Living costs worry expatriates in UAE
Dubai - As instability and violence drive professionals away from parts of the Arab world, and with the performance of global markets allowing the United Arab Emirates to maintain its tax-haven status, it is difficult to imagine serious labour issues in the Gulf state, which is renowned for its ample job opportunities and high salaries.
But in a recent survey conducted by the US-based social media platform LinkedIn, nine out of ten UAE-based professionals said they were looking to change jobs with more than 50% of respondents attributing this to salary worries. Salaries in cities such as Dubai and Abu Dhabi are among the highest in the region, even competing with Europe and North America in some sectors. But the issue facing the UAE is that these packages are stagnating while living costs increase.
At the core of the disparity between salaries and living costs is the country’s inflated real estate market in both the residential and commercial sectors. Falling oil prices add to the financial concerns.
The outlook for hydrocarbon prices remains uncertain with many oil majors cutting jobs and capital spending, while a currency linked with the strengthening US dollar makes the UAE a much more expensive place to live, work and invest.
The Arab Weekly spoke with a number of expatriates living in Dubai who say they do not wish to leave the UAE because “things aren’t that bad quite yet”, as media professional Ahmed, who has lived in the Emirates since 2007, put it.
“Rent in Dubai is too high for some people. When your salary only increased by 1 to 2% a year but your rent goes up 25%, you wonder how long you can keep going,” he says.
Rent increases eased in the first half of 2015 but Dubai’s real estate market is still set to face a difficult year. A combination of low oil prices, a strengthening dollar and supply-and-demand economics are expected to play roles in the slowdown of the market over the next 12 months. In the face of this, rent increases have only slowed rather than decreased as homeowners look to alleviate the falling values of their properties.
In an attempt to tackle the issue of high rents, Dubai is expected to introduce regulations imposing affordable housing quotas on new residential developments. Real estate analysts welcomed the initiative with UK real estate firm Cluttons releasing a statement claiming the move is “long overdue”.
“Even if rent increases slow down and the market offers more affordable solutions, the price precedent has been set and with salaries unlikely to see any drastic increases, other living costs are putting a burden on employees,” explained a representative from a UAE-based recruitment agency.
“As such, we are seeing people moving from job to job to try and increase their annual pay increment beyond what their current employer is prepared to offer.”
Nonetheless, there is little evidence to suggest that growing living costs are driving people away from the UAE. Economic heartache in places such as Egypt and Lebanon, coupled with wars in Syria and Iraq, means that the UAE and the rest of the Gulf Cooperation Council (GCC) countries will remain attractive and at times the only option for many living and working in the Gulf.
In addition, “global economic outlooks in other parts of the world also mean that many professionals from outside of the region will continue to see the UAE as a worthwhile place to work and live,” the recruitment representative said.
In saying this, as oil prices stagnate and with up to 30% of the UAE’s gross domestic product (GDP) coming from the hydrocarbons industry, many may find that living costs do not stabilise and salaries do not increase.
The news that the UAE is to consider draft laws on a new taxation system will worry expatriates who were already on the precipice. The drafting of the laws is expected by the final quarter of 2015, according to a report by Reuters.
It is understood the UAE may look to introduce value-added tax (VAT) and corporate tax despite the country’s reputation as an international tax haven. Previous reports suggested the UAE is reluctant to adopt VAT-type taxes unless neighbouring countries also do so in fear of hurting competitiveness in the region.
In May, GCC officials adopted a draft agreement to implement VAT. Each GCC member agreed to issue a separate VAT law that includes the principles of the draft agreement. At the time, no timetable was given for its implementation, with the UAE set to be the first to press ahead.
The proposed changes are guaranteed to stir a reaction from the expatriate community with some being forced to change jobs in the UAE or relocate outside of it.
As the country prepares to counter international factors affecting residents’ cost of living and salary demands, all eyes are watching to see if the market naturally adjusts to sustainable levels.