Nubricks Blog - Soaring Dubai Rents Good For RAK and Abu Dhabi

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07 May 2008

Soaring Dubai Rents Good For RAK and Abu Dhabi

UAE high rents

The Gulf has enjoyed a reputation over the past decade as something of an expat hotspot, coming in droves with their sights set on making money, tax-free and lots of it. The shift towards a rising demand for expat accommodation means higher property prices and soaring rents are the result of supply outstripping demand in many areas. Property rents in Dubai are rising at a rate which many are finding difficult to cope with, despite the authorities recently introducing a cap on the rent which landlords are allowed to charge. Many UAE landlords appear to be flouting these new rules with demand for rented accommodation so high, they have no difficulty finding new tenants at the higher prices, prompting expats to consider property in Ras Al Khaimah and the neighbouring emirates of Sharjah and Abu Dhabi.

Overall in the United Arab Emirates (UAE), there is the potential for a short to medium term problem in the areas where a vast number of expats live and work. The average increase in rent over the last 12 months has been within the region of 15%, and increasing numbers of residents are being forced to send their families to live elsewhere to save costs. Worryingly, despite salaries increasing by nearly 200% in some cases, some people are claiming that just under 50% of their monthly income goes on rent and with prices set to rise further in the short term, many are being forced deeper and deeper into debt. Some 42% of expats believe they are now failing to make money by being in the UAE region. Figures from a recent YouGovSiraj poll surveying nearly 15,000 expatriate employees in the six GCC countries across 20 industry sectors revealed, 37% are planning to move abroad as living costs in the GCC rises.

Much of the problem seems to have been caused by the influx of western corporations over the last decade, looking to secure a position in the prosperous UAE and surrounding region. Many of the companies which have introduced an Middle Eastern presence have in the past done very well and as a consequence covering the cost of their employee rent costs has been no problem. Recently, the combination of a falling dollar and the rising cost of living across the GCC created largely as a result of economic prospertity experienced by international corporations supporting the rental market, increasing demand and forcing prices higher. This has led to unprecedented levels of discontent among regional employees now expected to make up the shortfall in rent subsidies. Living costs have risen 38% and 37% in Qatar and Dubai respectively.

The under supply in the UAE property market has done wonders for property prices, particularly Dubai property investors and GCC landlords. We are now seeing a situation where the relationship between rental income and the value of properties is reaching breaking point. Even though the Gulf region continues to buck the global economic down turn at present, companies, employees and those living in the region are starting to experience its side effects and are looking to reduce their cost base. In addition to the drastic measures of upping sticks lock, stock and barrel, many expatriate residents are considering a longer commute relocating to the neighbouring emirates of Ras Al Khaimah, Sharjah, Ajman, Fujairah, Umm al-Quwain and even capital Abu Dhabi , where the cost of living is notably lower. The Dubai property boom is starting to cause the ripple effect.

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