The property market in a Post-COVID Dubai
Did you see the recent report by Moody’s?
It seems that consumers around the world have amassed an extra $5.4 trillion in savings since the coronavirus pandemic began. The savings are on top of what they would have saved if the pandemic had not occurred and saving behaviour had been the same as in 2019.
The excess savings are equal to 6% of global GDP. The United States boasts the largest share of excess saving, amounting to $2.6 trillion, or 12% of US GDP, with the United Kingdom close behind at 10% of GDP.
If people were to spend $1.8trillion of that stockpiled cash, they could boost the global economy in 2021 and 2022 by another two percentage points.
A major factor driving that accumulation of savings has been the unprecedented government support for individuals and companies. The International Monetary Fund said in November that governments and central banks around the world had announced $19.5 trillion to cushion their economies from the worst recession since the Great Depression.
Add the gazillions that have been made in Cryptocurrencies to the money sitting in savings accounts and you have a massive amount of ready cash.
What are those savers going to do with all that money?
No doubt some will remain where they are and invest locally despite their governments need to increase taxes which will for sure, focus on the wealthy. Note the tax reform plans for capital gains etc for the USA that Joe Biden announced last week. It is only a matter of time before other governments do something similar, and the higher tax rates are expected to be required for many years to pay off those pandemic debts.
Dubai must be at the top or close to the top of the shopping list for those looking to live and/or invest overseas, we are already experiencing a massive increase in transactions since the lockdown was lifted in May 2020, many agencies reporting record levels of transactions month on month over the last year.
These buyers have been attracted by new visa rules, zero capital gains tax, zero tax on rental income, the lowest property prices for 7 years, low-interest rates, increased LTVs and more, it is one of the safest places to live in the world, the sun is always shining, and the government has done a stellar job of managing the pandemic.
Do not forget the importance of EXPO 2020 which is scheduled to run from October 2021 to March 2022 plus we have the World Cup in Qatar in 2022, all adding to the popularity of the UAE due to being a major tourism, trade, and transit hub in the region.
It has already begun.
Dubai Land Department, ‘Real Estate Updates,’ March 2021, showed that real estate transactions in Q1 2021 achieved significant growth of 27 per cent and 47 per cent compared to Q1 2020 and Q1 2019, respectively
Highlighting the continued attractiveness of the real estate sector to new investors, the bulletin said 5,683 new investors entered the market in Q1 2021, representing 64 per cent of the total number of investors.
It is going to get even busier.
I can vouch for the fact that many of those purchases have been made remotely by overseas residents thanks to smartphones, Zoom and Teams etc, so imagine what is likely to happen in the market later this year as and when infection rates are lower, vaccination rates are higher and travel restrictions are lifted in Europe, Asia, and the Far East.
At the beginning of 2020, there were concerns about oversupply, lowering rents and further falls in prices and now I fear that we will have less choice available later in the year especially within the prime areas and so with less supply and increased demand we can expect prices to respond.