An international meeting in Paris next month may trigger billions of dollars of fresh investment in Dubai - and, if plans are not handled carefully, contribute to the kind of boom-and-bust cycle which nearly bankrupted the emirate four years ago.
Dubai is competing with Izmir in Turkey, Sao Paulo in Brazil and Yekaterinburg in Russia for the right to host the 2020 World Expo. A vote of the 167 member states of the Paris-based Bureau International des Expositions is expected to choose between them at an assembly on Nov. 26-27.
Holding the world's fair would be a defining moment for Dubai, marking the transformation of the emirate of 2.2 million people into a top global centre for tourism, trade and finance.
But it would carry a risk. Anticipation of a spike in demand due to the World Expo could cause property developers to build too many residential and commercial projects, and investors to pour too much money into them, inflating a speculative bubble that would eventually burst.
Such a bubble popped in 2008-2010, when the global financial crisis caused Dubai property prices to crash by more than 50 percent, shaking financial markets around the world.
"If Dubai wins the World Expo 2020 bid, we will witness another boom in the property market," said Khalid Kalban, chief executive of Dubai-listed property developer Union Properties , whose share price is up 142 percent so far this year.
"Hopefully this will be a planned boom rather than a speculative one, which we saw before," he said.
Thanks to its status as an international business hub, as well as a slick public relations campaign, Dubai may be the front-runner in the competition to host the Expo - although it could face stiff competition from Izmir, which lost its bid for Expo 2015 to Milan by 86 votes to 65. Signalling Dubai's determination, the logo for its Expo bid adorns government vehicles, buildings and emails.
Because of Dubai's small population, the Expo could have more of an impact on its economy than most host locations. The government cites a report by consultancy Oxford Economics which estimates the event would attract 25 million visitors over six months and create about 277,000 jobs.
Many property developers have expressed interest in projects around the proposed 438-hectare Expo site in Jebel Ali, near Dubai's new airport and the third busiest port in the world.
"Dubai's real estate growth will be in this area," said Craig Plumb, regional head of research at consultants Jones Lang LaSalle. In particular, "there's a need for more hotels close to the Expo site."
Some 45,000 new hotel rooms would need to be added, based on the government's calculation that 70 percent of the visitors would come from outside the United Arab Emirates, HSBC analysts Patrick Gaffney and Aybek Islamov said.
A huge exhibition centre would need to be built. Dubai's transport authority said in June that it would expedite plans for a 5 billion dirham ($1.4 billion) extension to its metro rail line if the emirate won the Expo.
As a result, total spending related to the Expo, including private sector projects, could reach $18.3 billion, HSBC estimated. That would still be dwarfed by China's spending on the 2010 Shanghai Expo, which totalled some $58 billion according to Chinese media reports.
The Dubai government is expected to provide a total of about $6.8 billion of capital spending for the Expo, while the fair would cost around $1.6 billion to operate, Bank of America Merrill Lynch said in a report.
Such figures, spread over seven years, look manageable for Dubai's $90 billion economy, even though it is still recovering from the last crisis; the International Monetary Fund estimates that about $64 billion of debt held by the government and related enterprises will come due between 2014 and 2016.
Direct economic benefits from hosting the Expo might be modest. The government estimates it would generate an additional $23 billion in spending by the hosts, participants and visitors between 2015 and 2021. Many of the jobs created would be for relatively low-paid construction workers from abroad, who remit much of their earnings back to their home countries.
Bank of America predicted the Expo could lift Dubai's gross domestic product growth by around 0.5 percentage point annually in 2016-2019 and about 2 percentage points in 2020/21.
It is not certain that a Dubai Expo would make a profit; Shanghai's event enjoyed an operating profit of over 1 billion yuan ($164 million), but Germany's 2000 Expo in Hanover lost $1 billion or more after attendance fell short of forecasts.
For proponents of the project, however, the immediate economic impact is secondary to the benefits of burnishing Dubai's reputation and introducing it to millions more visitors from around the world. Much of the emirate's success has been built on distinguishing itself through aggressive marketing from competing centres such as Qatar and Bahrain.
"I can tell you now, the benefit will outweigh the cost of hosting the event," Sheikh Ahmed bin Saeed al-Maktoum, head of Dubai's supreme fiscal council and its Expo committee, told reporters last month.
Dubai's ruler, Sheikh Mohammed bin Rashid al-Maktoum, described his approach in a book which he published last month: "To take a risk and fail is not a failure. The real failure is the fear of taking any risk...If we had waited for regional stability to be restored before launching our large projects, where would we stand today?"
One risk for Dubai lies in the fact that its Expo bid is being made at a time when the property market is already rebounding strongly from the crash and developers have already announced tens of billions of dollars of projects this year.
Apartment prices have jumped over 20 percent in the past 12 months; the stock market is up 79 percent this year. In this climate, winning the Expo could attract a fresh surge of money that overheats the property sector, some analysts worry.
"We think that the property market dynamics are increasingly being driven by investor demand rather than end-user demand," said Farouk Soussa, Citigroup's chief economist for the region.
"The implementation of large-scale projects risks exacerbating existing supply overhang issues and could fuel a future boom-bust property cycle in the emirate."
The IMF issued a similar warning in July, saying Dubai might need to intervene in its property market to prevent another bubble from forming.
There are many signs that authorities are aware of the risk and are taking steps to counter it. This month Dubai doubled, to 4 percent, the registration fee charged on land transactions; the UAE central bank plans rules to restrict mortgage lending and limit banks' lending exposure to big state firms.
But such steps cannot guarantee stability in the real estate market - especially if Dubai cannot find new occupants for its projects once the Expo crowds have gone home.
"The main downside risks include project funding given the existing elevated leverage in the system, as well as the likelihood of subsequent overcapacity in the hospitality sector, in our view," Bank of America said.
South Africa saw its hotel occupancy jump to 84 percent for its 2010 soccer World Cup tournament, but the rate plunged to just over 55 percent in the following year because of fewer visitors and greater supply, HSBC said.
"Dubai's toughest challenge isn't generating growth, it's managing its pace," said Simon Williams, chief economist for the Middle East and North Africa at HSBC.
"The decisions it takes in the months ahead will show us what lessons it has learnt from the boom-and-bust cycle of 2003-08."For all the latest real estate news from the UAE and Gulf countries, follow us on Twitter and Linkedin, like us on Facebook and subscribe to our YouTube page, which is updated daily.
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