- The emirate has attracted around 400,000 newcomers since the pandemic.
- This influx has driven up rents and property values while exerting pressure on schools.
The extent of Dubai’s post-pandemic recovery was evident late last month. On the same day that Africa’s richest man unveiled plans to set up his family office, Santander Group announced its latest expansion of wealth services in the emirate. While this influx of expatriates, drawn by high-paying jobs, is bolstering the nearly $115 billion economy of this Middle Eastern business hub, it also highlights the limitations of Dubai’s infrastructure. Home to 3.8 million people now, Dubai’s population is expected to increase to 5.8 million by 2040.
This anticipated growth would bring Dubai’s population closer to that of Singapore and mark a significant turnaround from the pandemic years. Since 2020, approximately 400,000 individuals have moved to Dubai, attracted by the city’s low taxes, safety, and proximity to major markets. The resulting economic growth has helped propel Dubai’s benchmark index into the ranks of the best global performers this year, led by state-backed entities such as Emirates NBD Bank PJSC, toll operator Salik, and Dubai Electricity & Water Authority.
However, this growth comes at a cost. An influx of traders, lawyers, and bankers willing to pay premium prices has pushed up property values and rents, while also intensifying competition for school admissions. Public transport options are limited, and roads frequently experience congestion, although Dubai still fares better than cities like London, New York, and Riyadh in terms of time lost per year in rush-hour traffic, according to data from TomTom.
Monica Malik, chief economist at Abu Dhabi Commercial Bank PJSC, predicts that this growth pace will continue through the 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 liveability.”
According to a spokesperson for the Dubai Media Office, Dubai has ambitions to be among the top three cities globally in terms of standard of living. Its 2040 urban master plan aims to enhance sustainability, while Social Agenda 33, launched this year, focuses on improving education, healthcare, and social services. Among the emirate’s key projects are a $5 billion expansion of the metro and an $8.2 billion drainage network, following extreme rains in April that flooded highways, homes, and businesses.
Financial Hub
The boom is most evident within the financial hub. The number of people working in the Dubai International Financial Centre has surged by 70% over the past five years, according to data from the free-zone, as hedge funds like Millennium Management and banks such as State Street established a presence. The DIFC anticipates a record number of firms to set up this year and is constructing three new office towers. Throughout the city, average office occupancy rates rose to over 91% in the second quarter, standing in stark contrast to the commercial real estate downturn seen in many global financial hubs.
The recovery began during the pandemic when Dubai, buoyed by high vaccination rates, welcomed visitors before most countries lifted lockdown measures. This, combined with relaxed visa regulations, spurred an influx of crypto millionaires, bankers from Asia, and digital nomads. Moscow’s invasion of Ukraine in 2022 prompted another wave of arrivals as wealthy Russians relocated to protect their assets.
According to Scott Livermore, chief economist at Oxford Economics Middle East, conflicts in the Middle East and Russia’s war on Ukraine have had a less severe impact on the global economy than was feared. “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 large influx of people has enabled Dubai’s real estate market to break away from its traditional boom-and-bust cycle. Home values have increased for 16 consecutive quarters, and rents for single-family villas have jumped by 86% since the onset of the pandemic, as reported by real estate consultancy JLL. Property prices in Dubai have outperformed those in London and Singapore since early 2019, according to data from Bloomberg. Developers are responding to this demand with approximately 90,000 new homes expected to be introduced to the market within the next two years.
However, some expatriates, feeling priced out, are turning to Sharjah—one of the seven emirates in the UAE—to rent or buy properties. Shane Breen, head of Savills’ Sharjah office, noted the migration from Dubai was quite apparent in a new building managed by his firm, where over two-thirds of the tenants relocated from Dubai. This shift brings a downside in the form of increased traffic on roads that are already congested. Hundreds of thousands of workers commute daily to Dubai from neighbouring emirates, including Sharjah, causing driving times to more than double during rush hours.
The competition for school placements is also intensifying. Enrolment is up 8% in 2024 compared to the previous year, according to James Mullen, co-founder of WhichSchoolAdvisor.com. With expatriates making up nearly 90% of the population and being effectively excluded from public schools, parents often spend a significant portion of their salaries on private school fees. “Any half-decent school is completely full, with most having long waiting lists,” Mullen mentioned. Approximately 15 new schools are expected to open over the next three years, in addition to the 220 currently operational, as businesses aim to capitalize on the influx of incoming families, he added.
Travel Destination
Tourism, a key pillar of Dubai’s economy, is thriving. Approximately 10.6 million people visited Dubai in the first seven months of this year, marking an 8% increase compared to the previous year, according to data from the city’s tourism department. This growth is supported by Dubai’s strategic position as an aviation hub, with the city’s airport projecting a record 91.8 million passengers to pass through its terminals this year.
While Dubai’s rapid population growth—back in 1960, the city only had 40,000 residents—might decelerate, the emirate is keen on attracting more investment and businesses. Plans involve launching projects worth tens of billions of dollars to cater to citizens, residents, and tourists alike. “The growth rate may decrease over the next couple of years as the post-pandemic rebound matures,” said Oxford Economics Middle East’s Scott Livermore. “The rapid expansion has certainly placed strain on some of Dubai’s infrastructure, but local authorities appear to have plans in place to manage the impact.”
