As school fees rise, so too do the number of financial products used to pay for them. Last week, The National reported on an offer introduced by one local bank that allows consumers to spread spending on a year’s worth of tuition fees over 18 months, which is just the latest indicator of the financial pressures many families find themselves under. The report also noted that more expatriates are finding it harder to fund their lifestyles and are borrowing to cover living expenses. According to statistics from the credit bureau, the average resident with debt has two loans.
Several factors are fuelling this increased demand for credit. Rents have risen sharply since 2011 in Dubai and tenants in Abu Dhabi have found themselves under more financial pressure since the rent cap was removed in 2013. The price of petrol and utilities have also risen this year as the Government reduces subsidies. With many of the key lifestyle elements – such as education and housing – requiring funding upfront, it is not surprising that residents are borrowing more to meet their commitments.
Though wages increased between 2011 and 2013, salaries are unlikely to keep up with the rising cost of living. The low oil price is leading to slowdowns in recruitment.
Many workers have traditionally seen this region as an attractive and safe place to live and work while bolstering their savings. They now find that the low-tax environment that lured them here is being eroded by the higher cost of living.
Employers are caught in the same complicated picture. This country has acted as a magnet for highly skilled professionals and employers have been able to sell the benefits of the vibrant business culture alongside the enviable lifestyle advantages.
But if that competitive edge is being blunted by rising living costs, it will potentially have a profound impact on the future of our commercial environment – and that is good for neither employers nor their workforce.