Highlighting the implications of a successful bid to host the World Expo 2020 on Dubai’s real estate market, property consultants Jones Lang LaSalle (JLL) warns that while the win would certainly result in long-term benefits to the economy and real estate market in general, its short-term impact will need to be managed carefully.
By Muhammad Aldalou, Kippreport
If Dubai successfully wins its bid to host this global six-month event in 2020, there is a risk that the inevitable boost in short-term sentiment will translate into excessive price growth or overdevelopment.
Alan Robertson, CEO of JLL MENA, says that while the Dubai real estate market is poised for growth, regardless of the World Expo 2020, the success of this bid will act as the most important influence on the real estate sector across the UAE in 2014.
However, Robertson adds that the Expo 2020 will not benefit all sectors of the market in the same way. According to him, the hotel and logistics sectors will be the biggest winners, followed by the residential and retail segments.
According to JLL, the impacts can be classified into three groups – prior, during and post the event. It adds that while the immediate impact is likely to dominate the headlines and define the shape of the market in 2014, its long-term ‘legacy’ effects will be more important for the UAE economy.
As far as short-term impact (from 2014 to 2019) is concerned, JLL expects the news of Dubai’s successful bid to result in a major boost in short-term sentiment and increased interest in the real estate sector.
The most immediate impact of this improved sentiment is likely to be an increase in the asking price for land sites, existing villas and apartments in developments close to the expo site. While prices in the Jebel Ali area will certainly increase, the availability of significant new supply will temper this growth, which could result in a widening gap between asking prices and those that the market is willing to pay.
Hosting the World Expo 2020 will have a significant positive impact on the Dubai economy. It has been estimated that the event could add as much as two per cent to its GDP and result in the creation of up to 277,000 jobs.
If these estimates prove correct, the real estate market would be a major beneficiary, through increased spending and higher demand for housing, hotels and commercial accommodation.
According to a new report by property consultancy CBRE, a successful bid will have a “resoundingly positive effect” on local real estate markets. However, should Dubai lose the bid, there could be a short-term dip in sentiment levels, specifically on the residential and land sectors.
The report further notes that significant hope value has been placed on the outcome of the decision, with notable growth in strategic areas close to the Expo site, warning that future development plans must remain anchored to actual supply and demand dynamics, rather than building just for a single event.
This article was first published on kippreport.com
Wednesday, November 27- 2013 @ 6:13 UAE local time (GMT+4) Replication or redistribution in whole or in part is expressly prohibited without the prior written consent of Mediaquest FZ LLC.