Hard-Hit but Striking Back: Dubai Finds Correct Balance

Last year, Dubai registered a sharp decline in its population. Almost eight of every 100 inhabitants left the country as the pandemic and a drop in oil prices unsettled nerves and the economy.

Key sectors such as real estate, tourism and retail suffered. Property developers are facing trying times, and have tapped their liquidity to stay afloat. Analysts expect no major failures as most Dubai real estate companies still enjoy access to funding, and have been proactively managing their cashflow and slashing overheads. But recovery is expected to take time, with only marginal improvements anticipated this year.

Expo 2020, the 35^th World Expo now scheduled to go ahead between October 1 this year and March 31, 2022, will offer some much-needed solace to the hammered tourism and hospitality industries. The normalisation of diplomatic ties with Israel and Qatar also bodes well. The biggest boost by far is expected from the United Arab Emirates’ successful vaccination drive, which has already delivered jabs to 56 percent of the population. This has driven the infection rate – the dreaded R-number – down to 0.88.

Dubai’s real estate professionals are reporting the arrival of the first opportunistic investors drawn by attractive discounts. According to Hussain Sajwani of Damac Properties, the slowdown of the property market started in 2018. “That soft landing became a hard one because of the corona pandemic. Prices of resale units have retreated by about 10 percent on average and are now lower than those of new developments. Now is a great time to buy.”

Though Sajwani does not foresee a further weakening of the market, he does admit that a return to the boom times of the early-2010s is not likely any time soon. “The soft market is here to stay for another year or two with very few new projects being launched,” he said. “However, Dubai will undoubtedly emerge from the pandemic stronger than before. The housing market will eventually tighten at which point new projects get underway and prices resume their rise.”

Tentative Recovery for Dubai real estate

Mo’asher, the official Dubai real estate price index, in January recorded some 3,300 sales with a transaction volume of $1.83bn – a jump of 15.5 percent in numbers and 37.7 percent in value over January 2020. The index, a joint effort of Property Finder and the Dubai Land Department, detected an upward trend in the resale market, which now represents 72 percent of all transactions. Mo’asher also detected a promising rebound of the overall property market in the fourth quarter of 2020, providing a silver lining to an otherwise disappointing year.

Last year, Dubai’s GDP contracted by 10.8 percent (UAE -6.6 percent). In its most recent country report, S&P Global Ratings predicted that the economy would return to the 2019 levels (in dollar terms) in 2023, with most sectors feeling the pressure of the pandemic fallout. The ratings agency did, however, admit that its outlook may prove pessimistic in light of the UAE’s vaccination campaign. That could provide a significant boost to business and tourism.

While most developed nations tightened restrictions as winter set in, Dubai took a calculated risk by reopening the economy early, betting that its vaccination programme would deliver early results – as it did. Business trackers recorded a fairly robust uptick in activity from December onwards, with non-oil employment levels rising and GDP expected to inch up 1.3 percent in 2021.

Early on, the Dubai government came in for considerable criticism over its decision to ease the lockdown. Cases quadrupled to almost 4,000 a day by the end of January. Daily infections have since dropped to about 3,000, with the country managing to sustain a fatality rate of 0.3 percent. Dubai also sustains the world’s highest daily testing rate at 1.5 percent of the population.

According to Amer Sharif of the Covid-19 Command and Control Centre, the balance between the safety and wellbeing of the population and economic sustainability has been right for a city state and global logistics hub. Dubai relies on cross-border traffic for more than half of its economy. Authorities have been cautious with decreeing travel bans and have only restricted direct passenger flights from the UK and South Africa due to novel virus strains.

Reforms

Dubai quickly positioned itself as the prime hub for vaccine distribution in the Middle East and beyond. The UAE has unveiled plans to locally manufacture China’s Sinopharm vaccine later this year, while also trying to secure a head start as the world’s first “vaccination tourism” destination, catering to those unwilling to wait for a jab and able to flash plastic.

National flag carrier Emirates also found a novel way to raise cash by giving its passengers the option to pay extra to block adjacent seats on its flights. Though first introduced by Air New Zealand, the Dubai-based carrier has upped the ante by allowing economy class travellers to buy up to three adjoining seats for prices ranging from $55 to $165.

In another surprise move, the UAE has launched a programme to offer Emirati citizenship to select foreign professionals. Ranked as one of the best in the world for mobility, UAE passports will be offered to investors, scientists, doctors, artists, intellectuals, and others with special talents whose bright minds contribute to the development and prosperity of the country.

UAE royals and officials may nominate deserving candidates, with the cabinet having the final say. Almost nine of every 10 UAE inhabitants are foreign nationals. The initiative is unique in the wider Gulf Region, where paths to citizenship are few and narrow.

The initiative follows a string of progressive reforms that include full ownership for foreigners of businesses outside free zones, legalisation of cohabitation and the sale of alcohol without a licence. According to a government spokesperson, the easing of restrictions seeks to encourage expatriates to invest money – and their future – in the country.

This would end the prevailing attitude amongst foreign nationals to make as much money as possible, and then leave for home. In time, the reforms are expected to add billions to the local economy, and forge a more inclusive society.