On May 5, the Shanghai government introduced the “Double Five Shopping Festival”, scheduled to last for two months, providing mega discounts and extended shopping hours to boost spending. According to the Shanghai Commerce Commission, $2.2 billion was made in just 24 hours, on online and offline retail.
The French brand Hermes’ Guangzhou flagship store reportedly generated $2.7 million in sales on the day it reopened in April, constituting the biggest single-day shopping on record at a luxury outlet in China. Apart from retail, the real estate sector witnessed a weekly increase of 37 per cent in home sales in China’s Tier- 1 and 2 cities, with sales of about 1.3 million square metres of property registered by China Real Estate Information Corporation.
Shopping-deprived consumers around the world are embarking on spending sprees after being on lockdown for months due to the COVID-19 pandemic. The post-quarantine customer is hungry... and indulging in what is being described by industry experts as “revenge spending” or “revenge buying”.
China is currently noting steady recoveries in businesses as consumers come out in vengeance to splurge as curbs ease, which explains the overindulgence in retail therapy by consumers who missed shopping at their favourite outlets. Furthermore, revenge spending by the affluent could drive hopes of an anticipated V-shaped recovery.
Can it be repeated here?
A question comes to mind as we analyse China’s revenge-spending phenomenon. Will we witness this dramatic shift in consumer behaviour and purchase trends closer to home in Dubai?
Dubai has positioned itself as an international commercial hub, and a safe haven that can withstand enormous economic sandstorms by employing quick policy changes. It has that flexible ability to cushion investors who intend to hedge their exposures from sudden and harsh economic climates.
A reduction in lending rates for real estate investments is a step by the UAE’s central bank that has instilled an urge to invest among some stakeholders, at least. The removal of the 20 per cent cap was accompanied by a reduction of the annual rent of commercial establishments from 5 per cent to 2.5.
Relaxed visa rules have been put in place for investors who invest Dh5 million to Dh10 million in real estate projects, in addition to further easing regulations for foreign ownership of businesses located outside free zones in support of demand.
With beneficial policies in place and a healthy push towards attracting investors, demand for property has just been deferred... not died. The rebound of investors and aspiring homeowners has to be carefully studied as a post-pandemic world will lead to a substantial shift in market requirements.
From the confines of digital
We have geared up for a post-pandemic market by analysing requirements and understanding the importance of technology in this new era. The Dubai Chamber emphasised on the need for digitalisation to gain efficiency. Developers have to encourage clients to view properties virtually from the comfort of their own homes.
During the lockdown, and even after, a family’s home is its office, school, restaurant, supermarket and more. Homes are now more important than ever before, and those who invest in owning rather than renting are seeing more financial stability and secured access to residency visas.
Real estate is a lucrative investment at a time when the UAE real estate sector is embarking on a path of regrowth. With global economies and businesses beginning to open, we anticipate a strong uptick in demand and sales that will become apparent between the fourth quarter of 2020 and first quarter of 2021. This is when we believe pre-pandemic levels will be reached... and subsequently surpassed.
As the world leaps back to normality, travel will be a that people will avoid for a period of time. Given that a return to stability has sparked hope for many businesses in the UAE, consumers will now spend in their country of residence instead of travelling. This opens up demand for investments in real estate.
IMF’s World Economic Outlook report narrates the UAE’s economy will contract 3.5 per cent in 2020 amid the pandemic, but expected to grow 3.3 per cent in 2021. The Dubai Land Department revealed a 12 per cent increase in rollover transactions in January 2020 compared to last year, while a 33 per cent hike was noted in February.
The government has the ability to withstand crises and amend policies to secure the economy and guarantee forecasts for recovery post-pandemic.
Let’s embrace our reattained freedom and make our investments count.
- Farhad Azizi is CEO of Azizi Development.