Dubai operators and investors urged to 'do their homework' before committing to the market
Parents in Dubai are being priced out of new schools, according to a report by Property Finder and the Education Intelligence Group (EIG).
The mismatch between new school supply in the emirate and the income and demand levels of its residents is highlighted in the ‘Knowledge Economy Report’, which cites an oversupply in both the residential market and the premium segment of the education sector in Dubai.
Property Finder estimates that 8,990 residential units were completed in Q1 2019, while the total freehold stock in Dubai stands at 528,757 units.
According to the report, the majority of new supply will be concentrated in communities such as Mohammed Bin Rashid City, Jumeirah Village Circle, Dubailand and Dubai South.
Lynnette Abad, director of research and data, Property Finder, said the price of education must be aligned to the new areas of housing available.
“It is imperative to look at all the various data sets when making these key decisions and working on feasibility studies, especially trying to project three or four years down the road," Abad said
"Asking price data, transaction price data, demand data, supply data and demographic data are all key data sets when assessing what type of schools to build, where and what their price points should be.
“Historically, failing to consider all this data is where the mismatch occurred and continues to persist,” he added.
This is certainly the case at the moment, with increasing pressures placed upon the education industry.
In recent years, a number of schools in Dubai have been faced with a rise in the number of empty seats. An increase in new school supply, coupled with a higher number of families relocating back home where schooling is often free, or moving their children to more affordable schools, has exacerbated the problem.
Despite more seats coming up in already existing schools, 16 new schools opened in 2018, adding 25,000 seats to the marketplace. The report revealed that only two of the schools could be classed as ‘affordable’, with the remaining schools offering fees within the premium or mid-market segment.
The average annual asking price of new schools entering the market in 2018 was AED55,509 ($15,111), an increase of AED14,695 ($4,000) from 2017.
Clive Pierrepont, speaking on behalf of Taaleem Group, said school operators and investors must do their homework before committing themselves to huge investments in the market.
He told Arabian Business: “The dynamics of Dubai are changing, and schools have to rapidly adapt to this new landscape. We have seen many recent entrants to the market, driven by their ‘oil tanker’ business plans that haven’t been able to turn around quickly to cope with the rapidly changing market dynamics.
“Up to 70 percent of parent enquiries are driven by referrals from co-workers, friends and family, and a robust reputation within the community cannot be underestimated as parents wade their way through the myriad of incentives offered by new entrants to the market.
“Parents are much wiser to the fact that new premium schools will face challenging times surviving in the current market and may not necessarily be able to deliver on all of their initial promises.”
According to the report, the majority of the new supply which has entered the market are in locations where there are existing schools offering similar price points and curriculums.
In some instances, schools have been forced to offer significant discounts and incentives to parents, including free uniforms, free transport and extra-curricular activities as part of the school fees.
Robison added: “We are now at the point where investors really have to delve deep and explore what residents in Dubai really want, and what it means to be part of the wider community of Dubai.
“The report details the specific needs of a cross section of parents, but the overarching message from them is that we all need to rethink and redefine our perception of what it means to contribute to this community.”