The UAE is suffering from a complex economic crisis, which shows signs of collapse of the most prominent sectors, especially real estate, where the capital Abu Dhabi suffers from a recession and paralysis like the Emirate of Dubai.
Dubai’s property crisis is rapidly spreading to neighboring Abu Dhabi, according to a report by British company Chestertons, which revealed that Abu Dhabi’s overall sales prices for apartments in Abu Dhabi continued to fall 1% in the third quarter from the previous quarter.
According to Chesterton’s report, Real Estate in Abu Dhabi during the third quarter of 2019, apartment sales prices declined during the third quarter of this year, while villa sales were unchanged from the previous quarter.
The British real estate company predicted that the market will be close to reaching its lowest level, pointing out that this will depend on the quantity of housing units that will enter the market in 2020.
According to the report, the third quarter of this year witnessed a slowdown in the decline in rents of apartments, which fell by 1% compared to the previous quarter, while the rents of villas did not change. The stability of villa rentals is simply due to the limited availability of villas in Abu Dhabi.
Corniche Street and Saadiyat Island witnessed the highest price declines of 4% and 3%, respectively, in the third quarter of this year, compared to the previous quarter.
Average rents for apartments in Mohammed Bin Zayed City and Al Raha Beach rose 1% in the third quarter compared to the previous quarter.
Villas in Al Raha Gardens recorded the biggest decline in average rents by 2%, while Khalifa City witnessed a 1% increase and the rest remained unchanged during the third quarter of this year.
The World Bank had predicted a limited growth rate in the UAE for 2019 would not exceed 2% of GDP.
The World Bank highlighted in its annual report that the UAE is facing a severe economic recession, especially in light of the real estate slowdown, the great tourism decline, the contraction of transit activity and the decline in the price of oil.
The UAE central bank has slashed the country’s economy by 2% of GDP this year, not by 3.5% according to previous estimates published in March.
As the economic crisis escalated, the regime extended the selective tax to e-cigarettes, associated liquids and sugar-added beverages.
A statement from the UAE Ministry of Finance explained that the tax would come into effect on December 1 and that it was part of an effort to reduce “harmful consumer practices.” Tobacco products, energy drinks and soft drinks are already taxed in the UAE.
In 2017, the UAE introduced a 100 percent selective tax on tobacco products and caffeine drinks, a move observers believe is aimed at offsetting the sharp decline in public revenues. The government also imposed a selective tax on soft drinks and sugar at 50%.
According to the Dubai Chamber of Commerce, the number of commodities covered by the selective tax at the time was about 1610, of which 60% are classified as soft drinks products, 26% are included in tobacco and its derivatives, and about 14% are included in the energy drinks segment.
With the collapse of oil prices at the end of 2014, most of the Gulf states, especially Saudi Arabia, the UAE and Bahrain, to cover the deficit in spending by raising service fees and the introduction of new taxes, which reflected negatively on the citizen and led to shrinking purchasing power.
In early 2018, the UAE and Saudi Arabia introduced a 5 percent VAT. The VAT is indirect, paid by the consumer and imposed on the difference between the purchase price from the factory and the selling price to the consumer.
This tax applies not only to goods and services in the UAE, but extends to recruitment fees from abroad, according to the UAE Federal Tax Authority (government), noting that the tax on recruitment fees will be paid by the final beneficiary.
The UAE has announced the beginning of liberalization of fuel prices in the country as of early August 2015, and the adoption of a pricing mechanism at international prices.
Aside from taxing, the UAE has resorted to borrowing to cover expenses at a time when financial resources are falling due to falling oil prices and rising war spending.