Dubai's rising population presents opportunities in select stocks

With Dubai’s population hiting 3.8 million, the city’s population growth is being evidently and tangibly felt by residents. This is likely to create strong opportunities for investors in select stocks in the Dubai Financial Market, analysts say.

Of late, the number of cars on the road has increased, malls are more crowded, and traffic delays have become the talk of the town. Population growth in Dubai is expected to land around the figure of 3 per cent from 2023’s 3.7 million, data suggests. The average population growth rate stands to be approximately 2.97 per cent since 2020.

In addition, in the first six months of 2024 alone, Dubai welcomed 9.31 million visitors. The city hosted visitors 2.45 times its resident population. In 2023, Dubai opened up to 17.15 million tourists. “The city has many things going for itself. It offers a life of luxury and ease, no income taxation, a good geographic location at the crossroads of the world, backed by strong government support, excellent safety, growing corporate opportunities and a rising global influence or soft power. Due to these very powerful reasons, Dubai is expected to reach 5.8 million in population by 2040,” says Vijay Valecha, Chief Investment Officer, Century Financial.

For example, Salik could see more cars passing through its gates. Parkin may fulfil the city’s need for vertical parking infrastructure. More heads mean more homes and these homes would need water, electricity and connectivity. A win for utility stocks. And finally, the city’s taxis would gear up to service the mix of residents and tourists. “It’s important to note that Salik, Dewa, Du, and Parkin operate as monopolies. While Dubai Taxi is not a monopoly, it currently holds the majority of the market share,” Valecha said.

The Toll Collector: Salik

Salik is positioned well to benefit from the rising population and, with it, the increasing number of cars in the city. Dubai’s layout almost makes owning a car a necessity. The numbers back this up: in 2023, the population was 3.7 million, while registered vehicles slightly exceeded that at 4 million — an average of 1.08 cars per person.

While this ratio isn’t literal, it highlights the steady rise in vehicles as the city grows. In 2022, the population stood at 3.6 million and cars at 3.7 million, and in 2021, both figures were 3.5 million. As Dubai expands, the number of cars on its roads will only continue to grow. “Up till 2023, Salik had eight toll gates running. From November this year, that number has gone up to 10. Moreover, the company has now introduced dynamic pricing, increasing the tolling fees during peak hours. With a projected 2040 population of 5.8 million, we can estimate around 1,008 total revenue-generating trips, potentially bringing higher revenue from the ten toll gates alone,” Valecha said.

In conclusion, Dubai’s population boom presents substantial growth opportunities for key players in the city’s infrastructure, utility and services sectors. As the population expands, so does the demand for essential services like electricity, water, telecommunications, transportation, and parking. “Salik, Parkin, Dewa, Du, and Dubai Taxi are all strategically positioned to capitalise on this macro-uptrend, with their monopolistic or dominant market positions enabling them to ride the wave of growth,” Valecha said.