It’s The End Of The World, As We Know It!                                    19 July 2024

Saudi Arabia’s Dar Global is partnering with the Trump Organisation to build Trump Tower Dubai, which will feature a Trump hotel and branded residential units, with further details, including the cost, location and timeline, being made available by year-end. (It would be interesting to see financial details, including a premium, if he were to become the next president). The project will also feature The Trump Private, an exclusive members-only club, among other amenities. Eric Trump, executive vice president of the Trump Organisation, said the company is “proud” to expand its presence in the region and is looking forward to “bringing our vision to life in one of the world’s most dynamic cities”; it already has a presence in Dubai, with a tie-up with Damac for two golf-related developments in Damac’s Akoya project. Last week’s blog, ‘Say A Little Prayer For Me’ included details of branded properties in Dubai:

‘ValuStrat’s head of real estate research, Haider Tuaima, confirms that “the demand (for branded residences) is there and is growing year-on-year,” and that “this was probably the third or fourth year, since Covid-19, that the demand for high-end luxury properties continues to grow.” More often than not, branded properties in Dubai will demand a higher premium than non-branded properties, with buyers preferring “something that is managed or that is branded, or that is associated with the brand .  .  .  it’s always at a high standard and well maintained and well managed.” Prathyusha Gurrapu, head of research and consulting at Cushman & Wakefield Core, notes that “the main drivers for branded residences are prestige, brand identity, international appeal, being part of the brand’s global hospitality network, superior levels of service, design, furniture packages, finishes along with investment potential through premiums and rental pools.” She also noted that “typically, branded residences command price premiums of about 25%-30%, compared to non-branded residences of similar build quality.” It is estimated that the average sq ft price of a branded residence comes in at US$ 1,770, with the two most expensive currently under construction, being Bulgari Lighthouse, (US$ 3,147 per sq ft), with thirty-one units, and Bulgari Residence, (US$ 2,854 per sq ft), with one hundred and eighty-two units;  a third, Bugatti Residences, (US$ 1,403 per sq ft), has one hundred and eighty-two units. Other projects already completed, include Four Seasons Residence, (US$ 2,742), Royal Atlantis Residences, (US$ 2,516), Armani Beach Residences (US$ 2,180), Baccarat Residences US$ (US$ 2,107), Ciel Tower (US$ 2,095), Oria by Omniyat, (US$ 1,928), and Six Senses Residences (US$ 1,796). Other projects still under construction include Cavalli Casa Tower, with four hundred and thirty-six units, and Mercedes-Benz Places, with one hundred and fifty units. More than 4.6k branded units are expected to be delivered in Dubai in the next five years, with more projects in the pipeline, so it is no surprise to see that the emirate boasts the highest inventory of branded residences compared to any other global city.

According to a Knight Frank report, global HNWIs will invest US$ 4.4 billion acquiring Dubai property in 2024 – a massive 74% increase on a year earlier. Many will be looking at branded residences – such as Armani Beach Residence by Arada currently being sold at a starting price of US$ 5.72 million, (AED 21 million) per unit. The company also noted that developers, such as Dar Global and Damac, are planning new launches to satisfy the growing demand at the top end of the Dubai real estate market. The former, having tested the market with four successful projects – Missoni, Aston Martin, Pagani and W residences – are planning another foray into the market. Meanwhile, Damac Properties is also looking to build new projects and is currently developing branded residential properties, in partnership with brands such as Cavalli and Swiss jewellery brand de Grisogono, which it acquired in 2022’.

Dubai H1 rentals have surged up to 31%, due to consistently strong demand, caused by the double whammy of population growth and Dubai residents moving faster from renting to owning properties, resulting in a dip in availability of existing supply in both affordable and luxury segments. Bayut estimated that Dubai rents rose between 4% and 31% in H1. Mid-tier apartments saw a rental increase of up to 15%, while luxury apartment rentals rose by up to 7%, whilst some units in Business Bay and Downtown Dubai reported price decreases of under 6%. Budget villa rentals have jumped 12%, mid-tier villa rentals have increased by up to 15% and luxury villa rentals have surged by up to 27%.

By 17 July, Dubai’s YTD population had already grown by 2.54%, (93k), to 3.748 million from 01 January’s figure of 3.655 million. It is noted that rentals are now increasing at a faster rate for new projects on the emirate’s outskirts because of affordability. A longer-term problem could be the fact that rents may become too high for certain sectors of the community, and if there were to be a population outflow at that level, there could well be a knock-on impact.

This blog estimates that the apartment to villa ratio is 82:18; the latest official figures, in 2022, showed that there were 639.0k apartments and 144.6k villas in Dubai – and assuming a 50k unit increase in 2023, that would give a 2023 year-end total of 680k apartments and 153.6k villas, a total of 833.6k units. Further surmising that the average villa and apartment has 4.85 and 4.25 occupants, and the 2024 population grows 165k (4.51%) from 3.655 million to 3.820 million, and if the number of new 2024 units comes in at 40k then the property portfolio would rise to 873.6k units; with the 82:18 ratio, that would result in 716.4k apartments and 157.2k villas. 4.25 occupants in 716.4k apartments would house 3.045 million and 4.85 occupants in 157.2k villas a further 762k; this gives a “housing population” of 3.807 million, almost in tandem to the forecast 3.820 million by the end of 2024. All well so far with the new supply in line with the demand from the rising population. But add to the equation the number of Airbnb’s, the number of existing residents moving from renting to buying, the number of second homes empty for most of the year and investment properties waiting to sell for capital appreciation, then it can be seen that this cycle has some way to go before running out of steam.

Shortly after the completion of Binghatti Emerald, the Dubai-based developer has announced the handover of Binghatti Corner which had been sold out shortly after its launch and was completed ahead of the scheduled delivery. Both developments are located in Jumeirah Village Circle. Binghatti Corner, with thirty-six storeys, comprises seven hundred and fifteen residential units, offering a variety of one and two-bedroom apartments, along with twelve retail spaces. Binghatti Emerald, with twenty-six floors, offers a diverse range of two hundred and eighty-one residences from one to three-bedroom units, as well as nine retail and thirty-eight office spaces.

Following its February debut US$ 300 million sukuk issuance on London Stock Exchange (ISM) and Nasdaq Dubai, Binghatti’s latest US$ 200 million was more than fourfold oversubscribed. The overwhelming demand for Binghatti’s sukuk resulted in a price reduction of approximately twenty bp which was linked to the robust levels of demand from both regional and international investors with the latter accounting for 40% of the total. Binghatti’s current portfolio value stands at over US$ 10.90 billion.

Ginco Properties has launched its One Residence – a US$ 327 million project located in the heart of Downtown Dubai, designed by Brad Wilkins; the renowned architect has been involved in building some of the world’s most famous skyscrapers like Pearl River Tower in China and the Burj Khalifa. The thirty-storey tower will house a range of units ranging from studios, one B/R, two B/R to exclusive penthouses. Ginco’s exclusive sales partner is One Broker Group, whilst Urban Properties have been appointed managers. Prices start at US$ 327k, with a possible 50:50 payment plan.

In H1, Dubai Land Department carried out four hundred and fifty field inspections and 1.53kinspections on associated advertisements, so as to check whether brokers have been complying with the terms and conditions for advertisements, specifically the presence of a QR code that should meet the approved specifications, is readable when scanned, and that the ad data matches the code authorisation. As a result, it is reported that DLD has fined two hundred and fifty-six property brokers for not complying with the regulations and terms and conditions of advertisement over the period and issued more than 1.2k legal warnings for not adhering to government regulations. The regulator will soon deploy AI technologies for advertisement monitoring which will significantly enhance the governance of the control process and reduce related violations.

Dubai South confirmed the successful completion of the first stage of the UAE’s autonomous vehicle trials in partnership with Evocargo. Trials have taken place on a set route in a closed area of the Dubai South Logistics District. During the trials, Evocargo checked and validated the hardware, software, and reliability of its unmanned electric truck, the Evocargo N1, for future service in the Logistics District. No failures or potentially hazardous incidents were reported by any parties during the series of tests.

In 2023, Dubai Mall was the Most Visited Place on Earth, and it seems that is on the way to repeating the accolade this year, having seen a 9.6% increase in H1 visitor numbers to fifty-seven million. Last year, the second-largest mall in the world by total land area, received one hundred and five million visitors, 19.0% higher on the year. In H1, various categories witnessed similar growth, recording growth in retail sales ranging from 8% to 15% over the same period last year.

Flydubai is to hire a further one hundred and thirty pilots, as it expands its fleet by seven new aircraft by the end of the year. The carrier also posted that it will expand its ever growing network by adding Basel, Riga, Tallinn, and Vilnius. Flydubai has a network of more than one hundred and twenty-five destinations, across fifty-eight countries, served by a fleet of eighty-eight Boeing 737 aircraft.  Its CEO, Ghaith Al Ghaith, noted that “Flydubai has grown its workforce to more than 5.8k skilled professionals, represented by one hundred and forty nationalities, more than 1.2k of whom are pilots”. At last year’s Dubai Air Show, the carrier placed its first-ever wide-body order for thirty Boeing 787s.

Emirates SkyCargo has placed a US$ 1 billion order for five more Boeing 777 Freighters, with delivery expected between 2025 and 2026. The airline already has five Boeing 777 Freighters on order and is also converting ten 777-300ERs into cargo aircraft. This will see the airline’s available main deck cargo capacity increasing by 30%; it will retire some of its older cargo fleet after receiving the new 777 Freighters by next year, with a fleet size of seventeen by the end of next year.

It has been announced that the newly formed DP World Evyap, a 58:42 merger between the Dubai port operator, (assuming a 58% stake in Evyapport), whilst the Evyap Group secures a 42% share of DP World Yarımca. The merger will unite the strengths of two major ports on the Marmara Sea to create a new international logistics hub that will enhance Türkiye’s global trade position and improve its supply lines; the merger has been approved by the Turkish Competition Authority. The rebranding will introduce ‘DP World Evyap Yarımca’ and ‘DP World Evyap Körfez’ as the new names for these key maritime gateways. The merger will see berthing space expanded to 2.1k mt and allow more than one ultra-large container vessel simultaneously at both terminals; total annual container handling capacity will also exceed two million TEUs.

Dubai-listed Amanat Holdings has confirmed, to the DFM, that it will proceed with an initial public offering of its education platform but did not disclose where it plans to list and how many shares it wishes to sell on the open market. Its education platform includes Middlesex University Dubai, Human Development Company, a provider of special education and care services in Saudi Arabia, and Nema Holding, which offers higher education in Abu Dhabi. Companies including Parkin, Salik, Tecom, Empower, Dubai Taxi Company, Spinneys and Al Ansari Financial Services have listed their shares on the DFM over the past two years. It is estimated that companies in Dubai have raised US$ 9.40 billion, through selling shares in the past three years, with aggregate investor demand for those listings reaching more than US$ 272.5 billion. Amanat also operates a healthcare platform with a medical and rehabilitation centre in Saudi Arabia and the UAE, and a hospital in Bahrain.

UAE-based property company is headed by Mohamed Alabbar, founder and managing director of Emaar Properties, which has a 25% stake in the company. This week, Indonesia’s ministry of state-owned enterprises signed a preliminary US$ 3.0 billion agreement with Eagle Hills to develop tourism infrastructure in the country; this will cover development of hotels, airports and tourism destinations. President Sheikh Mohamed and Indonesian President Joko Widodo witnessed this announcement along with several other Memoranda of Understanding and agreements aimed at further developing cooperation between the UAE and Indonesia.

Emirates NBD announced posted a 12.0% jump in H2 profit to a record US$ 3.67 billion, driven mainly by two factors – substantial impaired loan recoveries of US$ 600 million and enhanced lending, which grew 6.0% to over US$ 136.23 billion, driven by strong regional demand. Q2 profit, at a record US$ 1.91 billion, was “helped by the strongest ever results from Emirates Islamic, (at a record US$ 463 million), improving margins in DenizBank and sizeable recoveries bolstered by a buoyant economy.” Net interest was at US$ 381 million, with new corporate gross loans of US$ 13.08 billion. Lending increased by a record US$ 6.27 billion, on the year, growing 21 % to US$ 35.42 billion while deposits grew US$ 8.17 billion, with a CASA to Deposits ratio of 75%. The lender accounted for one-third market share of UAE Credit Card spend as card spend grew 15%.

The DFM opened the week on Monday 15 July, 126 points (3.1%) higher the previous six weeks, gained 77 points (1.9%) to close the trading week on 4,181 by Friday 19 July 2024. Emaar Properties, US$ 0.23 higher the previous five weeks, gained US$ 0.07, closing on US$ 2.28 by the end of the week. DEWA, Emirates NBD, DIB and DFM started the previous week on US$ 0.63, US$ 4.59, US$ 1.57 and US$ 0.34 and closed on US$ 0.63, US$ 4.78, US$ 1.62 and US$ 0.35. On 19 July, trading was at two hundred and eighty-three million shares, with a value of US$ 86 million, compared to one hundred and sixty-three million shares, with a value of US$ 66 million, on 12 July.

By Friday, 19 July 2024, Brent, US$ 0.77 lower (0.9%) the previous week, shed US$ 3.19 (3.7%) to close on US$ 82.58. Gold, US$ 93 (3.9%) higher the previous three weeks, shed US$ 20 (0.8%) to end the week’s trading at US$ 2,395 on 19 July 2024.

Wednesday saw gold prices move inexorably to the US$ 2.5k level, as it continued its recent upward trend to reach US$ 2,480 – a new record high for the yellow metal. The main driver seems to be an inevitable US rate cut over the next two months, with the markets fully pricing in a September Fed rate, cut while odds of another cut in December are increasingly likely.

Self-exiled Chinese businessman, and an associate of Stephen Bannon, (Donald Trump’s ex White House chief strategist), Guo Wengui, has been found guilty on nine of the twelve criminal counts he faced, including racketeering, fraud and money laundering, and convicted by a US court of defrauding his online followers in a billion-dollar scam. He was found guilty of raising more than US$ 1 billion from online followers, who joined him in investment and cryptocurrency schemes between 2018 and 2023, and used the funds to finance his lavish lifestyle which included a 50k sq ft mansion, a US$ 1 million Lamborghini and a US$ 37 million yacht. Guo’s political activism and his links to high-profile, right-wing US politicians and activists earned him hundreds of thousands of online followers, most of them Chinese people living in Western countries.

Following its March announcement that it would be slashing its global workforce by some 7.5k, Unilever has announced plans to cut 33%, (3.2k), of its European payroll by the end of next year. Part of the plan included splitting off its ice cream business, which includes the Wall’s, Ben & Jerry’s and Magnum brands, commenting that the shake-up would help it to “do fewer things better”. The consumer goods giant has been underperforming in recent years, and after he took over the top job last year, Hein Schumacher, has made it his goal to revive growth. Until 2020, the conglomerate had two major offices, London and Rotterdam, before deciding that the former should be its sole headquarters – at the time, it said it would not affect staffing. Unilever is one of the largest global consumer goods companies, with brands including Dove, Persil washing up power and Lynx body spray.

Administrators have indicated that there could be an imminent deal to acquire The Body Shop which had been struggling for a number of years and finally went into administration in February 2024; this led to the closure of seventy-five outlets and nearly five hundred jobs. The agreement, with a consortium led by investment platform Aurea group, which is headed by UK millionaire Mike Jatania, as well as a former senior executive at Swiss investment bank UBS, was confirmed by the administrators, advising they had approved an “exclusivity agreement” after “a competitive bidding process”. Due diligence checks are now in progress.

Czech billionaire Daniel Kretinsky’s US$ 4.67 billion offer, to acquire the Royal Mail, has been accepted by the board, with shareholders expected to approve the deal on 25 September; however, it must be finally approved by the Starmer government. His offer, including assumed debts, is valued at US$ 6.48 billion, (GBP 5.0 billion). Currently, the Universal Service Obligation requires Royal Mail to deliver letters six days a week throughout the country for the same price, and the prospective new owner has confirmed the six-day delivery service will continue “as long as I am alive”, and that he would be willing to share profits with employees, if given the go-ahead to buy the group. However, whether he accepts the idea of employees having a stake in Royal Mail, which unions have called for in exchange for their support, remains conjecture.

Mainly because of plunging sales figures – down 21.0% in Q2 – Burberry has replaced Jonathan Akeroyd, who had been chief executive for two years, “with immediate effect;” Joshua Schulman, the former head of US brand Michael Kors, (and also head of Jimmy Choo in London between 2007 and 2012), becomes the fashion brand’s fourth chief executive in a decade. Burberry, in line with other luxury brands, has been impacted by a downturn in demand for luxury goods, particularly in China, and has indicated that if this trend continued its profits will be below expectations, and that it would have to cut further jobs. Chairman Gerry Murphy called the figures “disappointing” with the luxury market “proving more challenging than expected”, and that the brand was now “taking decisive action to rebalance our offer to be more familiar to Burberry’s core customers whilst delivering relevant newness”.

After what seems ages of negotiations, Pakistan and the IMF have agreed a three-year US$ 7.0 billion aid package deal, that should enable Pakistan to “cement macroeconomic stability and create conditions for stronger, more inclusive and resilient growth”. In April, the world body had authorised US$ 1.1 billion in funding, the final portion of a US$ 3.0 billion arrangement agreed in 2023 so as to save Pakistan from defaulting on its debts. There is no doubt that the country’s economy has underperformed for years, not helped by a weak bureaucracy, cronyism and widespread corruption across the board. To add to its woes, Pakistan has recently been in the news because of several climatic events, brought about by major changes in weather patterns; in 2022, devastating floods caused about US$ 30.0 billion of damage.

The Russian Ministry of Finance posted that the country’s H1 revenues from the sale of energy resources came in at US$ 64.52 billion, with a 68.5% surge in volume. The main driver behind the rise was the high prices of Russian “Urals” oil, as it was sold at prices higher than the US$ 60 cap imposed by the West.

During H1, China’s yuan-denominated loans rose by US$ 1.86 trillion, (13.27 trillion yuan). Xinhua News Agency posted that M2, (encompassing cash in circulation and all deposits), was 6.2% higher on the year to US$ 42.75 trillion, whilst M1, (cash in circulation plus demand deposits), was 5.0% lower at US$ 9.09 trillion. The H2 social financing scale fell 14.7% to US$ 2.49 trillion, as outstanding yuan loans stood at US$ 34.55 trillion, 8.5% higher on the year. The country’s foreign exchange reserves totalled US$ 443.53 billion.

According to research by the Australia Council of Superannuation Investors, total compensation for ASX200 CEOs dipped in the last financial year, and that CEOs were three times more likely to lose their jobs than their bonuses. Its twenty-third edition of its annual CEO Pay in ASX200 Companies report, which examined the remuneration of one hundred and forty-five of Australia’s highest paid executives, found that CEOs of the top one hundred publicly listed firms in Australia saw their realised pay, (the value of cash and equity actually received), dip 1.5% on the year, to 30 June 2023, to a median of US$ 2.62 million – its lowest level in a decade. The heads of the ASX100 firms saw their average bonus decline by 4.7% to 66.3% of their maximum potential bonus payment. Only one CEO – Carsales boss Cameron McIntyre – received a 100% bonus – whilst Domino’s Pizza Enterprises’ Don Meij and Medibank’s David Koczkar missed out on receiving a bonus. In the ASX 101-200 CEOs bracket, bonuses were 7.3% lower at 60.7%, whilst five bosses received maximum bonuses, with six CEOs in the ASX101-200 missing their bonus payments. There were twenty-four termination payments across the full ASX200 sample, with the FY 2023 recording the highest aggregate termination cost in the ASX100 since FY 2011, at US$ 22.7 million, but the average size of a termination payment fell. Of the seventeen ASX100 CEO termination payments, twelve were above US$ 680k, (AUD 1 million), and seven were US$ 1.36 million, (AUD 2.0 million or higher, with the highest termination payment being for the departing boss of biotech company, CSL, Paul Perreault, who had the highest termination payment in FY 2023 of US$ 5.61 million, (AUD 7.61 million).

With government, (70k new jobs), and healthcare services, (82.4k), hiring comprising some 75% of the June payroll gain, of 206k jobs, as well as unemployment rate hitting a thirty-month high of 4.1%, pointing to a weakening labour market, it seems that a rate cut is certain over the next two months. Latest Labor Department figures showed the economy created 111k fewer jobs in April and May than previously estimated, suggesting the trend in payrolls growth was slowing. Job growth has averaged about 222k per month in H1, with some analysts estimate the economy needs to create up to 200k jobs per month to keep up with growth in the working-age population, taking into account a recent surge in immigration. Although there were rises in construction (by 27k), retail and manufacturing both shed jobs, along with professional/business services and temporary help losing 17k and 49k. Average hourly earnings rose 0.3% on the month and 3.9% on the year to 3.9% – the smallest gain in wages since June 2021 and followed a 4.1% rise in May.

England may have failed in the Euro final last Sunday but at least it seems that the team’s antics managed to push grocery inflation to its lowest level in almost three years – down 0.5% on the month to 1.6% in the four weeks ending 07 July; this figure, at its lowest level since September 2021,  was the seventeenth consecutive decline in the monthly rate following the peak seen in the months after Russia’s invasion of Ukraine. Supermarkets seem to have benefitted by fans rushing in to buy groceries, beers and snacks ahead of matches streamed live on TV, with many offering special promotions. Kantar noted that trips to the shop were 2.0% higher, compared to the same period in 2023, and that “football fans drove beer sales up by an average of 13% on the days that the England men’s team played, compared with the same day during the previous week”, and that “sales of crisps and snacks also got a boost, up by 5% compared with the month before.” Spending on no and low-alcohol beer soared by 38% on match days. Whether this will affect the BoE’s decision on 01 August to cut rates remains to be seen, as being as conservative as they are, they will probably want more evidence on the table to show that services inflation and the pace of wage growth are actually  coming down.

Those paying high mortgage interest all look forward to the day that the BoE starts cutting rates, but one benefit has been the upward trend of sterling, which currently favours all those travelling to the US and the eurozone, with the pound at a one year high to the greenback, at US$ 1.30 and a two year high of Eur 1.1915.

In the quarter ending 31 May, UK pay is rising at its slowest rate in almost two years as the job market continues to cool. However, wages, growing at annual 5.7% rate, are still above the rate of rising prices, with the impact of inflation taken into account, wages were up by 3.2%. In the period, the number of job vacancies has fallen while the unemployment rate remained at 4.4%. The inflation rate is now on par with the central bank’s long-standing 2.0% target Whether these figures are enough to convince the mandarins in the BoE, that a rate cut is what is required at their 01 August meeting, remains to be seen. However, they may consider the fact that with annual pay growth, excluding bonuses at 5.7%, the labour market may have to cool further before tinkering with rates. Although the number of vacancies dipped 30k, over the quarter, to 889k – and has been heading south for the past two years, the figures still remain higher than pre-coronavirus pandemic levels. The number of “economically inactive” – defined as those aged between 16 to 64 years old not in work or looking for a job – edged lower to 22.1% to 9.4 million people.

Today, transport networks around the world have been thrown into chaos by an IT outage, caused by a software update of the by cybersecurity company CrowdStrike, a Microsoft client, with more than 20k global subscription customers; the tech giant’s Microsoft software runs over 70% of the world’s desktop computers. The faulty code – just a few lines long – has led to global disruption, with an economic impact that is as yet incalculable – but likely to be huge. “Falcon Sensor” product designed to protect Windows from malicious attacks is used widely on Mac and Linux systems. With online systems run by Microsoft shut down, several of the world’s largest airports, including London Heathrow, Singapore’s Changi Airport, Schiphol Airport in Amsterdam and Melbourne Airport in Australia, (but not DBX), were impacted. In the US, major US airlines including American Airlines, Delta Airlines and United Airlines grounded all flights on Friday morning. The IT failure disrupted operations across multiple industries on Friday, including broadcasters going off-air and spreading to the likes of halting banking to healthcare systems. The governments of Australia, New Zealand, and a number of US states are facing issues. To some, the meltdown seemed like it could be the start of It’s The End Of The World, As We Know It!