Wednesday, Oct 19, 2016

Dubai: As the year comes to an end, many people may be wondering why their savings have dwindled.

This could be due to the price increases in housing and education sectors in Dubai during the first eight months of 2016 in comparison with the same months of the previous year.

According to the Dubai Statistics Centre (DSC), housing rentals increased by 3.8 per cent and education fees went up 5.9 per cent in Dubai this year.

“Levels of price increases vary by emirate and by sectors. In Dubai, housing and education account for the lion share of expats’ costs, and both have seen the largest price increases,” said Nikola Kosutic, research manager at global consultancy Euromonitor International.

He explained that both sectors account for the highest share of expenses, putting an additional financial burden on many families’ budgets.

“The situation, however, is improving due to the increasing availability of more affordable housing as well as improving infrastructure, which allows people to live in more distant and cheaper areas,” said Koustic.

Fuel prices

The fluctuating fuel prices in the UAE, however, had no significant impact on inflation rates.

Koustic explained that consumer expenditure on operation of personal transport equipment accounts for three per cent of total consumer expenditure in the UAE.

Dubai resident Mohammad Safa, from India, told Gulf News that his rent increased by 30 per cent last year, significantly raising his family’s overall expenses. “I have sent my family back to India because everything is too expensive here and it’s very hard to cover all the monthly expenses,” he said. Living by the Dubai Gold Souq in Al Ras for 10 years, Safa said he has noticed an increase in education fees and groceries in his residential area.

Similarly, Palestinian expatriate Sarah Abdullah said her monthly budget for groceries has gradually increased over the year. “It seems like every time I am at the supermarket, I discover that the price of another item has been increased,” she said. Living with her sister in Dubai, Abdullah said the increasing rent in the previous two years created an additional financial burden. “Now that the rent rates are steady more or less, it’s a little more manageable. However, inflation will hit another sector and we will see costs rising in another area,” added Abdullah.

Inflation and income

According to the Federal Competitiveness and Statistics Authority, inflation in the UAE remains at low levels with 2016’s annual rate estimated at 1.5 per cent, a slight increase from the average rate of 1.18 per cent seen over the last three years.

Nikola Koustic, research manager at global consultancy Euromonitor International, pointed out that the highest inflation rates in the first eight months of 2016 were observed in Dubai (1.9 per cent) and Abu Dhabi (2.6 per cent), while Ras Al Khaimah was the only emirate where consumer prices declined by 0.5 per cent.

Looking ahead, the average disposable income in the UAE is forecast to increase in 2016. However, there are great variations in increase rates between people in different socioeconomic classes.

According to Euromonitor’s ‘Income and Wealth Distribution Model’, the number of people earning Dh9,175 per month or less in 2016 is expected to decline, while the number of people earning more will increase, pointed out Koustic.

“The highest earning segment of people making Dh23,000 or more will increase by 12.2 per cent and their combined income will increase by 12.9 per cent, adding over $10 billion (Dh36.73 billion) of disposable income to the local economy.”

He added that a large part of this income will be added by high net worth individuals who consider the UAE a safe haven in the politically unstable region.

By Jumana Khamis Staff Reporter

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