S&P Global Ratings reported that Dubai’s population declined by 8.4% in 2020, marking one of the steepest population declines in the Gulf Region.
In Dubai, where more than 90% of the population are expatriates, the pandemic led to job losses. Since residence visas are typically linked with employment, expatriates who lost their jobs had to leave Dubai, hence the considerable decline in Dubai’s population.
Today, more than a year after the world’s health authorities sounded the alarm for the COVID-19 pandemic, expatriates are returning to Dubai. Is it time to check out Dubai Festival City apartments for rent to find your home in Dubai?
The Case for Dubai
Why are expatriates returning to Dubai even when the pandemic is far from over?
Just several months ago, Dubai’s prospects looked just as bleak as they looked like for the rest of the world. When the Dubai Chamber of Commerce and Industry surveyed 1,228 CEOs in Dubai in April 2020 during the city’s strictest lockdown, more than 70% of them expected to close within six months.
Now, however, the Dubai Department of Economic Development expects the local economy to grow by 3.1% in 2021 and 3.4% in the following year. Dubai, therefore, has a similar growth trajectory to the rest of the UAE. According to the UAE Central Bank, the country’s economy will grow by 2.1% and 4.2% in 2021 and 2022, respectively.
And the business confidence in Dubai has grown. This is in contrast to what it was at the beginning stages of the pandemic. In the Dubai Chamber of Commerce and Industry’s survey, about two-thirds of businesses are optimistic about the business environment in the third quarter. Dubai DCCI says this is the most optimistic businesses have been since 2014.
The Government’s Progressive and Proactive Economic Policies
One of the reasons is the UAE government’s intensification and strengthening of its programs that are meant to attract foreign capital and encourage businesses to thrive even during these trying times.
For instance, Federal Decree-Law No. 26 of 2020 amended the Commercial Companies Law of 2015. This change allowed 100% foreign ownership of companies formed in the UAE mainland. Dubai, for its part, has already identified more than one thousand economic activities where 100% foreign ownership shall be allowed in the Dubai mainland.
If you wanted to start a restaurant business in Dubai without a local partner, you could now do so. This is what the new policy means for foreigners who wish to start a business in the Dubai mainland.
The UAE government also intensified its campaign to promote its more liberal and accessible residency programs, encouraging the influx of foreign investors and skilled workers into the country.
On the local front, the government of Dubai initiated stimulus packages worth AED 7.1 billion then also cancelled the fees for numerous government services. Both measures helped lessen the burden on the people and businesses and helped make the economy more resilient.
One other thing that contributed significantly to business confidence and the rebound of the tourism, transport, and real estate markets in Dubai is the Dubai World Expo 2020, now being held from October 2021 to March 2022.
The Stellar Pandemic Response
But the UAE also shone in its COVID-19 response. A combination of excellent health care facilities, effective communications, proactive testing and contact tracing, continuous surveillance, robust, strictly enforced preventive measures, and a very active and widespread vaccination drive define the stellar pandemic response of the UAE.
The results speak for themselves. An article published in the Journal of Global Health in March 2021 reports the UAE having a low fatality rate of 0.3% and a significantly low positivity rate of 1.2%. The UAE is also highly proactive in testing and contract tracing, with the UAE leading in the number of COVID-19 tests conducted per 1,000 people.
The Real Estate Rental Market
By all appearances, the UAE, in general, and Dubai, in particular, have recovered from the crisis and are now steadily moving forward. Now is an excellent time to return and move to Dubai.
But can you afford to rent in Dubai right now? The short answer is yes. Now is an excellent time to rent in Dubai.
The Pandemic and the Real Estate Rental Market
It’s no secret that Dubai is one of the most expensive cities in the world. Also, in Dubai, a considerable portion or around 40% of a person’s income goes to rent.
However, Dubai currently has a housing oversupply, and the drop in demand due to the pandemic compounded the effect of this oversupply. This has turned Dubai into a tenants’ market.
In the Real Estate Market Performance Report, JLL reports that the third quarter of 2020 saw a 12 percent decline in rents in Dubai compared to rent in the same period of the previous year. Of course, the changes wrought to the rental market by the pandemic is more nuanced than what might appear on the surface.
Lockdowns and social distancing measures made people realise the importance of having open, private living spaces. The emphasis has switched from convenience to quality of living, from a central location to nearness to gardens, parks, and beaches.
This fuelled the move of some tenants from downtown neighbourhoods to the suburbs, from Dubai to Sharjah and Ajman, and from apartments to villas. In fact, in the 12 months leading to April 2021, the rents for villas increased by 4.7%, even as the rents for apartments fell by 10.3 percent.
The Dubai housing market is now on the rise, and, in the near future, housing prices are expected to either stay still or continue to climb up slowly. The remaining oversupply of properties could be inhibiting a more vigorous increase in housing prices, but no further contraction or decline is expected.
The World Expo 2020 has also increased the demand for short-term rentals in Dubai. This, too, has driven and may further drive up real estate prices.
In short, from now and in the following years, the expectation is that property prices, and subsequently rental costs, will rise. Although it may take a while for rental prices to go up as high as they used to be, they will increase and continue to do so.
It’s a Renters’ Market Now
Now is the best time to rent in Dubai. If you can find a relatively inexpensive apartment in a high-end development in the Dubai city centre, you should probably take it. And if you have excellent prospects and income security for many years, you can perhaps lock in your current low rate and rental incentives for years to come.
Dubai villas are not as affordable as apartments. However, villa rental rates are still lower now compared to pre-pandemic times.