Dubai versus Abu Dhabi: Where do people really want to live?

Comment: The two emirates do not compete against each other when residents decide which is the best city to call home


Abu Dhabi tries too hard.

The emirate is well aware of the plight of its residents because so many people in the UAE capital are connected with the public sector.

Anyone who lives or works in Abu Dhabi knows that whichever direction the government goes, so too does the residential property market. It is a symbiotic relationship.

Over the past decade, Abu Dhabi has struggled as it tries to figure out how to deal with residential rents. In 2006, the emirate introduced a 7 percent cap on rent increases, which was later reduced to 5 percent; then, in 2013, the cap was suspended. That same year, it was announced that employees on an Abu Dhabi visa had to live in the emirate to receive their housing allowance (they later added an amendment that exempted anyone who earned less than AED25,000). Most recently, in December 2016, Abu Dhabi reinstated its 5 percent rental cap.

Abu Dhabi is going through massive changes. Last year, Reuters reported that Etihad Rail cut 30 percent of its staff; Abu Dhabi Water and Electricity Authority laid off scores of people; and ADNOC cut 5,000 jobs after laying off 2,000 employees. Local media also reported last summer that more than 300 teachers from the Abu Dhabi Education Council were dismissed.

All of these entities are part of the public sector, and all offer some sort of housing allowance. In the past 12 months, however, curtailed housing allowances have replaced what was the excessive norm. Inevitably, these are having knock-on effects.

According to an April 2017 report from international real estate consultancy Cluttons, Abu Dhabi is experiencing weak economic conditions, rising inflation and high costs of living, all of which continue to curb demand in its real estate market. “Companies are removing housing allowances to cope with the financial pressures,” said Edward Carnegy, head of Cluttons Abu Dhabi.

I spoke to one gentleman who lives in Abu Dhabi and purchased a one-bedroom unit in Al Muneera, Al Raha Beach, in 2009. He paid AED950,000 ($258,590) (today it is worth AED1.3m). “The location is perfect, near the airport and the facilities at Yas Island. And the community itself has shops, gyms, pools, a private beach. I aim to hold onto it long term,” he said.

The reason he decided to buy in Abu Dhabi is as relevant in 2017 as in 2009. “I could tell there were big things in store for Abu Dhabi and appreciated that the city seemed to be planned out properly.”

This is it. The emirate has a plan. Ultimately, that is what will help attract new residents from overseas and even, dare I say it, from Dubai.

A single, 40-something male Brit said that after living in Dubai and commuting for seven years that he is thinking about moving to Abu Dhabi.

“The reasons I originally had for staying in Dubai no longer exist, namely people. The irony of travelling backwards and forward is that, as much as I wanted to maintain relationships with people in Dubai, the commute has cost me the time, energy and effort to do so.”

With the price of oil where it is, Abu Dhabi has had to make some tough decisions, including how to move away from handing out housing allowances to so many people with full-blown public sector jobs or quasi-government positions. In time, property prices will return to the landlords’ favour, but it will happen organically.

By then, the emirate will no longer be saddled with housing allowances for so many. That, of course, will bring a whole new set of challenges, but perhaps by then people will be living in Abu Dhabi for the same reason they live in Dubai: because they want to.

 

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