3 Major Events that Could Disrupt the Dubai Real Estate Market

“The inability to predict outliers implies the inability to predict the course of history”
— Nassim Nicholas Taleb

While the Expo 2020 might have had some everlasting effects on the Dubai real estate market, one could argue most of this effect has already been accounted for in the price boom back in 2013-2014.

There are some other events however that you should be aware of when setting your outlook on the coming years for the Dubai real estate market. These events are better described as potential fundamental shifts in the way Dubai does things. In this article, we will discuss three main trends or changes that we think will have big impact on Dubai.

1. A major transportation upgrade that will lead to an influx of residents into Dubai

As of today there are already a good number of people who reside in Dubai, mostly Dubai Marina and JLT, but travel on a daily basis to work in Abu Dhabi. What if instead of driving for an hour and a half each day to get to Abu Dhabi, the trip becomes 12 minutes long? This will most definitely spur a redistribution of residents amongst the two cities.

This will be possible if Dubai proceeds forward with the construction of its fast speed rail project thanks to Hyperloop One.

While this project is still in its early phases, the Dubai road and transport authority (RTA) and Virgin Hyperloop One Company have made considerable progress in the technical, engineering and economic feasibility study of the project. Progress has also been made in identifying the routes for operating the Hyperloop along with its initial design mode. The Hyperloop pod this year (2018) was showcased in City Walk Dubai where it might one day start transporting close to 10,000 people daily between Dubai and Abu Dhabi.

This new development alone is worth taking into consideration when thinking of investing in Dubai. The fast speed rail might one day be extended all the way to Riyadh, closing the distance between the two countries and bringing further population influx towards Dubai.

1. A major demographic shift rooted in a change in immigration policy

Expats from all over the world had been traveling to work in the gulf region ever since the oil boom. This is still the case today, but what has changed is the way expats have done things. Expats used to travel alone, mostly men back in the 70s or 80s whose main motive was to accumulate wealth, save it and send it back home.

What Dubai was able to do as it matured was to turn expats from savers to consumers, and to convince them to stay longer and raise a family in Dubai. This of course was only possible after a lot of infrastructure spending, the construction of entire communities with a focus on retail, leisure, education, hospitality and healthcare segments.

However till today, one thing remains the same in the way expats do things: a good portion of expats head back home after retirement. This is mainly due to the immigration laws in the emirate, where getting an Emirati nationality is quite impossible regardless of how long you work in Dubai. But this causes one to wonder - what if the UAE one day changed its immigration laws ?

Dubai might one day implement a form of two tier citizenship. A two tier citizenship system is implemented in more than a few countries in the world. Essentially a two tier citizenship would protect and give special rights and benefits to the natives of the emirate, but would also allow expats to eventually become second tier citizens with the predominant right to stay and live in the country.

Or the UAE might follow in the footsteps of Saudi Arabia. In order to become a citizen of Saudi Arabia, a resident must aggregate at least 23 qualifying points in addition to a number of factors such as Arabic language fluency. For instance, living in Saudi Arabia for a decade gives the applicant 10 points, a Bachelors degree equates to five points while a Masters degree counts for eight points. Thereafter an application for citizenship can be filed.

If a shift in naturalization policy might ever take place, its impact on the Dubai Real Estate market will be phenomenal raising real estate demand to new levels.

1. A major technology upgrade that will change the way we do real estate

Perhaps by now most of you have heard of bitcoin. A digital cryptocurrency that exploded back in 2017 which has recently been witnessing a slowdown in 2018. This new disruption in the world of finance wouldn’t have been possible without the blockchain. The blockchain is the distributed ledger technology that powers bitcoin and all the other cryptocurrencies in the world.

If the internet has made it possible for us to transfer information between two points in the world, the blockchain will allow the seamless transfer of value. Dubai is well aware of blockchain technology and will be the first blockchain powered government in the world by 2020. The Dubai Land Department is reportedly in the process of using IBM blockchain ledger technology to record real estate transactions.

Blockchain has the potential to digitize and tokenize real estate assets. So instead of buying a 1000 sqft apartment - blockchain will make it super easy to tokenize the 1000 sqft apartment into one hundred 10 sqft tokens easily turning any asset into an effective REIT.

The blockchain will introduce further transparency into the market. Ideally everyone will be able to know the full transaction history of every property on the market, when and how much it was rented for, and the utilities and service charges paid ever since the property was built.

Blockchain will mean instant transactions: there will be no need for registration trustees or other middlemen to complete a transaction. A title deed can be issued directly upon purchase.

In essence, blockchain allows for tokenization, smart contracts, disintermediation and transparency. We will have to wait and see to what extent will Dubai implement its blockchain strategy and the impact it will have on the real estate market.

Final Words

Bear in mind that all the above mentioned trends or changes are still to a good extent based on speculation. However they are not to be taken lightly if you chose to be investing in the UAE.

If you would like to position yourself as an investor in the Dubai real estate market, we highly suggest you find a property at a good discount to give yourself a price cushion for any further price correction.

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