It is a strange, but telling, reaction: some commuters in Dubai are breathing a sigh of relief when they hit traffic jams.

“I rejoice when I grind to a halt,” says one businessman, who has watched with growing unease over the past year as vehicles disappeared from the roads as building activity fell silent and companies reduced the size of their workforces.

The gloom after the crash that followed Dubai’s period of petro-dollar and credit-driven growth is starting to clear, and residents have returned from the extended summer and Ramadan lull to a city that feels as though it is expelling its economic demons.

The first post-break test has been cleared: schools have not seen marked reductions in returning pupils. Analysts had feared that an expatriate exodus would dampen domestic consumption and slash demand for real estate.

Several schools surveyed by the Financial Times have reported strong enrolments, from the high-end Repton School Dubai, a boarding school outpost of the English public school, to the cross-cultural educational empire of GEMS, which has seen numbers rise 5 per cent this year.

“Not many children have left, the school is bustling,” said Debbie Watson, head teacher at King’s School Dubai, where demand has peaked after a strong performance in last year’s debut schools inspections.

Real estate remains in the doldrums, with values half of their peak last year and an overhang of almost finished properties, but there are glimmers of hope.

Dubai can now fight back as a competitive city: its infrastructure and lifestyle are now bolstered by reasonable prices, says Blair Hagkull, regional managing director for Jones Lang Lasalle, the global property agent.

Plummeting rents have also allowed workers to bigger accommodation in better areas and agents say some residential areas are seeing more sales inquiries, possibly presaging a price rise. Many of those finding work in booming Abu Dhabi are using the western end of more relaxed Dubai as a dormitory, commuting up to three hours a day.

“The mood is changing and I can feel confidence strengthening as those that tried to suggest Dubai would be hollowed out by a summer expatriate exodus or brought to its knees by a drop in property prices have been proved wrong,” said Simon Williams, senior economist with HSBC in Dubai.

He argues that as the regional economy strengthens, demand for the business services that are Dubai’s forte will return, while domestic deflation will help the city to compete more effectively.

Already the stock market has rallied, insurance against a government default is easing and markets assume the Dubai government will clear developer Nakheel’s $4.05bn Islamic bond maturing in December.

“Dubai still has very serious challenges to overcome,” says Mr Williams. “I expect the next 12 months to be an awful lot better but don’t confuse this with a return to the boom days.”

Yet even with the newly-found optimism, the emirate continues to face hurdles in its path to growth, from an overbearing debt mountain to a huge property supply against questionable demand.

And in the meantime, Dubai-based expatriates continue to lose their jobs.

Nakheel is shedding at least 300 staff, as it continues to shrink its once-huge workforce towards a third of its peak.

One employee recently made redundant says he is seeking other work before his resident’s visa elapses in two months, but fears for the ability of the developer to carry on with such a skeleton staff.

For now, he keeps busy touring the shops, in between meetings and job interviews. And such jobs are generally on offer in the centres of growth, such as Abu Dhabi, Doha and Saudi Arabia.

“I like this area and want to stay, but will there be something for me here?” he asks.