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HOMEAPP & DAVIMA RESEARCH HOUSE
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TRUMP POLICIES WILL UNLIKELY BECOME A TANGIBLE THREAT TO DUBAI REAL ESTATE MARKET
Significant changes always pose concerns for investors whether they have priced the risk correctly. The same is applicable to change of US administration following President Trums election. There are voices of concerns about new Trump administration affecting global trends and potentially affecting investments in Dubai. In our view why potential changes should be carefully evaluated risk of collapsing Dubai real estate market is currently remote. As analised below these directives will unlikely have a serious impact on property market. It should also be considered that not all of Trump’s announcements were fulfilled. In our view, despite some announcements, Trumps administration will be adherent to flexible and reasonable policies and will pursue its goals trying to avoid sharp negative effect on a global economy.
The following political steps within Agenda 47 announced by Trump administration may potentially affect UAE real estate market through various transmission channels. Below we analise the impact of these steps on UAE real estate market.
I. END OF MILITARY ACTIVITIES IN UKRAINE
Possible effect on UAE: Outflow of Russian citizens from UAE
According to George Washington University Russian citizens residing in UAE may be with some approximation divided into several major groups: 1) wealthy people who relocate to safeguard capital, 2) so-called “info gypsies,” who make a living from social media and internet activities attracted by low taxes, 3) individuals who make money from cryptocurrency operations attracted by lower taxes, 4) entrepreneurs and professionals working in international companies due to political views, impact on domestic job market and desire to diversify their incomes, 5) professionals in the fashion, entertainment and food industry who followed people with money able to pay for high-end services and 6) a diverse group of individuals in the service sector (e.g., restaurants, beauty salons, etc.) catering to the growing demand.
According to various estimates Russian citizens became top five property buyers in 2022 having succumbed the lead to another nationalities in 2024. According to George Washington University research the real number of Russians settled in UAE is not officially disclosed.
In our view if the military operation ends in Ukraine the effect on Russian community will not be imminent due to:
II. TARRIFS LEADING TO “TRADE WARS”
Possible effect on UAE: slowdown of economic development as a result of disruption of global trade and damage to key trade partners (e.g. China)
There are several items on the US government’s agenda directed to improve competitiveness of the US economy and to improve its trade balance. As a result, there is a risk of “tariff wars” that may disrupt trade links locally and globally. While UAE is not a part of these “wars” its economy can still be affected by slowdown of economic growth of its key partners.
In our view the new administration will likely take relatively pragmatic steps in order not to disrupt the global economic growth as it will boomerang the US economy. The declarations and negotiations are vocal, but the final result will likely be muted with much less effect on global economy. If not, the effect will likely be short as it is not beneficial for all parties.
III. OIL PROJECTS GROWTH
Possible effect on UAE: Oil price decline
Getting out of the Paris Agreement, and issuing fast approvals to new oil infrastructure projects is aimed at restoring US energy sector which could potentially bring down energy prices.
The declaration to lift restriction of oil production does not mean that US oil companies drastically increase supply because they are cautious to avoid drop of oil prices because their breakeven oil price is much higher than those of GCC economies. Also, OPEC+Russia is taking precautions measures to prevent oil price collapse and these measures have historically been rather effective.
At the last but not the least, UAE economy is much more diversified (25% of GDP depends on energy sector) than in the past and can weather moderate oil price shocks, also assisted by its strong reserves. In addition, any slowdown of UAE economy will unlikely cause the exodus of population at the same scale as in the past in response to oil price shocks of a larger share of “settled” population.
IV. IMPROVE INFRASTRUCTURE AND ATTRACTIVENESS OF US
Possible effect on UAE: Rising competition for talents and investments
We believe that if US is successful in making its reforms its attractiveness for talents will still face issues of visa regime and other impediments, including stiff competition. In the UAE the conditions are still attractive for a talent pool. At the same time, we believe that the government will continue to implement measures attracting talents in response to rising competition, which could include further liberalisation of visa requirements – positively affecting real estate market.
Competition for investment flows will remain intense but the region has good buffer of resources and demonstrates attractiveness which we believe accompanied by right reforms will maintain competitiveness of UAE at good level.
V. GREEN ECONOMY
Possible effect on UAE: Lower attractiveness of “green” agenda could possibly affect UAE diversification path
We do not expect that the UAE government will shut its agenda to diversify the economy. This trend has been long-lasting accompanied by sustainable policies and is not expected to end quickly. Potentially lower investments in some” green” projects from oversees may be compensated by local funds or funds from other GCC partners. Also, UAE “green” economy is still in infancy and even if it is negatively affected by lower investments the UAE broader diversification trend will persist.
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