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Spiralling rents impact lifestyle patterns

Speaking to Khaleej Times, several people confirmed that rent increase was indeed a major issue for them.

“With no increase in salaries of private sector employees, I feel the unjustified rent hikes are back-breaking for people like us,” said Kamran Shaikh, a sales superviser with a private firm.

A survey conducted by Gulf Talent Recruitment Agency in March 2005 revealed that people were considering several options to tackle the matter. The most common course of action was to try and switch over to a higher-paying job with another employer. The second popular option was to negotiate for a higher salary with the current employer.

According to the survey, other options included cutting down on personal spending, leaving the UAE and getting a job in another country, negotiating a discount on rent with the landlord, moving to another emirate or moving to a cheaper accommodation in the same emirate, sending family back to their respective home countries, using up savings, taking legal action against the landlord over the rent increase, getting a part-time job to make some additional money, getting financial assistance from the family and friends or even borrowing.

The survey says rents in the UAE had gone up by about 26 per cent over last year’s rent, while the average salary increase stood at just 1.5 per cent, with most respondents reporting no salary increase at all. It also said the rent component of an individual’s salary had increased from an average of 26 per cent last year to 32 per cent now.

“I have learnt to balance my accounts better, and have also cut down on several ‘must-have’ commodities,” said Siraj Haider, who recently shifted from Dubai to Sharjah. “I had to move out from my apartment in Bur Dubai because the landlord would not listen to reason, and kept increasing the rent. Sharjah is still cheaper compared to Dubai,” he added.

According to the survey, six per cent of Dubai-based respondents planned to relocate to Sharjah to secure cheaper accommodation, while seven per cent of those living in Sharjah planned to move to Ajman. Twelve per cent of Sharjah residents planned to send their families back home compared to four per cent in Dubai and six per cent in Abu Dhabi. The survey forecasts that relocations within the UAE will accelerate in the coming months specifically from Dubai to Sharjah, and from Sharjah to Ajman due to the rent hike.

The survey reveals that room rentals registered a higher increase than apartments, reflecting the greater supply-demand imbalance in this segment of the property market. Within the apartment category, those in the lower price band rose at a faster pace. Dubai apartments with annual rent in the Dh10,000-20,000 range last year rose by 34 per cent while those costing Dh30,000-40,000 last year rose at a more modest 19 per cent on average.

This has created a ripple effect in the housing market, with rent increases in Dubai being passed on to the neighbouring emirates. At a macro level, the sudden squeeze on individual finances has forced some residents to dip into their savings, borrow or delay repayments on existing borrowings. This may result in degradation of retail credit quality and potentially higher default rates over the next 12 months affecting the local banking sector, the survey said.

The drive to cut costs could also result in less spending by some residents on retail, restaurant and entertainment sectors where most discretionary spending takes place. However, these sectors are unlikely to be seriously affected as such fall in demand will be offset by growing consumption by tourists, visitors as well as new residents, it said.

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