x Abu Dhabi, UAESunday 23 July 2017

The Dubai property market looks to Expo 2020 and beyond

A positive outlook for Dubai's property sector is forecast, regardless of November’s decision on which city wins the right to host Expo 2020.

Property markets around the world have proved to be acutely sensitive to changes in market sentiment. So there should be little surprise then that Dubai’s bid to host the 2020 World Expo has had a resoundingly positive effect on the local real estate markets over the past year.

A promising and well-received submission for the event has enabled Dubai to progress confidently into the last four, with the emirate now widely viewed as a front-runner in the final vote set to take place late next month.

A successful bid would be a great accolade for Dubai, opening a new window to the world to promote its status as a global city, and one with a truly world-class infrastructure. A winning bid would also help to drive demand into the emirate’s property sector, helping to reach new and untapped markets and ultimately increasing Dubai’s global reach.

Yet with current property prices already rising significantly, investors and residents alike may be left wondering exactly how Expo 2020 would benefit them and what impact it will have on the property market and the cost of living.

Although Dubai’s bid has certainly aided upwards growth trends in the residential market, we should remember that prices were already rebounding strongly before the emirate’s Expo bid gathered traction.

Economic performance has been positive since 2011, fuelling the initial recovery in property markets, albeit in a highly fragmented fashion. However, over the past 18 months the influence of speculative investors and those looking for a safe haven market has effectively overtaken core fundamentals as the principal driver of sales growth.

While still constrained by significant oversupply, the commercial office market is showing promising signs of a more sustained and long-term recovery, aided by growing demand from international corporations that are now back on the expansion trail, generating major new office requirements as companies seek consolidation into single corporate premises.

This has been aided by improving conditions in home markets across Europe and the United States, which has freed local offices to finally make major move decisions after a virtual hiatus on corporate relocations during the past five years.

There is no doubt that a Dubai Expo win would constitute a major catalyst for future growth across virtually all asset classes.

However, there is a general feeling in the marketplace that some of the potential upside may have already been seen and factored into recent growth as investors have effectively gambled on a positive result.

The clear winner of a successful bid would be the hospitality market, with huge potential for the emirate to increase its share of international tourism and to develop associated infrastructure and facilities that would sustain industry growth for years to come. There would also be a direct impact on related sectors, including retail, that would result in a significant increase in the spending power of visitors.

The last Expo, held in Shanghai in 2010, attracted close to 70 million visitors, significantly boosting the country’s tourism market and enabling the funding and delivery of new transport and leisure facilities. Unsurprisingly 2010 was a record year for tourist spending in the Chinese city.

A successful result would not only accelerate the pace of implementation of recently announced projects including Mohammed bin Rashid City, but in a wider context, the Expo would also have a substantial impact on overall infrastructure development with plans to fast-track the construction of the Dubai Metro Purple Line, among various other projects in and around Dubai World Central.

The award would also help to drive expansion of the airport itself, accelerating its use as a passenger hub and becoming a further catalyst to development of the air transport infrastructure – a key driver for the sustained economic growth of the emirate.

Although the positive ramifications of hosting an Expo event would be significant, failure would be far from disastrous.

The Dubai bid has already created a huge amount of interest globally, generating positive press locally and internationally for the quality of the submission and for the huge strides that have been taken in the emirate’s recovery since 2008.

Dubai’s economy is now clearly more robust and appears in better shape for the future, which is helping to attract a host of new companies keen to set up operations to service the wider region.

The tourism and retail markets are also buoyant, reflecting the strength of two core industry segments. With this in mind, we see a positive outlook for the property sector regardless of November’s decision.

Mat Green is the head of research for the UAE at CBRE Middle East