Dubai: For most residents in the UAE, nothing is more important than housing -- and they’re willing to spare a huge part of their income for it.
In a city where a huge proportion of the population don’t own a house, the biggest benefactor of consumer expenditure is real estate, recently released research data suggest.
According to a report compiled by the Dubai Chamber of Commerce and Industry and based on the data released by Euromonitor International, nearly half (41 per cent) of the country’s consumer expenditure, estimated to be around Dh278 billion, went to housing in 2014. The amount is comparable to almost 25 per cent of the country’s gross domestic product (GDP).
After housing, the next biggest expense for UAE residents is food and beverage, which accounted for 14 per cent of total expenditure, or more than Dh94 billion in 2014.
Another major spending category is transportation, representing 9.3 per cent of total household expenses. Communications, which include mobile phone usage and internet, captured 7.8 per cent of consumer spending in 2014.
Expenses on clothing and footwear represented 7.4 per cent of combined spending, while hotels and catering accounted for 4.9 per cent. Spending on education, childcare and other categories were not specified in the report.
The total amount of money that UAE consumers spend on various essentials, from accommodation, food to transportation, has been growing by 6.7 per cent every year in real terms
As of 2014, residents in the country spent out of their pockets a total of Dh673 billion, and that number is forecast to expand further to hit Dh750 billion by next year.
Residents’ appetite for spending in recent times has shown a positive turnaround compared to the period between 2009 and 2012, when expenditure registered a negative growth.
Explaining the major drivers of high consumption in the UAE, Nikola Kosutic, research manager at Euromonitor International, said the rapid rise in youth population, coupled with the high influx of new expatriate residents, has sparked the growth in spending.
“Positive consumer confidence and availability of consumer loans and credit cards [as well as] high penetration of internet-enabled devices, growth of internet retailing, m-commerce [are also important contributing factors],” Kosutic added.
The country’s fast-growing tourism industry, continued expansion of malls and the introduction of new and innovative retailing concepts are driving consumers to open their wallets as well.
Diana Jarmalaite, Euromonitor International analyst, said the intensive sales and promotion campaigns in the retail sector is another important driver.
“Retailers in the UAE use more innovative solutions to attract customers to the stores, as for instance brand promotions, sales event dedicated to exceptional clients as well as shopping events like Big Brands sales or mall-based shopping fests,” said Jarmalaite.
“All these business efforts are translated into higher sales, additionally the high season for tourism is supporting the positive development in retailing during the [first quarter and second quarter of 2016]. According to the early forecast for 2016, the store-based retailing market is expected to grow by six to 7 per cent in current terms.”
Source of infographic: Dubai Chamber of Commerce and Industry
