UAE residents pay lower rents but other costs have risen

• Shoppers check out the goods at a Spice Souq shop in Deira, Dubai. Economists warn that rising food prices are beginning to feed into inflation numbers.
• Image Credit: Francois Nel/Gulf News

Dubai: Residents in the UAE are spending less nowadays because of lower rents, among other reasons, according to Kershaw Leonard's 2010/2011 Cost of Living Report.

Lower property prices — including declining rents — have been the major factor in cutting expenditure and employers have benefited from them as well.

"Companies that are offering housing allowances separately are indeed cutting them, providing rent at cost, according to rental contracts presented by the employee," Mark Heynes, managing partner, Kershaw Leonard, told Gulf News.

• The fruit and vegetable section of a supermarket in Abu Dhabi. According to a Kershaw Leonard Cost of Living 2010-11 report, the prices of basic staples has stabilised after their 50-60 per cent increase in 2008.

Employees benefited from companies that paid their housing costs during the boom times.

Those who had to pay their own rent were often at a disadvantage as companies paid housing allowances that were way below the exorbitant increases in rent. But now they are being compensated to a certain extent.

"Companies which just offered the housing allowance as a lump sum, leaving it up to employees how to spend it, are not reducing the same, as the general cost of living hasn't dropped," said Heynes.

Comfort of living

Many residents in the UAE have chosen to upgrade from smaller properties to larger ones or moved to Dubai from Sharjah to be closer to work, or chose to live alone.

This would suggest that many residents are able or willing to increase their comfort of living by spending a substantial amount on rent instead of cutting their costs.

The Kershaw Leonard findings reveal that an Asian family living in Sharjah and working in Jebel Ali is spending on average around 21 per cent of their income on rent.

A single Arab or Western expatriate family living on Shaikh Zayed Road or in the Meadows is still spending 40 per cent of their salaries on accommodation.

While an Asian family has reduced the amount they spent on housing by staying in Sharjah by 8 per cent since 2008, the Western family has actually increased its budget for accommodation by 8 per cent.

The single person reduced his housing cost marginally by 5 per cent since 2008.

The debate on what the fair amount to pay of one's salary on rent is a subjective matter, but international guidelines have been used to establish what can be reasonably expected and could be called affordable.

"Expatriates expect a reasonable quality of life. The international norm would suggest one should expect to pay 30 per cent of the salary on rent," Elaine Jones, CEO of Asteco, told Gulf News.

The Kershaw Leonard figures would suggest UAE residents are still paying more than the internationally accepted average.

Asteco is working on a market analysis based on expatriates with stable jobs living in the UAE and their salaries to establish what prices and rents can be really afforded.

Average cost of living continues to  rise

The average cost of living is rising, with schools and medical expenses increasing, according to a Kershaw Leonard report. But, according to the recruitment consultancy's Cost of Living Report for 2010 and 2011, on the job front things are looking fine.

Costs such as school fees and medical insurance are still on the rise, but the shopping basket has only slightly increased, Mike Heynes, managing director, Kershaw Leonard, told Gulf News. "Staple food, after an increase of 50 to 60 per cent in 2008, has now stabilised. Imported food like cereals is still [going] up and so is dry cleaning. I don't know how they justify it with inflation down to around 2 per cent, according to government figures, instead of the previously high percentages of up to 20 we have experienced," he said.

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