Financial focus on… downsizing

WIDESPREAD redundancies and economic uncertainty have hit home hard, forcing many people to re-evaluate their domestic expenditures.

A prolonged and sustained loss of income can be harrowing when faced with impending rent, school fees and credit card and loan repayments.

That has led many families into self-imposed austerity in a bid to bring household spending in line with their means or to enable them to build up a cash cushion.

However, downsizing can be a very sobering experience, with a few hidden costs along the way.

Relocating

There are several standard and hidden costs associated with relocating in Dubai. Standard costs include a second security deposit to be made to Dubai Electricity Water Authority (DEWA) for connection services to the new property while transitioning from the old; a security deposit on a new property at a standard 5% of the rent; management agency fees at 5%; and movers’ costs which can vary between AED 3,500 ($953) and AED 5,000 ($1,361). If necessary, warehousing costs for 20 cubic metres (100 square feet) start from AED 1,000 ($272) to AED 1,800 ($490) per month.

On the UAE tenancy front, be warned that while rent cheques are issued in advance of a year, in some instances even if bona fide notice to end a tenancy agreement is given to a landlord, there are cases where landlords have penalised tenants for wanting to depart before end of the lease period. This might mean adding an extra couple of months to the standing rent before moving.

Transport and domestic costs

There will be several hidden transportation costs. If living in an outlying area then factor in the cost of a second car. A longer journey time to and from work and school will add to petrol bills and consider the number of Salik tolls along the way, too. School bus fares might also pull on the household’s purse strings.

There may be the need to purchase white goods to kit out a new kitchen or a new cooker due to different specifications at your new location. New builds often don’t include built-in wardrobes, so these might also need to be bought. Clever solutions for storage should be the order of the day.

Landline, TV and Internet

Research the telecommunications supplier at the new location; Etisalat and Du do not operate everywhere. Account holders are not able to transfer between providers, so a brand new account will have to be opened – at a cost. This might also affect your existing landline and fax numbers, so it is important to plan ahead.

‘Triple play’ style packages that include landline, TV (with a reasonable set of entertainment channels) and Internet typically costs from AED 650 ($177) per month.

Rental negotiation

On a positive note, although there is talk of there being some buoyancy in Dubai’s property market there is still an excess supply of available properties, so it’s worth approaching private landlords for good rental deals.

Ensure that the air conditioning cost is included and ask for extra months in the contract – so 13 or 14 months for the price of a year.

There are several up and coming free-zone developments in Dubai where you can rent or buy. These new developments are peripheral to established residential areas and are within easy access off main roads – in Business Bay, Silicon Oasis, Jumeirah Village Circle and Triangle, Sports City, IMPZ, DIP and Mirdif, among others.

Rental costs for apartments and a growing number of lower-cost townhouses and villas vary annually from AED 30,000 ($8,167) to AED 45,000 ($12,251) for one bedroom or AED 45,000 to AED 85,000 ($23,141) for two bedrooms and upwards, depending on added utility and maid’s rooms.

Pic credit: freedigitalphotos.net

Have you downsized amid the downturn? Tell us your stories…