Dubai- bouncing back?
Economic cycles in Dubai have tended to rotate at a different pace both to its neighbours and the global rhythm. Domestic real-estate and infrastructure development, global trade through Jebel Ali, inbound tourism and regional investment can each have independent effects on its prospects. As the covid pandemic evolves, are there signs that Dubai's response to it is paying dividends and an outline of its future position emerging?
After a strict lockdown in April and May of last year, the Dubai authorities have steadily opened up the economy whilst maintaining key social-distancing rules and associated monitoring guidelines. By most measures, activity levels are close or back to pre-covid levels. Traffic, offices, malls and hotels are busy. A surge of inbound tourism in December, driven by the new deal with Israel as well as holiday makers from Europe keen to escape lockdowns at home, drove hotel occupancy rates over 80% and kept malls, attractions and restaurants full. (One downside from this has been a recent significant rise in covid cases and subsequent reimposition of additional hospitality restrictions and pre-travel PCR tests). Dubai has been in the global spotlight as one of the most open destinations on the planet and, as is its habit, the emirate aims to take advantage of that attention.
Since the pandemic arrived, multiple new residency visa categories and upgrades have been announced that tap into the rapid changes to working and living patterns. Last summer, the government launched a global marketing campaign around its new "Work-in-Dubai" visa that enables remote working professionals to live in the emirate while continuing to work for their employers in their home country. Leveraging off Dubai's quality of life, healthcare network and digital infrastructure, the visa allows the holder and their family to reside for 12 months at a time. This week the government went so far as to offer free vaccines for these visa holders. In addition to this, the 'Golden Visa' has had additional categories of high value workers in sectors such as computer science and biotechnology added to attract more long-term residents, whilst the 'Retirement Visa' has also had amendments to make it easier for well-off retirees to settle in Dubai.
The influx of affluent tourists has also delivered additional short term upside for the emirate. With little appeal in returning home, especially to the UK where schools are closed for the foreseeable future, a significant number of visitors have elected to extend their stay in Dubai, supporting occupancy rates and in-country spend. It appears that a good number of the wealthier ones have taken things a step further and entered the residential property market. Sotheby's International Realty this week claimed to have sold over US$250M worth of homes in the first 3 weeks of 2021, almost 70% of the total for the whole of 2020. With little prospect of a swift return to normal in Europe, Dubai's advantages have been brought into sharp relief. Overall the secondary housing market saw a 7% rise in transactions in 2020, suggesting that buyers are looking for immediate occupancy options rather than buying off-plan and having to wait to take possession with off-plan sales dropping by 32% over the same period.
Two recent geo-political events in the region are producing immediate benefits. The historic peace deal between Israel and the UAE has allowed for the rapid establishment of travel and trade ties. Over 100,000 Israelis have already visited Dubai in the short time since the agreement was signed. Joint Israeli-UAE Business delegations and associations are regular features in newsfeeds, whilst free zones are providing seminars for member companies on opportunities between the two markets.
The GCC conference in Saudi earlier this month produced an agreement that lifted the blockade of Qatar and reinstated travel routes. Emirates, Qatar and FlyDubai have already started flying between Doha and Dubai again, likely boosting inbound arrivals of Qataris keen to enjoy the energy and options of the destination that has been denied to them for several years.
Anecdotally, it seems as if the expected expat exodus from the covid-driven downturn has been less deep than anticipated. Faced with the option of returning home to bleak prospects, many expats have instead chosen to tighten their belts and remain in Dubai to find new opportunities. The multiple options available to rapidly set up a company and maintain their own residency have been a viable alternative for many and has been a boon to the various free-zones in the city. As an example the DMCC free zone registered a surprising increase of 3% in new company registrations in 2020 despite the effects of the pandemic. Scope for expat entrepreneurism was already a unique feature of Dubai compared to its regional rivals and with each downtown has been a major factor in its resilience.
Saudi Arabia's resurgence based on its Vision2030 program has been an important source of regional employment and revenue for Dubai-based businesses and residents over the last few years. The speed at which it has recovered post the early phases of the pandemic, has also been a supporting factor in how sustainable the economy has been across the emirate. Although many consultants are travelling into the Kingdom much less than a year ago, the overall volume of projects, work and income has remained steady, with one major consultancy indicating that 2020 had almost matched 2019 as a stellar year.
In summary, the economic and residential building blocks that Dubai has been putting in place over the last two decades are proving to be solid foundations for weathering even major shocks such as a pandemic. Its ability to be agile, responsive and forward thinking is again paying dividends whilst its genuine status as a globally competitive destination, to live, work and play is once again apparent.