Economic Update

Published 25 Jul 2018

The private education sector in Dubai showed continued signs of growth in the recent academic year, although an expanding population and rising competition and prices could influence market dynamics in the short to medium term.

Private schools in Dubai – from kindergarten to secondary level – generated combined tuition fee revenues of $2bn in the 2017/18 academic year, compared to $1.9bn the previous year and $1.3bn five years ago, according to a June report by the Knowledge and Human Development Authority (KHDA) of Dubai.

The number of schools and enrolments also grew during the academic year: 11 new schools opened, bringing the total to 194, and enrolments rose by 2.9% to 281,000.

Sector sees rising competition and tuition fee increases

Despite consecutive years of expansion, there are indications that rising competition in the market and high tuition costs are changing market dynamics.

For example, although overall enrolment increased during the year, school capacity utilisation declined from 88.6% in 2016/17 to 85%, according to the KHDA report, indicating that the market could be oversupplied.

In addition, the high price of tuition fees in Dubai and the UAE – at around Dh 27,000 ($7300) per year – could weigh on enrolment and cause demand to shift towards mid-market schools as families look for quality schooling that also offers value for money, according to a report released in May by management consulting firm The Boston Consulting Group titled “Where to Invest Now in GCC Private Education”.

Institutions are entitled to raise their fees at a rate determined by performance, and in 2017/18 schools in Dubai assessed by the KDHA as being outstanding were permitted to increase their fees by 4.8%. Schools rated as very good or good were allowed to raise fees by 4.2% and 3.6%, respectively. Schools rated lower down the scale were allowed to increase charges by 2.4% in 2017/18, marginally above 2017 year-end inflation rate of 2.1%.

These conditions led to more than 22 schools electing to freeze or reduce fees in the 2017/18 academic year to attract students, while others offered scholarships and fee package deals, which included extracurricular activities and uniforms.

The authorities are also taking steps to ease the pressure of education costs on household incomes, announcing in early June a blanket freeze on educational cost increases in the next academic year. The decision led some providers to announce staff cuts or salary freezes for the coming year, according to local media reports.

Demographics and demand for quality underpin growth

Despite these shifts in the market, factors such as an expanding population and rising economic activity are expected to continue supporting solid sector growth over the coming years.

More than 175,000 additional places are expected to be required across the UAE’s K-12 segment by 2022, according to a 2017 report by PwC, driven by demand from both the local population and expatriates moving to the country to work on Expo 2022 and other mega-projects.

The authorities’ continuing emphasis on education quality, in line with efforts to strengthen the knowledge-based economy, should also continue to drive enrolments in certain segments.

Last November Sheikh Hamdan bin Mohammed bin Rashid Al Maktoum, Dubai’s crown prince and chairman of the executive council, said he wanted to see the number of Emirati children attending non-state schools rated as good or above to double by 2020.

The KHDA’s latest survey of school performance, which included 166 private institutions inspected in the 2017/18 academic year, noted that enrolments in these institutions had more than doubled over the past decade despite their higher feed.

The report found that the percentage of students attending schools in the good to outstanding bracket rose from 30% in 2008/09 – the year the KHDA began its assessments – to 66% in the most recent academic year.

Of the schools assessed by the KHDA, 14 were found to be outstanding, 27 very good, 68 good, 51 acceptable and six weak.