Dubai's growing expat population is putting pressure on its world news infrastructure

This will bring Dubai's population closer to that of Singapore and will mark a change from the pandemic years. About 400,000 people have arrived since 2020 due to low taxes, safety and proximity to major markets.

The growth boosted the economy and helped place Dubai's benchmark index among the world's best this year, led by state-backed Emirates NBD Bank PJSC, toll operator Salik and Dubai Electricity and Water Authority.

But it came at a price.

The dominance of businessmen, lawyers and bankers who want to reduce premium prices is driving up real estate prices and rents, increasing competition for school admissions. Public transport is limited and roads are regularly jammed – although Dubai still outperforms London, New York and Riyadh, time is lost during rush hour every year, according to TomTom.

Monica Malik, chief economist at Abu Dhabi Commercial Bank PJSC, sees further growth momentum this decade. “Lifestyle, ease of doing business and the personal income tax environment are all factors supporting this continued expansion,” he said. “We expect significant investments to improve the quality of life.”

According to a Dubai Media Office spokesman, Dubai has the ambition to be among the top three cities in the world in terms of quality of life. The city's 2040 master plan aims to make the city more sustainable, while Social Agenda 33, announced this year, focuses on improving education, health care and social services. The emirate's projects include a $5 billion metro expansion and an $8.2 billion drainage network after April's extreme rains flooded highways, homes and businesses.

Financial center

Nowhere is the boom more visible than in financial centers. Due to the emergence of hedge funds, including banks such as Millennium Management and State Street, the number of people working at the Dubai International Financial Center has increased by 70% in the last five years, according to Free-Zone data.

DIFC expects to launch a record number of companies this year and is building three new office towers. Citywide, average office occupancy rates rose above 91% in the second quarter, a sharp contrast to the commercial real estate collapse seen in many global financial centers.

The shift began during the pandemic, when Dubai – encouraged by high vaccination rates – welcomed visitors before most countries lifted lockdown measures. This, combined with relaxed visa regulations, has encouraged an influx of crypto millionaires, Asian bankers and digital nomads. Moscow's invasion of Ukraine in 2022 triggered another wave as wealthy Russians began to protect their assets.

According to Scott Livermore, chief economist for the Middle East at Oxford Economics, conflicts in the Middle East and Russia's war with Ukraine have had a less damaging impact on the global economy.

“This includes the Gulf countries and Dubai, which continue to record strong growth,” he said. “We should expect this to happen until there is a significant escalation of conflict in many countries.”

Apartment prices

This inflow has helped Dubai's real estate industry break out of the boom-and-bust cycle. According to real estate consultancy JLL, home values ​​have been rising for 16 straight quarters since the start of the pandemic, and rents for single-family villas have increased by 86%.

According to data collected by Bloomberg, since the beginning of 2019, property prices in Dubai have exceeded those in London and Singapore. Developers are responding. About 90,000 new homes are expected to hit the market over the next two years.

Some expats, setting their own prices, want to rent or buy in Sharjah – one of the seven sheikhdomes in the United Arab Emirates. Shane Breen, head of Savills' Sharjah office, said the exodus from Dubai could not be more visible than in the new building his company manages: more than two-thirds of tenants have moved from Dubai.

The downside is more traffic on already crowded streets. Hundreds of thousands of workers commute to Dubai from neighboring emirates, including Sharjah, and rush hour driving times can more than double.

Competition in schools is also intensifying, with school enrollment up 8% so far in 2024 compared to the previous year, according to James Mullen, co-founder of WhatSchoolAdvisor.com. Expatriates, who make up about 90% of the population, are effectively excluded from public schools, and parents spend a significant portion of their earnings on tuition.

“Any half-decent school is full of flowers, and most of them have long waiting lists,” Mullen said. He said about 15 new schools are expected to open over the next three years, in addition to the 220 already in operation, as agencies look to capitalize on the influx of arriving families.

destination

Tourism, a pillar of Dubai's economy, is also thriving. According to data from the city's Department of Tourism, around 10.6 million people visited Dubai this year through July, an increase of 8% year-on-year. At the heart of this is Dubai's position as an air hub. The city airport expects a record 91.8 million passengers to pass through its terminals this year.

While Dubai's population explosion – it had a population of just 40,000 people in 1960 – may be slowing, the emirate is keen to attract more investment and businesses and is planning multi-billion-dollar projects to house citizens, residents and tourists.

According to Livermore of Oxford Economics Middle East, “growth dynamics are likely to stabilize over the next few years as the pandemic matures.” “Rapid development has certainly put pressure on some of Dubai's infrastructure, but authorities appear to have a plan to deal with the consequences.”

© 2024 Bloomberg LP