Cost of living in UAE drops as rents fall

The cost of living in the UAE continued to drop in the first-half of 2018, thanks to fall in rents, lower government public service fees, freeze and reduction in school fees and, most importantly, rising strength of the dirham against major currencies. It also improved residents’ purchasing power and quality of life.

According to mid-year Cost of Living Index released by Numbeo, Dubai and Abu Dhabi were rated 113 and 97, respectively, in the list of most expensive cities during the first-half of 2018 as compared to 72 and 93, respectively, during H1 2017. This reflects that the country’s two biggest emirates became more affordable for the residents and tourists.

The data showed that the purchasing power of Dubai residents improved from 101.67 points in H1 2017 to 153.68 in the first-half of 2018. While cost of living index improved from 73.95 to 53.32 during the comparative period. Among other sub-indexes, the emirate further improved its rating in safety index, healthcare index, property price to income ratio, pollution index and climate index during the comparative period. All these factors further improved the quality of life index as well in Dubai.

But Traffic Commute Time was the sole index where the emirate’s rating declined during comparative period.

While Abu Dhabi fared well in quality of life, safety and healthcare indexes but rating for purchasing power and traffic commute time indexes fell during the first-half of 2018 as compared to the same period last year.

Ambareen Musa, founder and CEO of, said that while VAT has driven up the prices of various products and services in the UAE moderately, a steady fall in residential rents has served as a cushion to keep inflation in check.

“Housing and utilities have the highest weightage in the UAE’s Consumer Price Index (34 per cent), and a look at CPI statistics shows a continuous decline in this category month-on-month,” Musa said.

She opined that wide-ranging policy measures by the UAE government including a three-year freeze on government public services fees and a Central Bank cap on banking fees among others, will also help boost consumer confidence and keep cost of living in check.

Robert Jackson, regional director, RICS, said most significant cost of living decrease has been prevalent in accommodation, whether residents are looking to purchase or indeed rent.

“With increased accommodation being added to the market, continued downward pressure on property costs and lease rates has helped the consumer. We have also witnessed many residents move to smaller and more affordable housing options as this sector has seen significant product delivery and in doing so, residents are encountering lower costs surrounding fees and utilities,” Jackson said.

He pointed out that there needs to be a balance between cost of living and earnings.

“The growth of Dubai revolves around the population growth (resident and short-term/tourism) and several of the fee reductions are aimed as stimuli to keep people in Dubai or attract people to Dubai. The details surrounding the 10-year visas and 100 per cent onshore foreign owned businesses are keenly awaited and could provide necessary incentive to keep the underlying population growth and job creation on an upwards trend,” he added.

According to property portal’s first-half 2018 figures, average apartment rentals fell moderately in Abu Dhabi with the largest decreased 9-10 per cent. Buyers and renters continue to have the upper hand in the Abu Dhabi property market, but price decreases are overall slightly more modest than in Dubai.

Haider Ali Khan, CEO of Bayut, said tenants and buyers are firmly in the driving seat, with renters likely to bargain with landlords to negotiate a lower rent, or upgrade by moving to a larger property or a new area.

“The decrease in sales prices opens up opportunities for buyers too. Whether you are renting or buying, it is a good time to make a move in the Dubai property market,” he said.

Vijay Valecha, chief market analyst at Century Financial Brokers, said a combination of government initiatives as well as a slump in real estate have contributed to the decline in the cost of living in the first-half of this year.

He emphasises that the recent government initiatives such as reduction in licensing fees for establishment and cut in municipality fees for hospitality sector get transmitted through the general economy to the residents and help in toning down the inflationary expectations.

“However, we should not forget the role of recent US dollar appreciation which has increased the purchasing power of UAE residents as dirham is pegged to the greenback. Looks like happier times are here for the people of UAE,” Valecha added.

Syed Ali Naqvi, authorised consultant, Nexus Insurance Brokers, says drop in rent and low inflation make Dubai more affordable for expats.

He noted that though there is a marginal increase in the prices of goods following VAT implementation, so people are now more circumspect in their expenditures.

Globally, according to Numbeo, European cities, especially Switzerland, dominate the list of the most expensive cities. Hamilton, Zurich, Basel, Lausanne, Bern, Geneva, Reykjavik, Lugano, Stavanger and Oslo round off the top most costliest cities in the world.

Waheed Abbas, July 18, 2018

Saudi Arabia boosts fintech drive with UAE and Bahrain talks

LONDON – Saudi Arabia is discussing a coordinated approach to the regulation and nurturing of fintech startups with the UAE and Bahrain.

Such discussions form part of the Kingdom’s attempts to boost its nascent fintech ecosystem and to encourage the increased adoption of technology by incumbent lenders.

Discussions with central banks in the UAE and Bahrain would help to coordinate the fintech activities of financial centers around the Gulf region, all of whom are seeking to attract international and domestic entrepreneurs, said Mishari Al-Assailan, the acting head of Fintech Saudi, the division of the Saudi central bank charged with growing the sector in the Kingdom.

“We’re working on establishing some collaborations where we would give different assignments between different central banks and fintech hubs to develop a (common) GCC output when it comes to fintech,” he told Arab News.

Speaking at the “Unlocking the Fintech Scene in Saudi Arabia” event held in London on Friday, Al-Assailan said that it was important to develop a common approach to regulation among the region’s various fintech “sandboxes,” which enable startups to begin operating under a light-touch regulatory model.

“We’re all working today on excelling in our own sandboxes, but then there should be a GCC sandbox that ties into the rest of the Middle East,” he said.

“It’s hard to establish fintech firms (that can enter other markets) unless you have an infrastructure like the US that is quite open. We need to find a proper model for fintechs to jump in, get regulated quickly and if they do get regulated, everyone after them should use the same process.”

Saudi Arabia’s Capital Market Authority earlier this week approved the Kingdom’s first fintech licenses to Manafa Capital and Scopeer — both of which are fully Saudi-owned — to offer crowdfunding investment services on a trial basis.

The development of a fintech ecosystem is a significant component of Saudi Arabia’s Vision 2030 economic diversification strategy, and is seen as essential for broadening the country’s investment base and a transition toward a cashless digital economy.

Fintech initiatives in the Kingdom, however, have thus far trailed similar schemes launched in Bahrain and the UAE. Abu Dhabi Global Market launched its RegLab sandbox in November 2016, while fellow finance hub the Dubai International Financial Center launched “FinTech Hive,” the region’s first fintech accelerator program, in January 2017.

There are at present only about 20 Saudi fintech startups, according to Al-Assailan.

He conceded that the Kingdom had been slow to develop its fintech infrastructure in comparison with others, but expressed confidence that startups would be attracted by the size of the Saudi market.

“People used to go to the UAE and Bahrain because we didn’t have the infrastructure,” he said. “But most of those fintechs in the UAE and Bahrain want to sell into Saudi Arabia, because we have the market and the purchasing power and that by itself is an advantage for us.”

The new emphasis on fintech from Vision 2030 has subsequently made the Kingdom a more attractive destination for startups, according to an American fintech entrepreneur who has previously worked in Saudi Arabia.

“They’re coming late to the party, yes, but I don’t think that the timing is the only factor that will influence the companies that are looking to work in this space,” he said, asking not to be named.

“Obviously the UAE has a very well-developed ecosystem, but my experience is that with Vision 2030 Saudi Arabia now really wants to put its money where its mouth is.”

“The companies that have the really good ideas, if they’re knocking on the right doors, will find the support they need and probably more than you’d get in other countries.”

Fintech segments such as roboadvisory services, robobanking, crowdfunding and payment aggregation all offer significant growth opportunities, according to Al-Assailan.

In addition to the development of an ecosystem for startups, Fintech Saudi sees educating the Kingdom’s incumbent banks about the need to embrace technology in line with their counterparts in Europe, the US and elsewhere as important.

“It’s the future and it’s happening whether you like it or not,” he said.

“Banks need to realize that at some point you need to hire more developers than accountants into the bank, and that’s what we’re trying to preach.”

The development of robobanking lending facilities for the Kingdom’s SME sector was a particular priority, he said, given the central role of small businesses in Vision 2030.

“If we develop AI and robo capabilities to automatically approve and assign loans for SMEs and startups, this would boost the economy in a very efficient way,” he said.
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13 JULY, 2018
By John Everington, Arab News

UAE economy likely to rebound in 2018

This will be driven by oil prices, an expansionary fiscal stance and an upswing in investment

The UAE economy is expected to grow faster in 2018, driven primarily by recovering oil prices, an expansionary fiscal stance and an upswing in investment ahead of Expo 2020.

Analysts at the Institute of Chartered Accountants in England and Wales (ICAEW) said the UAE’s GDP growth would bounce back to 2.6 per cent in 2018 after a difficult year, when growth slowed to a seven-year low to 1.5 per cent in 2017.

Last month, the Central Bank of the UAE lifted its growth forecast for the country’s non-oil GDP to 3.9 per cent in 2018 from 3.6 per cent on the back of improving domestic economic activity and better prospects for the global economy. The regulator said economic activity has continued to improve during the first quarter of 2018, underpinned by the revival of oil prices and a stronger growth in non-oil activity.

The accountancy and finance body in its ‘Economic Insight: Middle East Q2 2018’ report produced by Oxford Economics, however, warned that general prices are expected to increase as inflation will rise to four per cent this year.

“The UAE’s growth will be primarily driven by recovering oil prices, an expansionary fiscal stance at the federal and emirate levels, a buoyant trade and tourism environment and a pick-up in investment ahead of Expo 2020 in Dubai,” it said.

Michael Armstrong, ICAEW regional director for the Middle East, Africa and South Asia, said the UAE is on the right track to economic diversification and is implementing necessary fiscal reforms to support these efforts.

“The introduction of VAT is an important step towards diversifying government revenue and building tax capacity. We’re also encouraged by the recent announcements to reform business ownership laws and residency visa rules. This will definitely help in attracting more foreign direct investment and in creating more stability in the market,” said Armstrong.

“Oil sector growth is expected to be limited this year, especially given the UAE’s increasing compliance with the production cuts, which averaged 124 per cent in the first three months of this year,” the report said.

In 2017, the oil sector contracted by 1.6 per cent, mainly because of the Opec-plus mandate that saw the UAE cut its oil production by 150,000 barrels per day (b/d) from an average of 3.09 million b/d in fourth quarter 2016 to an average of 2.89 million in the fourth quarter of 2017, representing a drop of nearly 6.4 per cent.

The report said the non-oil sector on the other hand proved to be resilient last year despite the unfavourable macroeconomic environment and regional economic slowdown, growing by three per cent. “The non-oil sector is expected to grow 3.7 per cent in 2018, supported by improving business sentiments, a buoyant trade and tourism environment and higher public spending. Since the UAE is a highly open economy with trade value accounting for more than twice the country’s GDP, any growth in regional and global economic activity will contribute positively to the country’s economic output this year.”

According to the ICAEW, the outlook for the UAE’s tourism industry is highly positive.

“More positively, the UAE federal government is expected to increase spending by 5.6 per cent. Dubai, which traditionally accounts for 25 to 30 per cent of the UAE’s GDP, will lift spending by 20 per cent in preparation for Expo 2020, with the allocation for infrastructure alone leaping by 46.5 per cent. The UAE continues to be the top destination in Mena for inward FDI, attracting $11 billion in 2017,” said the report.

Mohamed Bardastani, ICAEW economic advisor and senior economist for Middle East at Oxford Economics, said Middle East economies will see a pick up in GDP growth this year and in 2019 but “this doesn’t mean we should let complacency set in”.

With growing global trade tensions, geopolitical risks and rising interest rates, economic reforms are more necessary than ever in order to ensure stronger, sustainable and inclusive growth,” he said.

By Issac John, Khaleej Times,  03 JULY, 2018

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