Why expat school-children are a gauge of Dubai’s booming property prices

Forget the daily check on rental and property prices on Dubizzle.com or JustRentals.com, or even the weekly reports from the likes of Jones Lang LaSalle or Asteco.

To gauge realistic real estate trends in the Dubai market, Citigroup, no less, suggests this random exercise: simply look out of your balcony or window in the morning when the school buses are out picking up schoolchildren. If you spot an increase in the number of schoolchildren over a period of time, be sure there’s a property recovery brewing in Dubai. Literally.

In a report issued this month, Citigroup has used school enrolment patterns to measure growth in the expatriate population in Dubai, which it then links to the overall surge in Dubai’s economic wellbeing, of which the property sector is a major contributor as well as beneficiary.

It’s a smart way actually, like the increasing traffic jams on roads pointing to an economic recovery, but unlike the anecdotal nature of traffic snarls linked to GDP numbers, Citi actually did crunch the numbers to arrive at the conclusion.

Here’s how Citigroup says it works: “In an economy where 96 per cent of the workforce is made up of expatriates whose right to reside in the emirate is linked to their ongoing employment, the feedback between growth and demographics is particularly acute,” says author of the report Farouk Soussa, Middle East economist at Citi in Dubai.

“Not only does a growing population indicate higher employment and thus a healthy economy, it is also reinforces economic growth as it equates, prima facie, to higher domestic demand. This relationship tends to accentuate cyclical peaks and troughs in the economy, in our view: growth is reinforced by population growth, recession is deepened by population outflows,” he notes in the report.

The equation is also complicated by the ‘quality’ of those numbers. As Soussa explains: “The link between economic growth and Dubai’s population is, however, complicated by the fact that a large proportion of total foreign labour consists of guest workers: mainly unskilled labour doing manual jobs.

“Data from Dubai Statistics Centre show that only 24 per cent of the Dubai workforce holds a university degree, and that two thirds of the expatriate labour force earns less than $820 (Dh3,000) per month. The majority of these poorly paid labourers work on construction sites or as domestic household staff, and a significant part of their monthly salary is remitted to their homeland,” he says.

He goes on to explain that the overall growth in population, therefore, doesn’t necessarily translate in demand for villas and apartments as most of the construction workers are provided accommodation in camps by their employers.

So, it comes down to ‘white collar’ workers that are largely responsible for any fluctuation in demand for homes in Dubai. “We believe any analysis of population growth in Dubai, as it relates to domestic demand, should focus on what we term the ‘white collar population’, i.e. the more privileged third, rather than total population,” he says.

And while population numbers are hard to come by, that’s where the connection with schoolchildren comes into play, his report states.

“Unfortunately, timely and reliable population statistics for Dubai are not available, hindering meaningful analysis of population trends and their impact on growth. To get around this problem, we have identified one available indicator which we believe gives us a  reliable proxy for growth in the white-collar expat population: enrolment of ex-pat children in private schools,” says Soussa.

“We have used the school enrolment patterns as a blueprint for white-collar expatriate population growth more widely in the emirate,” he says. According to Citi statistics, the number of expatriate schoolchildren grew 8 per cent in the 2010-2011 school year, and anecdotal evidence suggests that this trend continues.

“According to our estimates, a sharp reduction in guest workers (mainly in construction) led to an overall decline in Dubai’s population in 2009, although not in the ‘white collar’ population.

Overall population growth has since recovered to around 2 per cent, but the ‘white-collar’ population grew by almost 8 per cent in 2011,” the report states.

In conclusion, if you’re facing problems with reserving your child in one of Dubai’s schools, take that as an indication that you might have to renegotiate your rental with the landlord the next time your annual contract comes up for renewal.

“Dubai’s economic rebound and improved investor sentiment has breathed life into the real estate market in recent months. Since the beginning of the year, the volume and value of real estate transactions carried out in the emirate have mushroomed,” suggests Soussa.

“We think the broader economic recovery in Dubai and the subsequent positive momentum in the real estate market are unambiguously good news for investors in the near term.”

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