Expo 2020 and the Dubai Real Estate Market
2020 is shaping up to be a year where Dubai will be a primary protagonist on the global stage, thanks to Expo 2020 Dubai. Some industries are expected to benefit more than others from the six-month world’s fair, and the Dubai real estate market is one of them. What is the current state of the market? What are they predicting for the future after the expo ends in April 2021? Here’s our closer look.
The current state of the Dubai residential real estate market
Dubai’s residential real estate market has been in decline since its last peak in 2014. It was that year when the price of oil collapsed, and as a result, government coffers in the region were emptier, and investors subsequently tightened their belts. A Cavendish Maxwell study found that the average price for a villa (the way people refer to single-family homes in Dubai) hit a ten-year low of AED1.82 million or US$495,500 ( about £378,066.50 according to the exchange rate on 19 December 2019).
One of the significant issues in the Dubai real estate market is an oversupply problem. The 2010s have seen development at an exponential rate with a plethora of wide-scale residential projects. Dubai-based real estate listing site Property Finder found that developers built around 30,000 new houses in 2018 and they are on track to complete around 40,000 new villas, flats and townhouses by the end of 2019. The consequence is that the competition among sellers is cutthroat, translating to housing prices down by 25% to 30% from the 2014 peak. In an attempt to address this issue, Sheikh Mohammed Bin Rashid Al Maktoum announced the government’s plan “...to stabilise the city’s declining home values...through a newly minted industry-led committee on supply.”
The Dubai government has strived to implement regulatory changes to help boost demand, such as rules that allow for 100% foreign ownership for enterprises and long-term residency options that would appeal to high-earning professionals, foreign retirees, and select classes of investors.
Before the Expo starts, what areas are benefitting most in the run-up? According to a research associate at Savills, real estate developments in the area around the expo site in Dubai South are currently experiencing strong demand from buyers. Now the question remains what will happen during and after the event.
Will Expo 2020 Dubai really lead to a sustained revival?
There is some debate as to whether this growth will be sustainable in the long-term. Some claim the buzz will die down after the close of the Dubai Expo 2020, while others like Damac Properties Chairman Hussain Sajwani are more optimistic. Sajwani believes that the Expo “...will be the catalyst needed to revitalize the local economy and drive the market into the next cycle of growth[.]”
An Ernst & Young (EY) report found that of the AED122.6 billion global value-added (GVA) contribution stemming from Expo 2020 from 2013 to 2031, 27 billion Dirhams from that total can be credited to construction alone. While some claim that it could be hard to directly attribute the impact of Expo 2020 Dubai to the market, Devmark CEO Sean McCauley notes that investor sentiment has previously played a significant role in the Dubai real estate market. As such, “overall investor sentiment has increased of late which may be as a result of the nearing of Expo to some extent.” He believes that the expo will have a long-term impact on the Dubai real estate sector.
Michelle Liddiard, a sales specialist at Luxihabitat, predicts that the impact that Expo 2020 Dubai will have on the luxury end of the Dubai real international estate market will be much higher after the event. She stated: “[o]nce the visitors for the Expo visit the city, they will want to come back, which will enhance the property market.”
Rating agency S&P is not as optimistic about the long-term impact the Dubai Expo will have on the Dubai real estate market. Sapgna Japgtiani, a credit analyst, wrote in the S&P statement that while they believe the expo will alleviate the pressure on hotels and retail, “...it is unlikely to materially improve long-term conditions in the real estate sector.” It also does not bode well that DAMAC claimed that residential projects would need to stop for at least one year to jumpstart a full market recovery.
Others, though, point to the fact that the long-term marketing boost the event will bring to Dubai real estate on the international stage many decades from now. So, it appears that the market will need to undergo a readjustment for the long-term prospects to indeed be known. However, sources on the ground in Dubai seem to be optimistic.
Are you looking to buy property in Dubai as part of Expo 2020?
Our team of Dubai and UAE residency and relocation experts, as well as our real estate team, have the know-how to guide you through the process of buying a property in the real estate markets in Dubai, Sharjah and other areas through the UAE. Take advantage of this dynamic real estate market with a world of opportunity. If you’re ready to get started, make an inquiry to set up your initial consultation with the Europe Emirates Group team.
Darrach Campbell ACSI
Senior Executive, Quality Management Services