The effect of Covid-19 on UAE real estate
Dubai, United Arab Emirates, February 25th, 2020
by Kalpesh Kinariwala, Founder and Chairman of Pantheon Group
“Real Estate Investors hope for a speedy recovery to the economic spheres”
Unarguably, the current priority for governments, healthcare professionals, and virologists, today is to come together and resolve the situation relating to the Covid-19 virus; however, we must also look to its effect on global and national economies. From my own and a wider UAE perspective, this means addressing the impact on the construction, development, and property markets. That said, the disruption in the movement of people between China and the UAE is likely to have a wider impact on other types of businesses, such as tourism and retail.
According to the World Economic Forum (WEF), the immediate effect of the virus will see China’s economic growth slow to 4.5 per cent, in Q1 of 2020, down 6 per cent (year-on-year) – the slowest since the 2008 financial crisis. From factory shutdowns, slowing Chinese production, to the first drop in global oil demand noted in over a decade, the virus has already proved to be adversely affecting a much wider scope than just the health of its unfortunate sufferers.
Highlighted by President Xi Jinping’s state visit, in 2018, the UAE is enjoying an ever-closer trade and investment relationship with China. In the last five years, Chinese nationals living in the UAE has grown by 53 per cent – to over 230,000 – and the UAE is now host to over 4,000 Chinese companies. In terms of real estate, a reduction from Chinese buyers was being noted before the virus outbreak; therefore, we must not rush to conclusions and consider all factors, including brokers steering focus to other markets, so as not to misrepresent the trends.
While, here in the UAE, authorities are taking the necessary preventive measures to contain its spread, we do find ourselves in the midst of the country’s peak tourism season and only several months before the start of Dubai Expo 2020. In the first six months of 2019, tourism to Dubai from China was up by 11 per cent, on the same period the previous year. We shall soon know the full extent of the early impact on UAE tourism; however, the UN’s International Civil Aviation Authority (ICAO) is already predicting that global airline revenues will fall by up to USD5 billion, in the first quarter of 2020.
While the situation continues to unfold and the immediate impact does bring with it some justifiable concerns, many economists remain optimistic of a quick recovery to the global economy, if the virus is contained. Recent assurances, particularly in relation to the tremendous efforts and dedication of the UAE’s Ministry of Health and Prevention, certainly provides confidence due to the professionalism in which the situation is being handled.
In short, we must remember that as serious as matters are, in relation to the Covid-19 virus, real estate is always a sector where we must look to the long-term. Investment and development in this sector remains one of the most trusted vehicles from which to weather many unforeseen or short-term economic impacts and, at Pantheon Development, we continue to look at the bigger picture with this in mind.