By Ayman Alashkar
It's important not to mistake short-term behavioural trends for the green shoots of a market recovery
Like many countries, the UAE has done a phenomenal job of managing and supporting its population during peak Coronavirus risk. As we begin easing strict lockdown conditions, the country is carefully reopening malls and considering reopening borders. Businesses are being guided to cautiously return to work. Key among them are real estate agencies.
Dubai’s property industry is a vital and enormous contributor to the country’s wider economy; because it’s universal. Every stakeholder is acutely aware of the critical need to get its services going again. We’re all hoping for a recovery; scanning for any signals that suggest one.
Beware False Positives
As estate agencies ease back to work, many of them are capriciously reporting that volumes of instructions, viewings and transactions are climbing off of lockdown lows.
This resurgent activity is a fusion of opportunism, optimism, and urgency. Some people will be trading-up from their property for a better one. Others will be trading-out of their property for a similar one at a lower price point. And sadly, some will be forced to trade-in their property to reduce their household expenses, in response to changing personal circumstances.
It’s important not to mistake any of these behavioural trends for the green shoots of a market recovery. This is simply the pent-up demand of weeks of inactivity, unleashed; knee-jerk reactions to the easing of lockdown restrictions. There’s more pain yet to come.
Let’s paint the picture
Global economic productivity is down. Governments worldwide are spraying relief money to prop their economies up.
In April’s economic outlook report the IMF predicted “the global economy is projected to contract sharply by –3% in 2020, much worse than during the 2008–09 financial crisis.”
The Bank of England expects the UK’s economy to be 30% smaller by the end of 2020 compared to 12 months’ prior, and its’ jobless rate is forecast to increase to 9%, as it heads into what many expect to be its worst crash in 300 years!
US economists are predicting the world’s largest economy’s unemployment to be “as high as 20%, a level unseen since the Great Depression.“
Saudi Arabia, the region’s economic powerhouse has just tripled its VAT levy and is planning to re-institute lockdown once the holy month of Ramadan ends.
Against this backdrop what can we expect from Dubai’s property market?
The Emirate’s economists expect 2019’s GDP growth to be “a sluggish 2.1 percent”. Before the pandemic even began, analysts and industry figures were already pointing to excess supply pressure on the property market. For the past five years Dubai’s house price index had been trending in one direction; down.
Nevertheless, by the start of 2020 most of Dubai’s property market participants were riding high, claiming bumper monthly figures and expecting a stellar year of performance metrics. Despite an oversupply risk and all the black swan events the market had encountered since 2016, the market had shown resilience. Transaction volumes were increasing. Confidence was high. And GDP was projected to grow by 3.2%.
This was to be the year of Dubai’s much-anticipated EXPO event; an economic catalyst like no other. EXPO 2020 has now been postponed.
A Simple Calculus
The coronavirus is the mother of economic black swans. It has changed the nature of market demand for everything. Nothing and no one is unscathed.
In its wake, industries face a simple calculus. Adapt, fast.
The property industry, notoriously slow to adopt technological change, has accelerated its digital shift in response to the pandemic. We’re seeing the automation and streamlining of many services – cue virtual viewings, and inevitable “death of the broker” discussions. To survive, and grow, key property players have had to change tact, innovate their business models, and be flexible. Estate agents, many of whom are paid commission-only incomes, have had to find ways to work smarter and faster.
For example, auto writing software such as OVERWRITE.AI lets estate agents input the key USP’s of their property in exchange for a grammatically correct and perfectly-written listing description, at the click of a button.
By automating this traditionally manual, time-consuming task, agents can engage with their target audience without making any unintentional yet unprofessional typing errors, whilst also avoiding the trap of re-using stale “cut and paste” marketing copy which can be rejected by portals or repurposed by other agents.
Estate agents should automate and digitise as much of their operations as they can; creating efficiencies across the business. Anti -Covid measures must be implemented throughout the entire customer journey. If it can be brought online, do it (if you won’t, your competitors will).
Notwithstanding false positives, Dubai’s inevitable real estate recovery will only begin once uncertainty subsides. When indicators like tourism and consumer spending trend upwards, schools reopen and businesses regain confidence. Whether that’s catalysed by a vaccine or something else; only time will tell.
Until then the property industry will adapt to fit its new normal. Those progressive, tech-savvy agencies that transform themselves today, will be the ones left standing when the market cycle truly turns positive.
Ayman Alashkar is the founder and CEO of proptech platform Overwrite.ai, which real estate agents use to instantly auto-write their property marketing descriptions in multiple languages.