Abu Dhabi Introduces 3% Fee on Expats’ Rent

With an expat community that greatly outnumbers the local population, Abu Dhabi is known for welcoming residents from all over the world. Many emigrate here for the fantastic career opportunities and tax-free wealth of the United Arab Emirates (UAE) but new fees to be imposed on expatriate tenants may make renting property in Abu Dhabi a less appealing prospect for some.
For those expats looking to reap the benefits of the oil-rich economy, Abu Dhabi is considered by many to be the most family friendly of the Emirates. Moving to the UAE with children may seem daunting but the many foreign families and expat parent networks make for a welcoming atmosphere. Whereas Dubai is the place where the tourists tend to go, Abu Dhabi tends to be the place where expats looking to settle for the long term prefer.
If you are looking to make a long term move, buying may be the preferred option compared to renting property in Abu Dhabi. This is especially so as new rules mean expatriate tenants will now have to pay a 3% fee on their rent as a municipality contract fee.
This new charge will be collected along with monthly utility bills and it is estimated that this will add approximately 5,000 AED (approximately £933 at current exchange rates) to the cost of renting a typical two bedroom apartment. The new fee was published in February’s Official Gazette, reports thenational.ae, meaning the law is technically already in effect. However, it is not known when the new charge will start to be collected in practice. This news comes in the same week the Emirate imposed a 4% fee on hotel stays.
For expats looking to settle for the long term, these new rules may swing the balance in favour of buying property in Abu Dhabi. Currently, an apartment in the city centre costs approximately 15,150 AED (approximately £2824) per square foot. Outside the city centre, apartments cost around 10,785 AED (approximately £2010).
Typically, expats in the UAE can borrow 75% of a property’s value if it is a new build or a resale. An exception to this rule is if the property is worth more than 5 million AED, in which case expats are only likely to be able to get a mortgage with a 65% loan to value. For off-plan, unbuilt, properties, expats and locals alike can only borrow 50% of the property’s value.
Public reaction to the new charge will be monitored closely, according to reports. If response is overwhelmingly negative from a large proportion of residents – or worse, if it dissuades expats from moving here – it’s likely the government will take action. For now, though, expats still looking to rent property in Abu Dhabi will have to factor this new charge into their decision whether to rent or buy.
If you are considering moving to Abu Dhabi or the other Emirates, Cadogan Tate will assist you every step of the way – from your first enquiry to unpacking at your new home, we are here to help and advise you.
Information correct at time of publication.