Boom in the face of conflict Dubai is getting richer and richer

One record follows another in the construction and tourism sectors: Dubai's economy is running at full speed. The emirate is benefiting indirectly from the crisis in the region - and not for the first time.

DPA

17.08.2024, 21:06

dpa

While the Middle East conflict casts a dark shadow over the region, wealth is growing in Dubai. Tourism and the construction industry are causing the economy to boom. At the same time, the sheikdom is positioning itself as a safe haven in the region, which is on a knife-edge following the assassination of Hamas leader Ismail Haniya.

"Dubai is in a unique position," says Zhann Jochinke, Managing Director of real estate consultancy Property Monitor. "We happen to be the net beneficiary of the crisis in the region, for better or for worse."

Such indirect profiting from crises has a long history in the emirate - for example during the coronavirus pandemic or the Russian war of aggression against Ukraine. As soon as the ultra-rich in the region feel alarmed by unrest, the city offers stability, low taxes and an uncomplicated visa system.

Demand for real estate in Dubai has skyrocketed, pushing prices to record levels. Even historic flooding in April did nothing to stop the boom.

The state-backed real estate group Emaar Properties, whose name adorns the Dubai skyline, reported a turnover of 8.1 billion dollars (approx. 7 billion Swiss francs) from its development business in the first half of 2024. In the same period last year, the figure was just under 5 billion francs.

The value of luxury villas across the city rose by around 38% year-on-year to a record high in the second quarter of 2024, according to real estate consultancy ValuStrat. The average price for a detached house exceeded 2.7 million dollars for the first time in ten years. The increase for premium apartments was hardly less. Apartments on the artificial island of Palm Jumeira in the Persian Gulf are already more expensive than they were at their peak in 2014.

Tarik Shah, head of sales at Pat & Co., a brokerage firm for high-end real estate, confirms the trend. Demand has risen exponentially and is far above expectations for luxury properties, he says.

At the same time, Dubai International Airport recorded a record 44.9 million travelers in the first half of this year. A total of 81.8 million passengers are expected for the whole of 2024, setting another record, says the airport's Managing Director, Paul Griffiths. Over the next ten years, Dubai plans to move operations to a new airport costing almost 35 (approx. 30.3 billion Swiss francs) billion dollars.

According to the state-owned bank Emirates NBD, around 9.3 million tourists visited the global hub in the first six months of the year, more than before the pandemic. The city-state's population grew from 3.2 million people in 2018 to almost 3.7 million today. An additional 1.1 million live in the city temporarily or commute there every day. The monarch family wants to increase the number of inhabitants to 5.8 million by 2040.

Is there a threat of an economic downturn?

However, some experts are questioning how long the record upturn can last. Some warn that an oversupply of real estate could put the brakes on the market at some point if demand does not keep pace. "From 2025 and 2026, there will be a large supply of new units that started construction in 2021," explains analyst Tatjana Lescova from S&P Global. "We expect that the new supply will not be fully absorbed by the market by then, and this could lead to an economic downturn."

Construction companies have already completed more than 6,000 residential units in the first half of 2024 and expect 20,000 more by the end of the year, according to the state news agency WAM. "These are big numbers, but the market is swallowing them up," says expert Jochinke. "People are buying the apartments."