Dubai’s growing expat population putting strain on its infrastructure | World News

That would bring Dubai’s population closer to Singapore’s and mark a turnaround from the pandemic years. Since 2020, about 400,000 people have arrived, drawn by low taxes, safety and proximity to major markets. 

The growth has stoked the economy, and that’s helped propel Dubai’s benchmark index into the ranks of the best global performers this year, led by state-backed Emirates NBD Bank PJSC, toll operator Salik and Dubai Electricity & Water Authority.

But it’s come at a cost. 

The glut of traders, lawyers and bankers willing to fork out premium prices is pushing up property values and rents, while intensifying competition for school admissions. Public transport is limited and roads are routinely jammed — though Dubai still fares better than London, New York and Riyadh on time lost per year in rush hour traffic, according to data from TomTom.  

Monica Malik, chief economist at Abu Dhabi Commercial Bank PJSC, sees the pace of growth continuing through this decade. “The lifestyle, ease of doing business and the personal income tax environment are all factors supporting this ongoing expansion,” she said. “We expect to see significant investment to support the livability.” 

 

Dubai has ambitions to be a top three city globally by standard of living, according to a spokesperson for the Dubai Media Office. Its 2040 urban master plan aims to make the city more sustainable, while Social Agenda 33, launched in this year, focuses on enhancing education, healthcare, and social services. Among the emirate’s projects are a $5 billion expansion of the metro and an $8.2 billion drainage network, after extreme rains in April flooded highways, homes and businesses.

Financial Hub

 

Nowhere is the boom more evident than within the financial hub. The number of people working in the Dubai International Financial Center has jumped 70% in the past five years, according to data from the free-zone, as hedge funds including Millennium Management and banks like State Street moved in.

The DIFC expects a record number of firms to set up this year, and is building three new office towers. Across the city, average office occupancy rates rose to over 91% in the second quarter, a sharp contrast to the commercial real estate downturn seen in many global financial hubs.

The turnaround started during the pandemic, when Dubai — emboldened by high vaccination rates — welcomed visitors before most countries lifted lockdown measures. That, combined with easing visa regulations, spurred a rush of crypto millionaires, bankers from Asia and digital nomads. Moscow’s invasion of Ukraine in 2022 prompted another wave of newcomers as wealthy Russians moved to shield their assets.

Conflicts in the Middle East and Russia’s war on Ukraine have had a less damaging impact on the global economy than was feared, according to Scott Livermore, chief economist at Oxford Economics Middle East.

“This is true in the Gulf countries and Dubai, which continue to enjoy strong growth,” he said. “We should expect this to continue unless there is a significant escalation in the conflict that draws in a wider number of countries.”

Housing Prices

 

The influx has helped Dubai’s real estate industry break free from its boom-and-bust cycle. Home values have risen for 16 consecutive quarters and rents for single family villas have soared 86% since the start of the pandemic, according to real estate consultancy JLL. 

Property prices in Dubai have outstripped London and Singapore since early 2019, according to data compiled by Bloomberg. Developers are responding. About 90,000 new homes are expected to hit the market in the next two years.

Some expatriates, finding themselves priced out, are looking to rent or buy in Sharjah — one of the seven sheikhdoms in the United Arab Emirates. Shane Breen, head of Savills’ Sharjah office, said the migration from Dubai couldn’t have been more evident than at a new building his firm managed: Over two-thirds of the tenants moved in from Dubai.

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

Competition is also intensifying for schools, with enrollment up 8% so far in 2024 from a year earlier, according to James Mullen, co-founder of WhichSchoolAdvisor.com. Expatriates, who make up nearly 90% of the population, are effectively shut out from public schools, and parents shell out substantial amounts of their salaries on school fees.

“Any half decent school is full to the gills and most have long waiting lists,” Mullen said. About 15 new schools are expected to open over the next three years, in addition to the 220 already in operation, as firms look to capitalize on the rush of incoming families, he said.

Travel Destination

 

Tourism, a pillar of Dubai’s economy, is also flourishing. About 10.6 million people visited Dubai this year through July, an 8% annual increase, according to data from the city’s tourism department. Underpinning that is Dubai’s position as an aviation hub. The city’s airport expects a record 91.8 million passengers to pass through its terminals this year. 

While Dubai’s population explosion — in 1960, it was home to just 40,000 people — may slow, the emirate wants to attract more investment and businesses, and is planning tens of billions of dollars of projects to accommodate citizens, residents and tourists.  

“The pace of growth may tail off over the next couple of years as the rebound from the pandemic matures,” according to Oxford Economics Middle East’s Livermore. “The rapid growth has certainly put strains on some of the infrastructure in Dubai but authorities seem to have a plan to cope with the consequences.”

© 2024 Bloomberg L.P.