dubaiites optimistic - show confidence in the future of the uae’s economy despite rises in cost of living and inflation economy despite rises in cost of living and inflation
In its pre-exhibition survey, DSL Exhibitions – organizers of the Resale & Rental Property Show (R&R Show) – unveil findings on the city’s cost of living trends and the impact it has had on the city residents’ appetite for lifestyle purchase patterns as well as real estate investments
DSL Exhibitions, organizer’s of the Resale & Rental Property Show – due to be held on the 7th and 8th September 2007 at the Crowne Plaza Hotel, Dubai – have announced the results of the cost of living survey, conducted to gauge the impact of inflation on the growth of the property market as well as on the quality of lifestyle and spending trends of Dubai residents. “The UAE market has witnessed rising prices for everything – including real estate, whether for purchase or rental –continuously for the last 3 years,” said Tessa Morris, Marketing Director at DSL Exhibitions. “While this is good for a large number of investors in the property business, it obviously begs the question – how is it impacting the purchase and lifestyle choices of the residents of Dubai in particular and the UAE at large?”
An extensive exercise, the survey gathered opinions from Dubai residents in the AED 200K+ per annum bracket (annual household income) who have lived in the city for the last 3 years or more and measured how costs of living have changed during this period. Touching upon areas such as share of wallet taken up by key expense heads, impact of change in costs of living and residents’ preferences when it comes to real estate purchases, the opinion survey gathered responses from 431 people.
Key findings:
Despite the rise on the cost of living and pressure on disposable incomes and savings, people are confident in the sustainability of the market in Dubai. They city shows all indications of very strong future growth and sustainability and residents are prepared to ride out financial pressures to reap the befits of long term growth
• Essential goods and services taking up the bulk of residents’ income: Items like housing, children’s education, transport and groceries are heads where cutting back is either difficult or impossible.
• Non-essential purchases being cut back on: Heads such as personal shopping, entertainment and leisure are where people are spending less and less of their total income, yet their overall expenses, even on these items, have gone up.
• Borrowings remain strong: Even though a majority of respondents see their savings going down, people are, on the whole, paying more interest on borrowings – which clearly indicates that sentiment is still riding high, as residents seem hopeful for an upturn in their overall financial future. There is, however, an increased risk of the city becoming an increasingly indebted society with banks aggressively selling loans to almost anyone who cares to ask for them.
• Good and bad news: While there is no denying that people’s lifestyles are being squeezed as incomes do not keep pace with rising costs, a significant portion of the people are still looking forward to make long term investment in the UAE, in terms of buying property. There is confidence in the market and a strong desire to invest
• Mid-market real estate demanded: A majority of respondents are looking to invest under AED 2 million on their property purchase. This clearly indicates that the middle segment of the market is where the future of Dubai’s property market lies.
“Looking at what this opinion survey has revealed, it is clear that Dubai is going through the throes of growth,” said Tessa. “The city is showing signs of quickly moving into a mature growth phase and while cost of living issues present a complex problem for a number of residents at present – as is normal in periods of growth and change – Dubaiites are demonstrating remarkable resilience and confidence in the future of UAE’s economy by remaining optimistic and upbeat.”
The survey:
Section 1: The first part of the survey gauges the public sentiment towards real estate costs and their willingness and capacity to invest in property:
• Of those surveyed, 23% have already bought property in Dubai while 77% have not.
• Questions directed at non-owners of property:
1. Of those who have not bought, 35% said their reason for not buying was because it was not good value, 47% said they could not afford it while 18% cited other reasons.
2. On being asked whether they would consider buying in the next 1 year, a significant portion (16%) said yes while 84% said no.
3. 79% of those who have still not bought real estate in Dubai said they want to invest under AED 2 million if they buy while 21% said they are willing to invest over AED 2 million.
4. 73% of this segment said that their real estate purchases will be to live in, with only 27% saying they will buy property as an investment.
• Of those surveyed, 62% are owners of property outside of UAE while 38% are not.
Section 2: The survey continues by analyzing city residents’ share of wallet for major expense heads and how their spending has changed on a particular head over the last 3 years:
• Housing:
1. Present share of wallet: 21% of the respondents said that housing took between 10% and 25% of their total income, while 12% said that they paid more than 50% of their income towards housing costs. But a whopping majority of 67% respondents spent between 25% and 50% of their income on this expense.
2. Changes witnessed in the last 3 years: Expenses on housing went down or stayed the same for only 3% of the respondents. For the others, 72% said their outlay has increased by 10% to 25%, 16% said it has gone up by 25% to 50% while for 8% of the respondents, the increase in housing costs has been more than 50% from what they used to pay 3 years’ back.
• Children’s education:
1. Present share of wallet: 32% of the respondents spend between 5% and 10% of their income on education, while 46% spend between 10% and 20%. However 22% said they spent over 20% of their income on children’s education.
2. Changes in the last 3 years: Children’s education bills stayed the same or went down for 6% of those surveyed. They went up by 5% to 10% for 18% of the respondents, by 25% to 50% for 68% people and by over 50% for 15% surveyed residents in the last 3 years.
• Medical:
1. Present share of wallet: Majority of respondents (88%) spend less than 5% on medical expenses. 9% people said they spent between 5% and 10% while just 3% have medical bills exceeding 10% of their annual income.
2. Changes in the last 3 years: A large section of those surveyed (27%) said their medical bills either stayed the same or fell as compared to 3 years back but a majority (47%) said their expenses have gone up 5% or less. 14% respondents witnessed an increase of between 5% and 10% while medical bills went up by more than 10% for 12% of those surveyed.
• Transport:
1. Present share of wallet: 13% of the respondents said they spent under 10% of their annual household income on transport while 72% said their expenditure on this head fell between 10% and 20% of their take-home. 15% respondents spend over 20% on transport. While this includes the money spent on the purchase of vehicles, it does not include the cost of credit (interest on loans).
2. Changes in the last 3 years: Transport costs went down or stayed the same for 2% of the respondents, grew by 10% or less for 54% people, by 10% to 20% for 36% of those surveyed and by more than 20% for just 1%.
• Entertainment / Leisure / Holidays:
1. Present share of wallet: A large chunk of the respondents (62%) said they spend under 5% of their annual income on this head, 29% spend between 5% and 10% while only 9% spend over 10% of their income on recreation.
2. Changes in the last 3 years: Spending on this head either went down or stayed the same for 5% respondents, went up by 5% or less for 28% people, by 5% to 10% for 21% people and by over 10% for the majority of those surveyed (46%).
• Personal shopping:
1. Present share of wallet: 75% of the people surveyed said they spent under 10% of their income on shopping for personal items, 14% spent between 10% and 20% while 11% people spent more than 20% of their income on this head.
2. Changes in the last 3 years: Spending on personal shopping either stayed the same or went down for 72% of the people, grew by 10% or less for 15% respondents, went up by 10% to 20% for 12% while only 1% of those surveyed said they now spent more than 20% on personal shopping than what they did 3 years ago.
• Furniture / furnishings / white goods:
1. Present share of wallet: Major household purchases account for under 10% of total income for 63% of those who responded, while 31% people surveyed said they spend between 10% and 20%. A minority (6%) spent over 20% of their income on this.
2. Changes in the last 3 years: Spending on this head remained the same or went down for a large chunk of the population (66%), went up by less than 10% for 23% of those surveyed, by 10% to 20% for 9% people and by over 20% for 2% of the respondents, as compared to 3 years back.
• Groceries:
1. Present share of wallet: A large section of the respondents (81%) said they spend between 10-20% of their income on shopping for groceries. 7% people spend under 10% while 11% spend over 20% on groceries.
2. Changes in the last 3 years: Spending on groceries remained the same or went down for 2% of those surveyed, increased by 10% or less for 12% and grew by 10% to 20% for 19% of respondents. But 67% of those surveyed said they now spend more than 20% of what they used to spend on groceries 3 years back.
• Interest on credit / borrowings:
1. Share of wallet: 26% of Dubai residents surveyed said their interest payout was less than 2% of their annual household income while 12% of those who responded said they paid over 10%. But the biggest section (62%) said they paid between 2% and 10% of their total income as interest to banks / financial institutions.
2. Changes in the last 3 years: Payouts for interest on credit stayed the same or went down for just 7% of the respondents. For the rest, 16% said they paid up to 10% more, 34% said they paid between 10% and 20% more while a majority (43%) said their interest payouts or credit has gone up by more than 20% compared to 3 years ago.
• Savings / investments:
1. Share of wallet: 57% of the surveyed respondents said they were able to save under 10% of their income. 22% said they were able to save between 10% and 25%; 15% said they were able to save between 25% and 50% of their income; while only 6% said they saved more than 50% of their income for investments.
2. Changes in the last 3 years: 21% of the respondents said their savings have improved over the last 3 years, 32% said their savings had stayed the same while 57% of those surveys reported a drop in their savings from 3 years back.
Extending its offerings this year, the R&R Show will be adding the Dubai Lifestyle Solutions to the exhibition – a complimentary event that offers suppliers of lifestyle products and services an opportunity to interact with visitors who are ready to buy. In addition, the show will host the PROFIT forum, bringing property finance experts to the show, offering free workshops and advice to visitors.
