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| 18 November, 2017

UAE residents' spending to surge to $245bln in next 5 years

United Arab Emirates Dirhams in hand

United Arab Emirates Dirhams in hand

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Spending on housing, food and beverages and transport will account for 58% of the total expenditures


Expenditure by UAE residents will increase by more than a quarter over the next five years to cross Dh900 billion, driven by growth in disposable incomes and surge in high-income population.

According to Euromonitor International's forecast, spending on housing, food and beverages and transport will account for 58 per cent of the total expenditures, which will surge from Dh712.16 billion this year to Dh900.9 billion by 2022, an increase of 26.5 per cent, or Dh188.7 billion.

"Key factors driving consumer spending are expected to be change in demographics, with a decline in the low-income class and growth of the high-income class. Continuous influx of expatriates in the country is expected to increase the consumer base which is expected to increase the population by an average rate of 2 per cent by 2022," said Rabia Yasmeen, research analyst, Euromonitor International.

Around 20 per cent of adults in the UAE make up the bottom-income group in 2017 which will decline to 12 per cent by 2022. While the top-income forms 32 per cent of the country's adult population in 2017 which will expand up to 45 per cent by 2022, forecasts Euromonitor International's Income and Wealth Distribution model.

She noted that reforms such as value-added tax (VAT) could prompt middle and lower middle income groups to opt for discretionary spending more.

Forecasting five per cent on average growth in disposable incomes by 2022, Yasmeen said in a statement to Khaleej Times that increased consumption would drive domestic demand, therefore would keep stability in terms of GDP growth. By 2022, the UAE is expected to observe a GDP growth of five per cent on average. However consumer expenditure would account for 48.4 per cent of the total GDP during the period.

Based on Euromonitor's forecasts, the residents' spending on housing will increase by 26.7 per cent to Dh380.5 billion in 2022 as against Dh300.3 billion this year, accounting for the biggest share of the residents' spending at 42 per cent.

Food and beverages comes next which will consume Dh129.55 billion of their expenditures by 2022 as against Dh103.1 billion this year, an increase of 25.6 per cent. It is followed by transport, which will cost the UAE residents Dh120.4 billion per annum in 2022 as against Dh93.8 billion this year, an increase of over 28 per cent.

"Housing is one of the largest spending per fixed-income household in the UAE, ranging anywhere between 35 to 60 per cent, depending on the residents' lifestyle and location. High rents have pushed people working and earning in Dubai to move in to neighbouring emirates to cheaper alternatives. That's why buying a property is a good option provided that the income level supports the monthly payment. Many families were prompt enough to take advantage of the lower house price in the earlier days to buy and eventually move into their freehold homes," said Sailesh Jatania, CEO, Gemini Property Developers.

"With a softening of the property prices, such opportunity currently exists and there are ready-to-move-in properties with attractive payment plan that supports the end-users to make informed decision to buy property. In most cases, the equated monthly instalments (EMIs) are lower than that of an apartment's rent if broken down to monthly rental value - which makes buying a property more economical and very sensible," he said, adding that property prices are so attractive, that residents could save themselves from rent-related inflationary pressure by just buying a property in Dubai.

Commenting on the growing expenditures on food and beverages, Zaid Al Hachem, director of sales and catering, Dynamic Hospitality, said: "No doubt we see growth in the coming years, and what keeps us motivated is Dubai's continuous growth in the food trends, which is evolving tremendously and I must say deliciously. In the next few years, our expansion will leave us with more than 20 new F&B brands."

The group has taken a new strategy of opting for standalone projects and staying away from major developers that are too busy to market their existing projects.

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