With preparations for Dubai`s hosting of the World Expo 2020 now gaining momentum, it is a favourable time to have a closer look at the implications which this event is likely to have on the emirate`s property market.
Scarce Empirical Evidence
Empirical evidence about the influence that previous world fairs have effected on property prices in the hosting cities is scarce. However, Belgian researcher De Groote has undertaken such a study („A multidisciplinary analysis of world fairs (= expos) and their effects“), examining the fluctuation of property prices in world expo cities during the five years preceding the event as well as during an equal time frame after.
It becomes apparent that even markets that are known to generally show less price volatility – i.e. compared to the Dubai market – witnessed substantial upwards pricing trends over the periods under review.
Secondly, it might come as a surprise to some that an expo event is not the equivalent of an one-off straw fire that burns out immediately once the event closes its doors.
Underestimated Long-Term Economic Impulse
In fact, world expo events catalyze investment into and development of several industries and economic sectors, many of which bear fruit only in the mid- to long term, thus explaining the above figures.
However, as the example of Saragossa shows, this is not an automatism either. As Spain was among the Southern European countries to be hit hardest by the financial market crisis unfolding from 2008, Saragossa witnessed a total collapse of its property market, thereby fully overriding the remainder of any positive impacts.
As a consequence it can be stated that world fairs in general bring about positive effects in demand and investment for the hosting city and country while not necessarily offsetting underlying opposing economic trends. This means that if preparation and hosting of the event are synchronized with the onset of a new economic and property cycle, the positive effects on property prices can be expected to be more pronounced.
What to Expect for Dubai?
The economical data available for the UAE and Dubai today suggest that commercial activity is on the rise. Tourism has shown a remarkable comeback with hotels posting an increase of 18,7% in RevPAR in April 2017 vis-a-vis the previous year while the composite EmiratesNBD Economy Tracker Index clocked a value of 57,5, its highest since February 2015.
Moreover, Dubai`s property market is bottoming out after witnessing a period of softening property prices since mid-2014 with rents retreating equally, thus still offering excellent yields.
While the investor should keep track of some risks on a regional and international scope, the onset of a new property cycle within the next six to twelve months appears highly likely.
As this new cycle will be synchronized with the preparation and implementation of the Dubai World Expo 2020, I expect that the impetus of the non-recurring event will intensify the market upturn at some point in time.
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The author advises institutional investors about property transactions and handles property portfolios in Dubai since the year 2007. Should you have comments or inquiries, please contact the author on author@property-blog-dubai.com.
