Beyond Expo 2020

Take a listen to what the Shanghai Expo tells us about the potential impact of the global fair on DubaiNiraj Masand

There are a lot of questions about what lies beyond the World Expo 2020. Nearly Dh39 billion in investments is expected to be poured into the event, according to the Dubai Department of Tourism and Commerce Marketing, while Deutsche Bank has estimated Dh158 billion will be required to upgrade the emirate's infrastructure for the event.

However, many are wondering what will happen when the world's attention is drawn away from Dubai after the Expo. In particular, how will the real estate market react? Will it sustain itself beyond 2020?

Some are maintaining an optimistic, albeit cautious, outlook such as market analyst JLL, which doesn't believe another bubble is on the horizon. JLL also expects the Expo 2020 to have a positive impact on Dubai's economy, ultimately benefiting the real estate market.

That said, JLL's Head of Research for the Middle East and North Africa, Craig Plumb, did admit that it was extremely difficult to predict the timing or magnitude at which the market would "pass the peak of its cycle".

Echoing a similar view is Essam Al Tamimi, founder and Senior Partner of Al Tamimi and Company, the region's largest Arab-owned law advisory. He said it is imperative for the government and private sector to view 2020 as a fresh start and a platform for Dubai and the UAE to soar to new heights, rather than considering it as the culmination of an ongoing economic growth.

Citing what happened in the years that followed the Shanghai Expo 2010, when hotel capacity witnessed a sudden vacuum due to the drop of occupancy and growth, Al Tamimi suggests using this experience as a learning opportunity.


The Shanghai Expo, which ran from May to October 2010, attracted 72 million visitors. Yet the slowdown in tourist numbers and the reopening of temporarily closed factories around the site shortly after the Expo quickly sobered up the city of 14 million people. So did the realisation that $45 billion (Dh165.28 billion) had been spent to host the extravagant event — an amount largely funded through a combination of government bonds and bank loans.

The city did benefit from direct revenue, an enhanced image and the development of a range of new transportation systems and entertainment facilities. It also found a good reason to transform run-down districts into sought-after areas for luxury commercial development.

In fact, the retail and residential property sectors were some of the direct beneficiaries of the Shanghai Expo, although many projects had been hurriedly completed for the event.

Most of all, the Expo helped position Shanghai as a global city, as the government did an excellent job of building up the in frastructure, as what Shaun Rein, Managing Director of the China Market Research Group, had said.

While the Dubai Expo slightly differs from the Shanghai event, being the first to be held in the Middle East, this hasn't stopped a rising concern over increasing inflation. Having grown 3 per cent this year from last year, inflation is running at its highest in nearly five years, unsurprisingly driven by soaring property prices.

"General optimism about the Dubai Expo 2020 remains high," Dubai-based research company Insight Discovery stated in its Dubai Expo 2020 report, which revealed insights from a survey of 1,087 UAE residents.

Increased risk

However, the analysis also noted that many residents were concerned about the impact on rents and property prices, as most believe the event had elevated the risk of another housing bubble.

Bayina Bashtaeva, a Credit Research Analyst at Barclays, said the Expo may encourage Dubai and corporate entities to undertake large, debt-financed projects.

"This could increase the corporates' exposure to any post-Expo economic slowdown if real estate prices were to face a downward pressure," says Bashtaeva.

Of course, the Expo is not just about real estate, but the market is a significant contributor to the emirate's economic growth. Between 2012 and last year alone, the total value of real estate transac tions climbed from Dh154 billion to Dh236 billion, based on figures from the Dubai Land Department.

Mega developments

While there will be different predictions on what will happen to Dubai after the Expo, what is evident is that new projects will continue to be built over the next six years.

If construction proceeds smoothly, several developments will be completed by 2016, such as Business Bay, Al Habtoor City and the Dubai Creek development's floating market. By 2020, Meydan City, Downtown Jebel Ali and the World Expo 2020 master plan should follow suit.

It doesn't end there. Projects such as Jumeirah Gardens (2021), Mohammad Bin Rashid City (2023) and the ambitious Dubai World Central (2030) are all expected to complete all their components after the Expo.

Moreover, the 2014 Top Trends for UAE Real Estate report says that the pace of property development has notably been changing with mega projects being phased according to end-user demand.

With so much dependent on the success — and sus-tainability — of Dubai's real estate market, investments should certainly not be made based on speculation.

Instead, they should be seen as long-term assets that can achieve capital appreciation over the long run, keeping in mind that the population has been growing at an annual rate of 5 per cent, while residential property prices increased at a much faster pace of nearly 37 per cent year-on-year in May.

Dubai's own target of around 25 million visitors during the World Expo 2020 should also be kept in mind as a goal — one that the city could well achieve. ^

Click on Dubai: Working plans to know more about Expo 2020

Source: Niraj Masand, Special to Property Weekly
The writer is a Director of Banke International Properties, a boutique real estate brokerage based in Dubai.


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