Dubai’s glitzy property market, hit by a three-year downturn, is regaining momentum as the emirate prepares for its Expo 2020 trade fair, analysts and developers say.
The six-month event, the first World Expo to be staged in the Middle East, is expected to attract up to 300,000 visitors a day when it opens in October 2020.
Officials are hoping it will breathe new life into Dubai’s property market, under pressure from weak demand and low economic growth since a 2014 slump in oil prices.
“Our real estate market is preparing for a new phase of growth in the run-up to Expo 2020,” Sultan Butti bin Mejren, director general of Dubai Land Department, told a press conference.
Undeterred by lower rents and sale prices, developers launched new projects worth tens of billions of dollars at a Cityscape Global property show which ended on Wednesday.
Top property developers including Emaar, Nakheel and Deyaar reported strong sales at the three-day event, attended by 300 firms. Some claimed to have sold out.
Sales of properties in Dubai rose rapidly in the years after the market was opened to foreigners in 2002.
Prices soared as investors piled in, but when the global financial crisis hit the debt-laden emirate in 2009, it sent them into free-fall.
A recovery led by tourism, trade and transportation pushed prices up again between 2012 and 2014.
But in 2014, a glut in oil production slapped down the price of crude, hitting the Gulf economies that underpin Dubai’s real estate sector.
Prices for homes in Dubai have since dropped by over 15 per cent and rents have fallen even more.
Faisal Durrani, partner-head of research at Cluttons, a property consultancy, said that prices in most parts of Dubai had now stopped falling.
“It actually looks like we started to get to the bottom of the cycle and the catalysing factor is Expo 2020,” Durrani said.
He said the fair was expected to generate as many as 300,000 jobs by 2020, boosting demand for real estate.
Not everyone is as optimistic. Some observers expect prices to continue falling as more companies cut back on Dubai-based staff.
Layoffs, “along with weak job growth and a ballooning supply of properties, are driving a drop in values”, said Phidar Advisory, a Dubai-based property think-tank, in a report this week.
“Sale volumes of completed properties are at a six-year low and vacancies are rising across the city,” reaching 35 per cent in some districts, it said.
That has forced developers to offer incentives like improved payment terms to lure buyers, especially foreigners.
Between December 2015 and June 2017, overseas investors put up as much as $41 billion to purchase property in the emirate, the Dubai Land Department said last month.
Indians topped the list of foreign investors with USD 5.6 billion, followed by Saudis who pumped in USD 3.4 billion.
But real estate developers are talking up the opportunities.
PNC Menon, chairman of Sobha Group — a large property firm in the subcontinent and the Middle East — said he believes the real estate market will not go back into decline for at least the coming three years.
“It is a mature market… Prices will remain the same,” at least in the coming three years, he told AFP.
Sobha Group presented two projects at Cityscape, valued together at over USD 12 billion, one of them in the sprawling Mohammed bin Rashed City near Burj Khalifa tower, the world’s tallest.
Cluttons has forecast that developers will complete as many as 90,000 units by 2020, mainly driven by the recovery.
But Dubai-based real estate services firm Asteco said apartment prices fell seven percent year on year in the first half of 2017.
In a report, it said it does not expect a recovery until economic sentiment improves on the back of a rise in oil prices.