Rents go up 26pc in the UAE

UAE, 8 Jul 2005

DUBAI - Rents this year in the UAE were, on average, 26 per cent higher than the previous year, though average salaries had only risen by 1.5 per cent in the private sector in the same period, causing a substantial shortfall in most employees' cash flow.

Faced with substantially higher rents for residential accommodation, over half of all senior executives in the UAE are planning to demand a pay increase or switch to another employer, according to results of a survey conducted by GulfTalent.

According to the survey results, Dubai had the highest average rent increase at 27 per cent, followed by Sharjah with 25 per cent and Abu Dhabi in third place with 23 per cent. Nationwide, rents for apartments went up by around 24 per cent, while room rents shot up at a staggering 31 per cent.

Salaries continue to stagnate, with most respondents reporting no increase in pay. Average wage increase for the multi-nationals at 2.0 per cent and local companies at 0.8 per cent. Rather surprisingly, senior executives experienced a below-average increase of just 0.7 per cent, possibly due to the increasing number of international executives now willing to relocate and work in the UAE.

A GulfTalent spokes person told Khaleej Times, "There are expectations of some kind of adjustment in the next four months. Human Resource Managers had informed us that they will conduct reviews.

"Our data suggest that rent as a percentage of salary has increased from 26 per cent to 32 per cent this year. This represents a substantial fall in net disposable income, which may have repercussions for the rest of the economy. There is likely to be increased turnover in the job market, particularly at the senior level where candidates are more mobile. More disturbingly, we are finding that many people are having to take loans or delay their repayments in order to deal with the hike and this may lead to increasing default rates for the banking sector in the next 12 months," he added.

Other common reactions revealed in GulfTalent's survey were to send families back home or relocate to another Emirate. About 6 per cent of Dubai-based respondents planned to relocate to Sharjah, while 7 per cent of those in Sharjah planned to move to neighbouring Ajman. For female respondents, the most popular choice was to cut their spending, negotiate a pay rise with their employer or negotiate a discount with the landlord. Male respondents, on the other hand, would primarily switch to another employer, ask for a pay rise, or leave the UAE.

Responses also varied across Emirates. 12pc of Sharjah residents planned to send their families back home, compared to an average of 5 per cent in Dubai and Abu Dhabi. Over 24 per cent of those working in Sharjah and Abu Dhabi planned to ask for a pay rise, compared with just 14 per cent in Dubai, reflecting the greater bargaining power of employers based in Dubai.

Abdullah Abdul Rahim, Director of Dubai Municipality's Planning and Survey Department told Khaleej Times, "when the housing costs more than 25 per cent of the resident's income, it has an impact on the individual's economy, and effects drastic changes in lifestyles."