The financial scars of the 2008 banking crisis had long since disappeared, but the traces of its impact are still clearly visible.
Parking lots at Dubai International Airport remain home to a plethora of vehicles, buried in dust and sand, where the hand break was raised one last time before individuals and families fled the country, their financial worries and, some might say, their responsibilities.
Dubai only just escaped a debt crisis in 2009, caused by collapsing property prices, which threatened to force some state-linked companies to default on billions of dollars of debt. Fast forward over a decade later and there is a new crisis that the emirate, and the world, is facing: Covid-19.
Oxford Economists is warning it could knock 1.3 percent off global growth this year, amounting to a staggering $1.1 trillion in lost income.
A survey by the ‘Middle East: Coronavirus: implications for MENA businesses and their leaders’ survey from The Economist Corporate Network, revealed almost a quarter (24 percent) of respondents said that their business is already making redundancies, and 20 percent said they have been forced to take unpaid leave as a result of business disruption caused by the coronavirus.
Almost three in 10 (28 percent) of regional businesses are currently enforcing paid leave. However, leading real estate experts believe the emirate is better placed now to deal with the economic fallout of the current pandemic.
Richard Waind, group managing director, Better Homes, certainly does not expect an exodus of expatriates. He tells Arabian Business: “This is a global issue and most expats I have spoken to believe the UAE is the best place to be during and after this pandemic.
“While some will lose their jobs, the same will happen in their home countries, and Dubai has proven in the past that it bounces back better than anywhere else, so I expect the vast majority of expats to remain in Dubai.
“Economy and oil prices do not hit the middle class people. For them the salary is important. They are not businessmen looking at the oil prices going up or down”
“I wouldn’t be surprised if, after the virus, we don’t see an influx of new residents to Dubai as it will be seen as an opportunity destination.”
The emirate’s real estate industry was showing signs of recovery over the last six months, with the overarching issues of supply and demand being addressed head-on by the government and its Higher Committee of Real Estate.
A total of 35,000 residential units, both villas and apartments, were delivered into the market in 2019. While that was considered a record, there are 80,000 pencilled in for delivery this year. Or at least there were.
Still, that hasn’t stopped Dubai-based developer Danube from launching its latest affordable project, Olivz, a development which will bring 741 units to the market.
Owner Rizwan Sajan revealed plans to complete a total of 2,800 units by the end of Q2, 2020. This, in spite of the world slipping ever closer to a global recession, compounded by the coronavirus and a huge drop in oil prices.
He says: “Economy and oil prices do not hit the middle class people. For them the salary is important. They are not businessmen looking at the oil prices going up or down. For them it is important that they have a stable job and that they have salaries coming in on time and that is what is happening. I don’t think anyone is thinking of quitting on the salaries of any company, especially the corporates.”
While this maybe conflicts with the aforementioned results of The Economist survey, Dubai Land Department (DLD) statistics revealed there was a 12 percent rise in overall transactions in January 2020 compared to January 2019, while February saw a 33 percent hike compared to the same time the year before.
Notably, February also witnessed a 76 percent rise in off-plan transactions, including 504 off-plan villa transactions and 2,251 apartment transactions.
Lynnette Abad, director, research and data at Property Finder Group, tells Arabian Business: “In past history, we have seen during times like this is when investors buy real estate. Real estate continues to offer attractive returns in comparison to other asset classes.”
Gulf countries have imposed various restrictions to combat the spread of the novel coronavirus pandemic, particularly in the air transport sector.
“While some will lose their jobs, the same will happen in their home countries, and Dubai has proven that it bounces back better than anywhere else”
The UAE has stopped granting visas on arrival and forbidden foreigners who are legal residents, but are outside the country, from returning.
While this may have a knock-on effect on international investors, Chris Hobden, head of strategic consultancy, Chestertons MENA, tells Arabian Business he does not expect any long-term negative impact.
“Recent performance across the UAE’s residential markets has been encouraging and, while international buyer interest and aspects of the transactional processes may be disrupted, we expect the impact to be limited,” he says.
Arguably the area of greatest concern for the large portion of expat workers is the rental market. Rents for both apartments and villas in the emirate, overall, were down about eight percent year-on-year and further softening was expected this year.
And Waind expects plenty of wiggle room for tenants looking to downsize or renegotiate rents. He says: “With less new tenants entering Dubai and many tenants putting off decision to move, yes, landlords are going to have to be more aggressive in terms of pricing to attract tenants for both residential and commercial property.
“We have already seen discounts of over 10 percent from individual landlords who are perhaps highly leveraged and need to find occupants quickly. Other landlords are taking a more ‘wait and see’ approach and are holding rents as they are.”
The government has also played a key role in proceedings and in late March boosted the size of its stimulus package to $34bn. The cabinet approved an additional support package of AED16bn, bringing the total size to AED126bn, according to a tweet from Dubai ruler Sheikh Mohammed Bin Rashid Al Maktoum.
Murray Strang, head of Dubai office at Savills Middle East, says: “The introduction of a stimulus package by the Central Bank will be a shot-in-the-arm to the property market in the medium-to-long term.
“We have already witnessed a gradual increase in demand, especially across the residential sector in 2019. Banks will likely step-up their exposure to real estate and the construction sector, a spike in re-mortgage activity may also be witnessed in the coming months due to attractive borrowing rates and other promotional discounts.”More
By Gavin Gibbon