DUBAI (Reuters) - Expo 2020 is unlikely to improve the dire conditions of Dubai’s real estate market, S&P Global Ratings said, where residential property prices have fallen by over a quarter since 2014.
Dubai could attract 11 million foreign visitors to the Expo 2020 world fair, which starts in October next year, organizers have previously said.
But while this may give a boost to tourism and improve conditions for the retail sector, the emirate’s real estate market – crucial to Dubai’s economy – is unlikely to be impacted.
“We believe Expo 2020, just on the back of potential visitor flows to the emirate, will ease temporary pressures on hotels and retailers. However, it is unlikely to materially improve long-term conditions in the real estate sector,” S&P Global Ratings credit analyst Sapna Jagtiani said in a statement.
The comment comes as Dubai posted on Sunday a 2.1% year on year economic growth in the first half of 2019, with real estate activity having grown also by 2.1% in the same period and contributed nearly 7.4% to the total GDP.
Arif Al Muhairi, executive director at Dubai Statistics Center, said that the flexibility of Dubai’s economy and its business structure helped it maintain economic growth, despite a slowdown of the regional and global economy.
Dubai’s economy – buoyed by foreign trade, tourism and its status as the main regional hub for business services – is amongst the most diversified in the Gulf region, where governments continue to rely heavily on oil revenues.
But it has faced a slowing real estate market for most of the decade, barring a brief pick-up more than five years ago. Housing oversupply has driven prices down at least a quarter since 2014.
Since February, residential property prices have fallen by 10% and are expected to continue to slide for the rest of this year as new supply hits the market, S&P said.
Dubai set up a real estate planning commission in September to regulate projects and avoid competition between semi-government and private firms.
Still, one of Dubai’s largest property companies, DAMAC DAMAC.DU, said last month a complete pause in new residential projects for at least one year would be needed to trigger a market recovery.
Reporting by Davide Barbuscia; Editing by Toby Chopra