Posted on: 29-07-2017 in Financial Planning
We all know that Dubai can be expensive. But this coming 12 months is going to be especially hard on the wallet. It’s a great time to save cash where you can.
Not only have we already seen in March this year a sudden hike in cost of insurance for an estimated third of Dubai motorists. But there’s worse to come: January 2018 will see a 5% value-added tax (VAT) levied in Dubai on all but 94 types of consumer product.
The tax comes in on the back of a GCC initiative aimed at raising revenues of over Dh90bn a year. “The Unified Agreement for Value Added Tax (VAT)” was finalised by the 6 GCC states in March 2017.
Further legislation is coming this year to add to the 94 consumer products already agreed as exempt. The Gulf News reports that, “grocery, hospital or school bills will most likely remain unchanged”. Electronics and big-ticket items will be hit, including tourist goods. Rental and property costs will go untouched apart from a controversial 5% levy on the first sale of residential property.
So key sectors have escaped the VAT (so far, it seems); pundits are agreed that the financial impact of the new tax on most consumers will likely be barely felt. But that’s not all we’ve got coming at us here in Dubai in terms of taxation. As a further part of the GCC tax package, the Khaleej Times reports that a separate “selective items tax” will apply to “tobacco, soft drinks and energy drinks” capped at 100%.
The Dubai Ministry of Finance has yet to decide what % tax rate to impose on these “selective items”. Will they charge the full 100% rate that the GCC agreement allows? Smokers in Dubai will be crossing their fingers this summer that leniency is shown; but tobacco IS expected to be hit hard.
The good news is that, in the broader picture of taxation, the Ministry of Finance has confirmed that it is definitely NOT “currently considering personal income taxes.” Phew.
But with costs definitely set to rise, we need to get saving! So here Holborn Assets reviews not ten (as is traditional in blogs) but ELEVEN tips to save cash in Dubai this summer 2017:
The UAE’s property market gets ever more competitive. And you can see it in the competition amongst mortgage providers to offer decent low rates of interest. Whether you have a fixed or floating rate mortgage, now is the time to speak to your lender and see if they can do you a better deal. Find out first which competitor lenders can re-finance you at a lower rate — and start negotiating!
If you’ve invested in foreign property, such as in the UK, such refinancing options are also possible — though there will be a smaller pool of end-lenders with whom you can shop around.
See what’s out there! If you take the time to browse websites such as propertyfinder.com, bayut.com and consumer commerce favourite, dubizzle.com, you may be surprised at the rates for one-, two- and three-bedroom apartments in popular areas, and even villas in the quieter neighbourhoods.
Data provider Reidin found in April that apartments, townhouses and villas declined in rental price by 4.08%, 3.49% and 7.29%, respectively, against the same month last year, while villas have dropped in value by 13.16% over the last two years.
Look two at the way you are paying the rent. In how many cheques are you paying the rent? Time was when you had to pay your whole year’s rent in one cheque. Might not negotiating multiple cheques work better for your cashflow? Or do you stand to get a better rate paying all your rent in one go? Review your arrangements. With Dubai’s dynamic rental sector, it’s a sure bet that better arrangements are available.
Let’s be honest about the big three supermarkets: Spinney’s, France’s Carrefour, and Geant. Their big outlets attached to malls are cost-competitive. Their smaller stores? Less so.
Beyond the biggies, however, it is a well-known secret that more of the ‘local’ supermarkets offer a better price comparison on a typical basket of groceries. Union Cooperative, for example, (particularly the Al Barsha branch) is also renowned from a quality-versus-price perspective for its butchery. Indeed, a sample basket of 11 common items was found to be 11.2% more expensive in Spinney’s than Union Coop, according to MoneyDoctor/Souqmal.
The state-owned utility providers charge different rates depending on your location and type of accommodation. Villas have the highest rate, which makes sense when consumption is typically higher in a house than an apartment.
Other variations arise in areas like Jumeirah Lakes Towers (JLT). Compared to other regions where your chiller (ie. sweet, sweet air-conditioning!) is provided by Dubai Electricity & Water Authority (DEWA), JLT has a unique provider called Empower that is separate from DEWA and therefore involves a separate set of both quarterly and monthly charges. Does any fall in rents in JLT compensate for this added, separate fee to keep your interior air cool? Worth weighing up if you are assessing a more penny-wise location.
Staying on the topic of bills from tip 4 above, UAEMoneyExpert.com offers a fascinating tip about utilities: faulty pipes could be the reason why your DEWA bill relating to water consumption seems so high.
The consumer advice site advises an inspection of the pipes and a comparison with your neighbour to check any big differences in your bills.
Other proven ways of reducing your consumption without hassle include installing an on-demand water heater and/or insulation to keep hot water hot; taking showers instead of baths; and the collecting and using of your “Grey water”— the stuff that escapes in general usage — for something appropriate, like your garden.
The price to fill your car up has swung back and forth in the last year.
Figures from CarSwitch show a low of Dh1.64 per litre of 95 Special in September 2016 and a high of Dh1.92 by March 2017 — then since slipping back to Dh1.85 in June.
The CarSwitch auto experts have some great ways to cut fuel consumption and general wear-and-tear that bump up your car bills. These include not using air conditioning in the cooler months, keeping windows shut on open road drives (aerodynamics, it seems!), going easy on the brakes, and finding alternative routes home to avoid the stop-start infuriation of a gridlocked main road.
There are many other car-related savings to be had, of course. If you’re a couple, can you survive with one car rather than two? If your home and office are both near Dubai Metro stations, do you need a car at all? If so, think on this: if your job currently refuses to compensate you for the fuel used in your car for work purposes (arguing that you also use it on weekends and evenings), it would have less wiggle room if you used taxis for work appointments, made a spreadsheet of the details, and kept the receipts. See how it goes!
The price of a tipple in a bar or restaurant is one of the chief signs that you’re in expensive Dubai, with even Happy Hour drinks generally north of the equivalent of GBP5.
Drinking at home certainly is the cheaper option overall (as would be dining/entertaining at home rather than eating at a restaurant). You can purchase alcohol at Dubai Duty Free as you come through the airport, but also at chain distributors — African + Eastern and MMI — or at stores dotted around the Emirates, including the most well-known, Barracuda, which is attached to a beach resort in Umm Al Quwain.
Remember, the alcohol license card needed for such on-the-ground purchases requires both the application form and a No Objection Letter from your company.
On the subject of restaurants, livingindubai.org has a great tip: eating in restaurants that don’t serve alcohol tend to charge less for food.
Budgeting is so important, that we could have spent the whole article going over ways of doing it well. There’s a lot to consider. Different methods suit different people. Different people have different cost pressures. And, to cap it all, just as you’re doing well and your insurances are in place, ‘life’ tends to happen and a big expenditure becomes necessary. Sometimes this will have nothing to do with you — such as suddenly needing to help a family member back home, or losing your job.
With this in mind, and your general goal to save, it is useful to choose a fixed percentage of your income that you will save each month. You choose! Perhaps 5-30%. Perhaps you can even automatically transfer your allotted monthly savings to the savings component of your bank account just as pay day hits. That way, should a random expenditure arise, that saved income can be ring-fenced, in a sense, with some of the other costs – shopping, dining, entertainment – making way to pay for it.
Dubai residents are bombarded with credit card and personal loan advertising. If you do take out a credit card, think about the key differentiators between cards:
This blog recently covered some top general tips for credit card use. A top tip is to be prompt with your repayments, clearing debt before the end of each month when the charges are subsequently applied.
If you have a non-credit card personal loan, perhaps engage with your lending bank to see if the monthly or annual fee can be reduced, or even removed.
Many apartment towers and villa neighbourhoods have complementary gym facilities for residents. It sounds simple, but is your membership with that fancy gym chain really necessary when you have something on your doorstep?
If your building does not have a gym, or the facilities don’t match your Iron Man requirements, could you be your friend’s guest at their building’s gym?! The security or lifeguard on duty can only say ‘no’. And, if it works out, your buddy gets a gym buddy ie. you!
Beyond this, jogging outside and swimming in the sea are free, and there are only small fees for fun-runs.
Clearly you’re looking to be savvy with your spending — not switch to living in a box. Getting your cash out on the weekend will still happen! So it’s worth thinking about the places you spend your money and see where there are loyalty cards for you to collect points and get future discounts.
But this is a balancing act. As with our credit card blog advice about not spending on a card just to get the rewards, it’s important that you don’t end up spending more than you normally would just to get to a certain threshold to claim that discount or freebie. It’s the brands and stores that offered that card, don’t forget— they know the economics better than you do!
Still, don’t miss an opportunity to save: when you spend in certain stores and services as per necessity, scan that card, see what it can get you down the line. If your job books you a flight, can they punch in your Frequent Flyer details when they do so, to help tot up your points? If you’re always put up in a Rotana hotel, this chain has a highly-regarded three-tier loyalty programme. Even the two-for-one on VOX movie tickets for Du customers on Tuesday, or the ‘free tenth coffee’ from completing Caffe Nero and Costa’s card stamp system can cut down your weekly spend.