It’s the silly season, and this time of the year always brings pressure and the odd curve ball to the education sector.
I don’t think I’m alone in thinking that September is going to be a huge month in many ways, and what plays out may shape the sector for the next academic year.
The education and real estate sector in Dubai are the two biggest talking points for parents in Dubai in 2018. The supply of affordable housing has increased in the past year and with new developments launching, residents who choose to rent have greater choice and better payment terms.
Residents who are in the process of selling their property will now have to pay a 3% fee which was recently introduced.
There could be up to 14 more new schools opening in September.
As choice becomes the norm in the housing and education sector, school operators need to be agile in their marketing tactics to attract parents to their schools in different ways.
Back in May, I wrote about ‘The Battle of the Billboards or, the Duel of the Discounts?’ and I don’t think this has gone away yet.
From January to June this year, there was 32% increase in spending for schools on traditional advertising in 2018 when compared to 2017 (IPSOS Statex). That’s huge and is driven mainly by premium schools entering the market.
In the past two years, we’ve seen two premium schools open and close within 8 months. The market really does penalise you if you get it wrong.
I believe that as the sector continues to mature, geography will be one of the biggest driving factors for parents in their decision making when it comes education. Parents no longer need to travel across the city to find the education they are looking for. Virtually every community, and sub-community in Dubai has more than one high quality school close by, and a choice of curriculum and price point.
Rental prices in many communities around Dubai have decreased or remained the same as new developments have forced property agents and landlords to incentivize tenants with more flexible payment terms and maintenance packages.
The birth of “A month’s free rent…” happened in 2018. No-one predicted that in 2014.
Certain areas of Dubai are becoming “competition hot-spots”. These areas have seen a high number of schools open in the past three years with a similar offerings in terms of price point and curriculum.
In some cases, teaching staff have simply moved from one school to another across the street.
The travel distance from The Villa to Al Barsha South is approximately 25 kilometers and it takes between 20 and 25 minutes to travel between the two.
In between those two locations are The Falcon City of Wonders, The Arabian Ranches, The Arabian Ranches 2, Mudon, Sustainable City, Akoya, Motor City, Sports City, Jumierah Golf Estates, Remraam, Al Barari and Al Barsha South. A total of twenty nine schools can be found within this area, serving a population of 81,000 residents as of 2016. New villa developments such as Al Mira, Mudon and Akoya have expanded the suburbs and brought rental prices down.
The Dubai Competition Hotspot
The schools within this location have seen a population increase of 29% between 2015 and 2016, and Al Barsha South has seen a huge influx of residents with new developments creating affordable housing opportunities for families. The most dominant recorded nationality within this geography are people from the United Kingdom with 18% of the population, followed by Arabs not including Emiratis with 14% of the population share.
Schools within this area are clearly competing for the local population and the high density of UK expatriates correlates to the high number of UK curriculum schools within the area.
The biggest competition zone at the moment is in Al Barsha South just off Umm Suqeim Road.
Within this area, there are 12 schools in very close proximity. For parents, this means that travel time from any of the surrounding communities is short, and they have a choice of UK or US branded premium schools, IB schools, US & UK mid-market schools and an affordable school.
The average fees is AED 59,335 and six new schools along with forty three new residential developments are set to open in this area in 2018 with over 14,000 residential units.
Within this geography, 21 schools are currently offering discounts. Fairgreen International School is currently offering 30% discount within the foundation stage. The Dwight School is offering up to 43% discount from its KHDA approved fees in certain grades and Dunecrest is offering up to 18% discount in certain grades.
Any new operator to this geography will have to be very clear about its distinctive features and be able to offer something above and beyond the price and/or curriculum.
With a variety of schools in this area, and with fee reductions, discounts and scholarships available, this area is a competition hot spot for school operators. With more new schools coming, tuition fees may continue to be frozen or decline. With rents remaining stagnant or declining, it is clear why this area is attractive to expatriates who want to save and experience a high quality education.
Further residential developments may push the rents of apartments and villas down further, and attract more people to the area.
For new operators coming in, the challenge of recruiting children is extremely difficult but not impossible. That said, schools that are either rated as Outstanding or Very Good within this area are generally very popular but still have availability in certain grades. The challenge for new entrants will be their ability to manage high capital costs in the early days, and not de-value their brand by discounting too much.
The Biggest Challenges for New Operators
Land availability – Operators and new entrants to the market often struggle to find land suitable for the education they wish to offer in the location of their choice. This issue may become more magnified as new operators may be forced to convince parents to travel at time when Dubai is becoming more localized.
Shifting demographics – Certain areas of Dubai have seen a spike in their population, others have seen a noticeable decline. As a city, there are many developments still launching in 2019, and the city is set to expand again. With attractive rental conditions, and incentives to move, families will have even greater choice in the housing market.
Competition between schools – Schools are competing on every level. The evolution of discounts suggests that further school fee reductions may be on the horizon. This will force investors and operators to review their margins, and take tough decisions about their position in the market.
