United Arab Emirates: from “Build it and they will come” to “Make them stay” - a shift in the development model

The United Arab Emirates (UAE) efforts to reduce its reliance on oil and gas industries led to a decline in the economy’s share of those industries from 80% in 1980 to 30% of GDP as of 2020. The UAE based its development and economic diversification model on the construction/property industry as one if its key pillars that b eside the fast development of the financial sector, tourism and trade, would see the arrival of wealthy expatriates and foreign investor s: the ‘build it and they will come” model. R e cent government schemes to attract foreign professionals ( permanent residency “golden card” and program for overseas remote working professionals in response to the Covid-19 sanitary crisis) aim at attracting high-skilled foreign professionals to the UAE property market and “make them stay”. In 2020, Dubai saw a V-shaped rebound in residential sales , with existing home sale volumes rising by almost 160% qoq (+14.5% y o y ) in Q3, the best quarter since 2012. Yet, Dubai would need to see a prolonged period of robust sales to absorb the supply glut, while pressured real estate developers are unlikely to be able to wait for the market to tighten. Also, the exodus of foreign workforce exacerbated by the sanitary crisis may continue amid job losses. On the upside, while the UAE economy will contract 6.6% in 2020, GDP growth will recover to 1.3% and 2.2% in 2021 and 2022 respectively , adding jobs. Meanwhile , difficulties faced by developers on the back of the Covid-19 crisis (sudden stop of activity) should reduce new project launches at least in the short term , helping to balance the current UAE housing supply-demand mismatch. Under the current global challenging environment , the recently acted government schemes aimed to facilitate the settlement of high-level professionals may take some time before posting positive outcomes. Yet, the lockdown experience, p rice discounts and low interest rates along with a lower number of property deliveries bode well for supply and demand dynamics pointing to stabilization in the residential sector.