Will moving closer to work break your bank?

dubai - More affordable housing in Dubai is reducing rents marginally in northern emirates

Insurance professional Najeeb, name changed on request, commutes daily from Sharjah to Abu Dhabi for work because he wants to avoid paying high rents in the capital city. He endures the long hours and daily traffic bottlenecks on the road to save money.

Despite a softening in rents in both Dubai and Abu Dhabi, both the emirates are still much more expensive in comparison with the northern emirates such as Sharjah, Ajman, Umm Al Quwain and Ras Al Khaimah.

For several years, a significant number of expatriates who work in Dubai have chosen to reside in Sharjah and further afield in Ajman - similar to those who work in New York, but live in New Jersey.

For the sake of comparison, here is a breakdown of rents, as per real estate consultancy Asteco's Q4 2016 report. The average rent for a one-bedroom apartment is Dh85,000 in Dubai, Dh32,000 in Sharjah, Dh39,500 in Ras Al Khaimah, Dh23,000 in Umm Al Quwain, Dh40,000 in Fujairah and Dh98,000 in Abu Dhabi.

"In Dubai, the affordable average rent for a one-bedroom property in 2016 was Dh60,000. This compared to Dh84,000 for mid to high-end average properties; and Dh112,00 in the high to luxury end average. In Abu Dhabi, the average rent for a mid and lower-end property is Dh77,600. This compared to Dh102,700 for high-end properties; and Dh134,000 for prime properties," says John Stevens, managing director of Asteco.

Although this sounds like comparing apples with oranges, one can still live in the northern emirates and enjoy the best facilities Dubai has to offer.
The increase in affordable housing in Dubai had a negative effect on rents in the northern emirates in Q4 2016. Average rents declined marginally during Q4 2016 in the northern emirates, with Sharjah, Ajman and Fujairah witnessing decreases of one per cent on average.

Tax-free salaries
"Dubai is a dynamic, modern, thriving city full of opportunity that is attracting some of the best talent in the world across a range of industries. Its senior executives enjoy tax-free salaries that are among the highest in the world. And while Dubai may seem expensive for many people, for professionals who originate from other major economic cities such as London, New York, Geneva, Sydney or Paris, property and life in Dubai is considerably cheaper and the value for money better," says Lukman Hajje, CCO, propertyfinder group.

Dubai rents come at a premium because the city offers a wealth of first-class services across the board - the best schools, healthcare, cutting-edge entertainment and the latest technology in fitness, to name a few.

"Dubai, and the UAE as a whole, offer many different alternatives to suit various budgets, from both a housing and a facilities perspective. We have seen several new developments in Sharjah offering excellent amenities, particularly in the Corniche area, where prices have increased in line with the offerings available," adds Stevens.

Many people currently commute daily to Abu Dhabi to make the most of the Dubai lifestyle and better value accommodation. The removal of housing allowances for employees of Abu Dhabi government-owned entities who did not reside in Abu Dhabi reduced these numbers and helped support rents in the capital, but the numbers are still significant.

The introduction of the Hyperloop is expected to be a respite for such commuters. "One imagines that the Hyperloop will make options for residents of both cities massively more attractive. It will make the commute from Dubai and even Sharjah much easier for Abu Dhabi workers. And conversely once Abu Dhabi workers can commute to Dubai in just 12 minutes, they may well choose to live in Abu Dhabi and quickly pop in to Dubai several times per week. The Hyperloop will make that feasible," says Hajje.

Improved transport infrastructure always enhances the capital value of the locations it connects. As capital values increase, so will the rents.

"Transport links, such as the Dubai Metro, have resulted in price increases in areas in close proximity to the stations. If we look at cities around the world with good transport links to neighbouring cities or neighbouring countries, there is evidence of increased prices in both rents and sales," concludes Stevens.

- deepthi@khaleejtimes.com