COST OF LIVING IN ABU DHABI TO RISES AS MUNICIPALITY FEE KICKS IN
Abu Dhabi: The municipality fee on tenants in Abu Dhabi that is being collected starting this month will create the perfect storm in raising the cost of living in the emirate following hikes in water and electricity tariffs as well as fuel subsidy cuts.
Analysts say that the fee, amounting to 3 per cent of a tenant’s annual rent, is likely to push down consumer spending in Abu Dhabi, especially amid a backdrop of uncertainty in the economic environment and job cuts across many industries.
Just recently Abu Dhabi had reinstituted a 5 per cent rental cap, which would ease some of the tenants’ cost of living. “This [the municipality fee] will have an impact on people’s spending levels, and for some, it just might be the thing that sets them over the edge in considering whether they can actually afford to be here or not. It’s only 3 per cent of your rent, but it will certainly get people’s back up.
“We have a similar system [municipal fee] in Dubai, and I don’t think it’s off-putting for the market … so I’m not sure if it’s sufficient to have a particularly negative impact on the property market,” said Matt Green, head of research and consulting at CBRE Middle East.
He pointed that Dubai has a similar municipality fee on tenants, albeit slightly higher at 5 per cent, and that has not been detrimental for investors or tenants.
Edward Carnegy, director and head of consultancy Cluttons Abu Dhabi, agreed with that view, adding that the fee was a necessity for the government in order to increase and diversify its revenue sources.
He said, however, that the main challenge with the fee is that it is backdated to February 2016, meaning tenants will have to pay a lump sum this month.
A statement on Thursday by the municipality said the calculation of the fee will apply — not from January 2017 — but from the February 2016, which is the date of issuing Resolution No 13 for 2016 by the Executive Council on tenant contracts.
“Fees accumulated since the Resolution had been taken are being added to Abu Dhabi Water and Electricity Authority (Adwea) bills as a lump sum. Applicable fees in the future shall be added to Adwea monthly bills starting from January 2017,” according to the statement.
DUBAI DUTY FREE SALES REACHED DH6.673 BILLION IN 2016
Dubai: Despite growing passenger numbers, consumer spending on tax-free merchandise at Dubai airports has suffered a slump.
According to the latest figures released on Thursday, Dubai Duty Free sales reached Dh6.673 billion in 2016, down by approximately 3.17 per cent from 2015.
Perfumes remained the best seller, registering Dh1.104 billion in sales, down from Dh1.137 billion in 2015. Bottles of beverages and bubbly generated Dh1.063 billion in sales, down from Dh1.069 billion in 2015. Cigarettes and tobacco were last year’s third-most popular item, with sales reaching Dh578.53 million, compared to Dh589.67 million in 2015.
Total number of customer transactions, however, increased to 27.119 million, up by 1 per cent from more than 26 million in 2015.
On average, Dubai Duty Free recorded 74,097 sales transactions per day across its outlets in Dubai International and Al Maktoum International Airports last year.
Colm McLoughlin, executive vice chairman and CEO of DDF, attributed the decline in sales to foreign exchange fluctuations.
“It has been a challenging year for retail overall and for the travel retail industry worldwide, mainly due to currency fluctuations,” he said.
DDF is considered one of the world’s biggest travel retail operators, employing more than 5,000 workers. When it started its operations in 1983, its one-year sales reached $20 million (Dh73.4 million).
Official data showed that flyer traffic passing through Dubai’s airports has been growing, reaching more than 75.9 million from January to November 2016, up 7 per cent from the same period in 2015.
In February last year, DDF opened 7,000 square metres of retail space in Concourse D, the newest terminal in Dubai International, bringing the total retail area under its management in Dubai to 36,000 square metres.
McLoughlin said there is a lot more to look forward to this year, including the improvement of their retail offering at both Dubai International Airport’s Concourse C and Al Maktoum International Airport’s Passenger Terminal Building.
FOR RESIDENTS OF DUBAI, RENT LEVELS ARE NOT A RELIEF
Dubai: Tenants in Dubai are not going to get much to cheer about their rents this year — more so if they are living outside of the city’s freehold communities. Rents, it seems, have become so immune to a soft economy, continuing job losses in key sectors and the fact that more homes are being delivered in the freehold zones.
Even with all the uncertainties stalking the economy during 2016, the overall rental index for Dubai is down by less than 8 per cent since mid-2014 compared with the 35 per cent crash — from a much less residential stock — witnessed between January 2009 to January 2011, which coincided with the worst phase of the global financial crisis, according to data from JLL, the consultancy.
“In our view, the overall residential market is now positioned close to the bottom of the current cycle, with virtually no change in average prices — or rentals — over recent months,” said Craig Plumb, Head of Research at JLL Mena. “The level of sales activity in the market has declined by more than prices (down around 30 per cent year-on-year), but has started to increase over the past couple of months. And sales activity is usually a good leading indicator of future price trends.”
An 8 per cent rental decline in the current economic climate is marginal at best, more so as rents across Dubai had firmed up significantly in the period between mid-2012 to mid-2014.
And in residential areas outside of the freehold areas, residents are even now confronting landlords demanding more. So, why is it that Dubai’s rental rates have remained so resilient?
Sure, trends in the rental market always lag those seen on the sales side of things. Even then, at the same time, they are mirroring some of the trends being seen in property sales.
“It is a more nuanced market this time around with luxury home prices having fallen by much more than those in the mid,” said Sameer Lakhani, Managing Director of Global Capital Partners. “Rental declines have reflected these.
“And in the case of certain mid-income communities, even flattening or have already started to rise.
“Dubai’s freehold market has predominantly been barbell-shaped, with supply concentrated at the top and the lower end with very little in between. It is the mid-end that has started to exert more influence and that has been one of the factors contributing to “sticky” rents.
TERMINATED UAE EMPLOYEE DESERVES PAY ON TOP OF GRATUITY – LEGAL ADEPT
Dubai: Dennis, an expatriate based in Dubai, has just been informed that his services are no longer needed by his company. The news came as a shock, especially since he had been with the same employer for 16 years. At the same time, he’s overwhelmed with stress – and fears what the future holds for him and his family.
“It’s painful and scary at the same time because it’s difficult to find another job these days,” he said. But there’s nothing the father of two could do. His company is going through a difficult period and can no longer pay for his salary without incurring losses.
Redundancies are part of business reality. During a downturn, many employers face the tough economic decision to let go of some of their staff. In some cases, the termination is with immediate effect and without prior notice, leaving jobless workers suddenly without money to pay for bills and housing rent.
According to one legal counsel, there has recently been a rise in the number of expatriates seeking assistance after their services have been terminated without due notice. “This month alone, we have more than 30 cases,” said one lawyer based in Dubai.
As businesses attempt to find ways to survive amid a low oil price environment, a number of companies in the UAE, including banks, have imposed some job cuts. Just recently, Etihad confirmed that it is laying off some staff.
But while companies have the right to downsize, employees, too, have the right to be compensated in order for them to have a smooth transition. The labour law specifies that those who have been dismissed outright due to economic reasons are entitled to receive an extra payout on top of the gratuity.
The amount of indemnity, also known as “compensation in lieu of notice,” will depend on the terms of the employment contract, which can either be 30 days or 90 days’ worth of total salary, including allowances.
Terminated employees are, therefore, advised to check the provisions or terms in their contract, particularly the section that talks about notice period for termination because this will be used as basis for calculating the indemnity in cases where the employee gets fired out of the blue. In most instances, employment contracts in UAE mandate a 30-day termination notice, but employees holding sensitive roles have more than 30 days.
INTERNATIONAL CITY RETAINS BEST YIELD GENERATOR STATUS IN DUBAI
Dubai: Two of Dubai’s oldest mid-market freehold communities are still offering investors the best yields — International City (with a fairly robust 9.65 per cent) and Discovery Gardens (at 9.2 per cent). It remains the case even with the rental declines freehold communities in Dubai experienced all through last year, according to data from Reidin-GCP.
“Even though yields in both areas have fallen slightly on a year-on-year basis (reflecting falling rents for the year), they remain the highest income generating assets,” said Sameer Lakhani, Managing Director at the consultancy Global Capital Partners. “This does not come as a surprise, as structurally speaking, there has always been a trade-off between capital gains and yield in Dubai real estate since the advent of freehold.
“These areas were always in high demand from a tenancy perspective, and this has been one of the reasons why they have attracted high levels of investor interest.” Yield calculations are pretty straightforward — divide what a property generates as rents (minus such sundry costs as maintenance costs, etc) by the value of the property.
At a time when Dubai’s freehold market is yet to get back into a sustained turnaround phase, and which would then lead to higher property values, yields are what counts for investors. And they seem to seeing optimum returns in the mid-market, as is the case with International City and Discovery Gardens.
The city’s emerging mid-tier areas where yields are likely to be higher than the average are in the Dubailand communities Arjan, Majan and Liwan, as well as Al Furjan and Dubai South. (Investors are already vesting a lot of expectations in Dubai South’s prospects. There are anecdotal tales of existing property owners in International City or a Discovery Gardens exiting their assets and then signing on for the off-plan launches that took place recently in Dubai South.) So, how do the upscale destinations measure up in realising optimum yields for its investors? A property in Downtown could be generating 6.06 per cent now while the Palm’s would be around 5.85 per cent, according to number crunching by Reidin-GCP.
MONEY RESOLUTIONS FOR UAE EXPATS TO GET WEATHIER
Dubai: Every New Year, a lot of people resolve to get wealthier or improve their personal finances. Many vow to cut back on spending, settle their debts, pay more attention to their budgets and save more.
But these things are easier said than done, especially in the UAE, where personal borrowings are piling up. Consumer loans in the UAE alone have been growing, amounting to Dh417 million in the last quarter of 2015, up by Dh27 million from the first quarter of the year. Data released by Strategic Analysis also put down the debt burden in the UAE to Dh348,000 per household, which will make total indebtedness amount to $114 billion.
With these grim figures in mind, it would be difficult to achieve personal finance goals. And one must have a clear strategy and enough determination to follow through.
It is said that the experts to provide some useful advice around the area of investing, financial planning, budgeting, saving or spending to help improve the financial situation of residents in the UAE
Saving money is a top priority for those who want to build their wealth, especially among residents from Europe or the US. According to a National Bonds survey, Western expatriates (48 per cent) are the most committed to save money on a regular basis, followed by Asians (44 per cent) and UAE and Arab nationals at 28 per cent and 27 per cent, respectively.
But how do you save money? A new research by Gocompare.com reveals that the majority of British nationals (88 per cent) have resolved to do something in 2017 to grow their wealth. Popular money-saving measures include using vouchers and apps that provide discounts, and taking advantage of loyalty and cash back schemes.
Other frugal habits also include shopping around for a better deal on a range of goods and services, from insurance policies to groceries.
But cutting down on household expenses can be very challenging, especially in a place like UAE, where consumers are constantly tempted to open their wallets.