 2023 index, scoring 80.8, in the Economist Intelligence Unit’s Global Liveability Index 2024. The report noted that sustained investment, in health, infrastructure and education, was a significant factor for the emirate’s strong performance, along with scoring highly on stability. For the third consecutive year, Vienna was named the world’s most liveable city, scoring 98.4 out of 100, among the 173 cities ranked on the index on thirty indicators measuring stability, health care, culture and environment, education and infrastructure. The two other cities in the top three were Copenhagen (98.0) and Zurich (97.1). The top five cities in the Mena region were Abu Dhabi, Dubai, Kuwait City, Doha and Manama at number 76, 78, 93, 101 and 105. Damascus retained its ranking as the least comfortable city in the world, with a score of 30.7, with results for stability and health care “particularly poor”, followed by Tripoli, with a score of 40.1, and Algiers with 42.0.

The Ministry of Finance has successfully closed its final offering of a ten-year US$ 1.50 billion bond, issued with a yield of 4.857%, at a spread of 60 bp over US Treasuries; the bond will be listed on the London Stock Exchange and Nasdaq Dubai. The issue was over four times oversubscribed, with the order book of US$ 6.50 billion – an indicator of the country’s growing attraction to both domestic and international investors. Mohamed Hadi Al Hussaini, Minister of State for Financial Affairs, said, “the successful completion of another sovereign bond by the UAE is a testament to our nation’s enduring attractiveness to investors and our position as one of the world’s premier investment hubs.” Location-wise, the final distribution showed that investors from the ME, US, UK, Europe and Asia accounted for 38%, 34%, 18%, 7% and 35% respectively. By investor-type, the allocation for fund managers, banks, pension funds, central banks/SVW and others received 56%, 40%, 1%, 1% and 2% respectively. The notes will be rated AA- by Fitch and Aa2 – an indicator that the UAE has a fine reputation on the global market, driven by its high GDP per capita, innovative policies, strong international relationships, and resilience to economic and financial challenges.

The Central Bank of the UAE noted that foreign trade performance would continue, this year and next, with GDP growth of 3.9% and 6.2% in 2025; growth of the non-hydrocarbon GDP will be 5.4% and 5.3% and for the hydrocarbon sector 0.3% and 8.4%. The former accounts for about 75% of the country’s GDP, and last year non-oil trade reached US$ 953.68 billion, (AED 3.5 trillion).  It also revised downwards, by 0.2%, its inflation forecast for 2024 to 2.3%. The bank noted that “indicators point towards robust economic activity within the non-oil private sectors.”

The DFM opened the week on Monday 24 June, 34 points (0.8%) higher the previous three week gained 18 points (0.4%) to close the trading week on 4,030 by Friday 28 June 2024. Emaar Properties, US$ 0.13 higher the previous fortnight, gained US$ 0.04, closing on US$ 2.15 by the end of the week. DEWA, Emirates NBD, DIB and DFM started the previous week on US$ 0.60, US$ 4.47, US$ 1.57 and US$ 0.35 and closed on US$ 0.60, US$ 4.50, US$ 1.56 and US$ 0.35. On 28 June, trading was at two hundred and twenty-eight million shares, with a value of US$ 193 million, compared to one hundred and eighty-nine million shares, with a value of US$ 104 million, on 21 June.

The bourse had opened the year on 4,063 and, having closed on 28 June at 4030 was 33 points (0.8%) lower. Emaar started the year with a 01 January 2024 opening figure of US$ 2.16, to close YTD at US$ 2.23. Four other bellwether stocks, DEWA, Emirates NBD, DIB and DFM started the year on US$ 0.67, US$ 4.70, US$ 1.56 and US$ 0.38 and closed YTD at US$ 0.60, US$ 4.50, US$ 1.56 and US$ 0.35. 

By Friday, 28 June 2024, Brent, US$ 5.58 higher (5.8%) the previous fortnight, gained US$ 1.25 (1.5%) to close on US$ 86.40. Gold, US$ 27 (1.9%) lighter the previous week, gained US$ 15 (0.5%) to end the week’s trading at US$ 2,337 on 28 June 2024.

Brent started the year on US$ 77.23 and gained US$ 9.17 (11.9%), to close 28 June 2024 on US$ 86.40. Meanwhile, the yellow metal opened 2024 trading at US$ 2,074 and gained US$ 263 (12.7%) to close YTD on US$ 2,337.

Italian regulators have fined DR Automobiles US$ 6.4 million for supposedly branding vehicles that were made in China, as being produced in Italy. In fact, the Italian company assembles low-cost vehicles, using components produced by Chinese car makers Chery, BAIC and JAC. The regulator confirmed that only minor assembly and finishing work was carried out in Italy, and that the vehicles, under the company’s DR and EVO brands, were sold as being Italian made but were largely of Chinese origin. Last week, the EU threatened to hit Chinese EVs with import taxes of up to 38%, (on top of the current rate of 10% levied on all Chinese electric car imports to the EU,) after politicians called them a threat to the region’s motor industry. The announcement came after the US last month raised its tariff on Chinese electric cars from 25% to 100%.

Stellantis has warned the UK government that it would halt all production in the country, in less than a year, if it does not receive more finances to boost EV demand. The carmaker, concerned that the government’s policy of banning diesel and petrol vehicles would damage its UK business, owns several brands including Fiat, Jeep, Alfa Romeo, Chrysler, Dodge, Maserati and Opel, added that “Stellantis UK does not stop, but Sellantis production in the UK could stop”. The Sunak’s government back-pedalled a little by extending the 2030 target by a further five years to 2035. There has been an ongoing war of words, between the government and car manufacturers, over the push towards EVs, the demand of which has fallen recently because of the flooding of cheap, (apparently heavily subsidised by the Xi Jinping government), Chinese imports.

This week, Volkswagen announced it would invest up US$ 5.0 billion in Rivian, a rival to Tesla, with the JV allowing both partners to share technology; an initial US$ 1.0 billion will be put in the electric truck and SUV maker, with the US$ 4.0 balance invested by 2026. Rivian shares booted 50% higher on the news. In Q1, Rivian, founded in 2009 and yet to turn in a quarterly profit, posted a Q1 US$ 1.4 billion deficit. The industry has been beset by intensified competition between EV makers in a market that has seen a flood of cheap Chinese imports, increased government regulations, reduced revenue and falling margins. The agreement will benefit both VW in its shift away from fossil fuel-powered vehicles, as it comes under pressure from rivals, like Tesla and China’s BYD, and Rivian which has struggled to make headway in a highly competitive market.

Nike shares plunged more than 12% in yesterday’s after-hours trading, equating to a market cap loss of some US$ 15 billion, as it faces increasing competition from relatively new competitors, such as On and Hoka, as well as weakening demand in international markets, including China. The world’s largest sportswear company expects a 10% decline in quarterly revenue, posting that its direct-to-consumer business declined 8%, as some customers went for more trendy upstart brands. The company also lowered its outlook for the 2025 fiscal year. However, there is some optimism with it introducing new products and a marketing campaign at the upcoming Olympic Games in Paris will help the company regain momentum with consumers, as will the fact that it sponsors jerseys for nine of the teams in the current UEFA Euro 2024 tournament, including England, France and Portugal. Sales have been negatively impacted by the company’s reluctance to utilise wholesalers and continue to sell its products through its own stores and website.

Shein has finally filed initial paperwork in its bid to be listed on the London Stock Exchange which could value the Chinese fast fashion firm at over US$ 63.30 billion. Based in Singapore, the online retail giant, and with a strong customer base in China, has been facing strong criticism on its modus operandi and its environmental impact. The retailer, which came to the fore during the pandemic, has seen its working practices – including allegations of forced labour in its supply chain, sweat shops and trade tricks – raising concerns. It was widely expected that Shein would list in New York late last year, after it had filed papers but close scrutiny by politicians, (from both sides), and regulatory authorities about its close links with China, soon damped their enthusiasm. There is still some paperwork to close the listing process, but it does seem that it is likely that Shein will become one of the biggest names on the LSE.

Good news for some is that ex-BHS director, Dominic Chappell, has been ordered to pay US$ 63 million, (including US$ 27 million for wrongful trading and US$ 22 million for breach of fiduciary duty and other additional costs, to cover losses the firm incurred before its collapse). Mr Justice Lee, the High Court judge, noted that Mr Chappell tried to “plunder the BHS Group whenever possible” after he bought the company for US$ 1.26 (GBP 1) from Sir Phillip Green in 2015, and that he never had a realistic plan to secure capital for the company when he acquired it; he still faces another fine over a misfeasance or wrongful trading claim. He had also been imprisoned for six years in 2020 over tax evasion. The accused, a former racing driver, with no retail experience, was at the helm of BHS when it fell into administration, with a billion pounds worth of trading liabilities and pension debts, (of some US$ 722 million), in 2016. 11k employees lost their jobs. Earlier this month, two former BHS directors, Lennart Henningson and Dominic Chandler, were ordered to pay at least US$ 23 million to creditors over their role in the collapse of the retailer.

Novo Nordisk is investing US$ 4.1 billion to take advantage of the current craze for its blockbuster weight loss drugs. To meet demand, the Danish pharma firm will double the size of its Raleigh North Carolina facility to 2.8 million sq ft, which will be completed between 2027 – 2029. It is fighting with its main rival Eli Lilly for the lion’s share of a US$ 42.0 billion market in a new class of diabetes and weight loss drugs, known as GLP-1s; sales are expected to top US$ 130 billion by 2030.

This week, the yen fell to its lowest level, at 160.24 to the greenback, in thirty-seven years, and this despite increased market intervention to try and slow down the downward trend. The Japanese authorities had signalled in recent days their intention to respond to excessive volatility in the forex market, indicating that currency movements should reflect fundamentals. The current confidence in the US dollar is based on the distinct possibility that US rates will keep at its elevated rates and that the US economy continues its upward trend; this is in contrast, with Japan’s rate still hovering around the zero mark. There are reports that the Finance Ministry spent about US$ 61 billion, between 26 April to 29 May, to slow the yen’s rapid fall against the dollar. Japanese households continue to struggle with the rising cost of living, due in large part to the weaker yen making imported goods more expensive.

Japan’s industrial output in May grew 2.8% on the month driven by increased car production, with the seasonally adjusted index of production at factories and mines at 103.6 against the 2020 base of 100. The Ministry of Trade retained its basic assessment from the previous month that industrial production “showed weakness while fluctuating indecisively”. Thirteen of the fifteen industrial sectors, covered by the survey, posted higher output, whilst the index of industrial shipments increased 3.5% to 103.5, while that of inventories rose 1.1% to 103.5. Based on a poll of manufacturers, it expects output to decrease 4.8% this month but increase 3.6% in July.

A report on the demise of the Australian budget airline, Bonza, concluded that the company had “significant” solvency and operational concerns as far back as November, and “may have been insolvent from 01 March 2024 and remained so up to and including the date of the administration.” The report noted that the two Australian directors, CEO Tim Jordan and CFO Lidia Valenzuela, had had co-operated with the administrators, while the two American directors from 777 Partners, (who have an 89.87% stake in Bonza), did not; the problem was that the carrier was reliant on its majority owner 777 Partners for funding. From the start, there were problems, as Bonza had planned a June 2022 start, with three planes and scale up to eight jets over the next twelve months. Actually, the airline did not take off until February 2023 due to regulatory delays, and only had four aircraft by the time it collapsed two months ago. Over that period, it never made a profit and made total losses of US$ 87 million, (AUD 130 million) – and owes the tax office over US$ 1 million. Creditors started issuing demands for immediate payment of outstanding invoices from as early as July 2023, whilst the Commonwealth Bank notified Bonza in June 2023 that it was ceasing the banking relationship. The airline should have charged higher airfares, the report found, while noting Bonza was hamstrung by an exclusive arrangement to sell tickets through its app and not via third-party booking engines. The administrators, Hall Chadwick, (who are claiming nearly US$ 3 million in fees so far), will provide its findings to the corporate watchdog, the Australian Securities and Investments Commission. Meanwhile, creditors, including three hundred and twenty-three staff and 71.4k customers, could walk away with nothing, with the majority shareholder claiming US$ 52 million and the two minority shareholders US$ 66k and US$ 71k.

In Australia, as in many other nations’ property markets, demand continues to overwhelm supply, with the March quarter median profit made on a home sale being US$ 176k (AUD 265k) in the March quarter. Generally, the longer a vendor holds a property the higher the returns, with vendors selling after thirty or more years attracting the largest median gain of US$ 519k, (AUD 780k). According to Core Logic, Australian property resales reached their highest rate of profitability, since July 2010. The median hold period of resales across Australia was 8.8 years in Q1, down from 9.0 years in the December quarter of 2023, and 8.9 years in the March quarter of 2023. In August 2023, the portion of properties sold after two years peaked at 8.4% of resales, up from a decade average of 6.7%, whilst three-year held resales in the year to March have hit a high of 15.8%. CoreLogic estimates the combined value of nominal gains from resale was US$ 19.03 billion in the March quarter, down, on the quarter from US$ 20.33 billion, with nominal losses from resales being US$ 185 million in Q1, down from US$ 201 million. The RBA will inevitably continue to watch the number of shorter-term property resales closely for further signs of mortgage stress, but for the time being, it appears that the profitability rate across the Australian housing market helps to shore up financial stability for many property owners, at a time when higher mortgage costs are starting to take their toll on household budgets.

It was a surprise to see that the Australian May headline inflation nudge 0.4% higher, on the month to 4.0%, well above the Reserve Bank of Australia’s 2% – 3% target. The takeout from this is that the chance of a rate hike, in early Augus, has risen, as the RBA struggles to get price growth down. A lot will be decided after the release of the June CPI report on 31 July, with an August rise of 0.25% to 4.6% in the cash rate if there is still inflationary pressure evident. Surprisingly, Australia is the only G10 country where underlying inflation has increased since December. The main contributors to the price increase over the year to May were housing (5.2%), food/non-alcoholic beverages (3.3%), transport (4.9%), and alcohol/tobacco (6.7%).

It seems that corruption is rife in Europe, with the latest example involving the ex-supremo of the European Investment Bank from 2011 to 2023. Werner Hoyer, the former president of the world’s largest multilateral lender is accused of corruption, abuse of influence and misappropriation of EU funds; the seventy-two year old refutes all charges, saying the allegations against him were “absurd and unfounded”. It is thought that the investigation is centred on a compensation payment to a departing EIB staff employee, with the European Public Prosecutor’s Office, having already searched Hoyer’s house, consider him a person with knowledge of the matter. EU officials are granted immunity from legal proceedings unless it is waived by their institution. In this case it was confirmed that the EIB had lifted two former employees’ immunity so they could be investigated for suspected corruption, abuse of influence and misappropriation of EU funds. It appears that these two are Hoyer himself and the employee to whom the payment was made.

Deloitte’s latest annual review of football finance sees the twenty EPL teams set to score record revenues this season, with an annual 7.0% increase to US$ 8.09 billion, attributable to larger stadia, increased international broadcast deals, higher ticket prices, new and enhanced sponsorship deals and format changes to European competitions. Last season, revenue came in flat, at around US$ 7.59 billion, mainly due to English sides’ underperformance in Europe with none making it past the quarter finals in the Champions League. Even at US$ 7.59 billion, it was way higher than second place Germany’s US$ 4.81 billion.

With the Unite union members set to strike on 08 July, at the Tata steelworks in Port Talbot, the conglomerate has decided to bring forward its closure to 07 July; it was due to shut in September. The steelworks had two fossil-fuel-powered blast furnaces – one of which was closed down today and the other due for decommissioning in September. One of the main reasons behind the decision was to reduce carbon emissions at what is the UK’s single largest source of CO2. With these two closures, 2.8k jobs will be lost -2.5k in the next year, and a further 300 in three years – and this despite the government investing US$ 632 million, (GBP 500 million) to support the site’s transition to cheaper, greener steel production to cut emissions. The blast furnaces will be replaced by a single electric arc furnace.

The BoE posted that about three million households are set to see their mortgage payments rise in the next two years, with about 400k mortgage holders facing some “very large” payment increases of up to 50%. However, it does seem that 33% of UK mortgage holders, (about three million), are still paying rates of less than 3%, with many starting to expire and the majority of fixed rate deals will conclude by 2026. For the typical household, monthly mortgage repayments are forecast to increase by 28%, or around US$ 228k. The BoE report comes after HSBC, NatWest and Barclays began reducing mortgage rates, following hints of a summer interest rate cut by the Bank of England; it also noted that renters remain under pressure from the higher cost of living and higher interest rates.

A report by the Resolution Foundation has found that a typical household income has risen by just US$ 177, (GBP 140), a year since 2010; this equates to a total rise of just 7% over the fourteen-year period, or less than 0.5% on an annual basis, in the amount people had left over to spend after paying tax. This compares to disposable incomes rising 38% over the fourteen years up to 2010. Interestingly, it seems that poorer households have seen stronger income growth than richer ones, partly due to the UK’s strong jobs market and one-off cost-of-living payments last year; these were offset by the impact of what the report called “regressive tax and benefits policy decisions”, resulting in a 13% total overall rise in disposable incomes over the period. The richest households meanwhile saw only 2% income growth over the fourteen-year period. It put the disappointing figures down to slow economic growth and three major economic shocks – the 2008 GFC, the Covid pandemic and recent high inflation. It also noted that data from Eurostat, covering a similar but not identical period between 2007 and 2022, suggested the UK had fared worse when it came to disposable income growth than several other leading European countries, including Netherlands, France and Germany. It also found absolute poverty had fallen 3.6% since 2010, but in the thirteen years prior to 2010 it had fallen by 14.0%, and that relative poverty levels remained broadly stable over the last fourteen years, but the number of children in large families living in poverty had risen, while those in small families living in poverty had declined.

May Government borrowing was 5.6% higher on the year, (US$ 18.93 billion), and at the highest since the pandemic, as well as being the third highest return since records began in 1993. In short, this demonstrates that the public sector spent more than it received in taxes and other income, leading the government to borrow billions of pounds. The problems facing the new government – whoever that may be but definitely not the present incumbent – are manifold as it seems likely that interest rates will remain high at least for the rest of the year, thus making borrowing more expensive, public spending will inevitably have to head north and the debt will become even harder to bring down. Current government debt equates to 99.8% of the country’s GDP which is at an extraordinary level – and the highest since the 1960s. Last month, the interest payable on central government debt was US$ 10.13 billion, which was one of the highest amounts on record.  Traditionally government receipts come from an array of sources, including direct tax, VAT and National Insurance. But with the latter seeing May receipts US$ 1.14 billion less than a year earlier, offset somewhat by tax receipts of US$ 1.0 billion, there is very little in the coffers especially for the monies needed by a gamut of public services – and the distinct possibility of public debt sinking to over 100% of GDP.

There is no doubt that lending at this level cannot continue at the same pace, with events such as the GFC, the pandemic, the war in Ukraine, having forced the national debt to grow to current worryingly high levels. On top of that, own goals by the brief tenure of the  Truss/Kwarteng administration and by the then Chancellor Rishi Sunak exacerbated the interest problem. In September 2022, Truss’ US$ 57.0 billion package of unfunded tax cuts — with the promise of more to come – sunk the pound, sent interest rates soaring, caused chaos on the bond markets and forced the Bank of England to prop up failing pension funds. Then there is the think tank, National Institute of Economic and Social Research, blaming the Chancellor Sunak of failing to insure against interest rate rises, when the official rate was still 0.1%, that would have saved the UK taxpayer billions of pounds, as rates shot northwards. In 2021, when the official rate was still 0.1%, NIESR said the government should have insured the cost of servicing this debt against the risk of rising interest rates. It said interest payments have “now become much more expensive” and it estimates that the loss over the previous year was at around US$ 14.0 billion. The end result is that whoever wins the UK general election may be unable to fuel growth by increasing government borrowing. The only options available would be to raise taxes, cut public spending, (including NHS, education and police), or even to start thinking about growing the economy.

A report by the Resolution Foundation has found that a typical household income has risen by just US$ 177, (GBP 140), a year since 2010; this equates to a total rise of just 7% over the fourteen-year period, or less than 0.5% on an annual basis, in the amount people had left over to spend after paying tax. This compares to disposable incomes having risen 38% over the fourteen years up to 2010. Interestingly, it seems that poorer households have seen stronger income growth than richer ones, partly due to the UK’s strong jobs market and one-off cost-of-living payments last year; these were offset by the impact of what the report called “regressive tax and benefits policy decisions”, resulting in a 13% total overall rise in disposable incomes over the period. The richest households meanwhile saw only 2% income growth over the fourteen-year period. It put the disappointing figures down to slow economic growth and three major economic shocks – the 2008 GFC, the Covid pandemic and recent high inflation. It also noted that data from Eurostat, covering a similar but not identical period between 2007 and 2022, suggested the UK had fared worse when it came to disposable income growth than several other leading European countries, including Netherlands, France and Germany. It also found absolute poverty had fallen 3.6% since 2010, but in the thirteen years prior to 2010 it had fallen by 14.0%, and that relative poverty levels remained broadly stable over the last fourteen years, but the number of children in large families living in poverty had risen, while those in small families living in poverty had fallen. With a track record like that, and the general election next Thursday, 04 July, the simple message for Rishi Sunak, his cronies and the Conservative Party is It’s Time To Go!